• Steve Martin

When Children Leave Home, Do Parents Save More for Retirement?

This is in interesting article about a scary subject.  I can’t tell you how many times parents have promised me that they will increases savings rates when the kids leave home. Steve

When Children Leave Home, Do Parents Save More for Retirement?

Researchers at the Center for Retirement Research at Boston College (CRR) found that parents do not meaningfully increase their rate of saving when children leave home. Instead, they find new places to spend the money they had been spending to take care of their children. The analysis showed that, “Households save only slightly more in 401(k)s when kids leave, far below what is likely needed for a secure retirement.”

Missed Opportunity

A CRR Brief summarized the paper’s findings in this way: “Spending the extra money means fewer resources at retirement and a higher standard of living to target; saving it means more resources and a lower target.

”Such evidence offers investors another compelling reason to take advantage of opportunities to save more for retirement. The authors shared the following observation in the paper’s conclusion:

“If households stand pat and maintain their total consumption when the kids leave, they will aim to keep that consumption level in retirement and will have less savings with which to do it. If, instead, they increase saving, they will have more retirement assets and a lower level of consumption to maintain.”

Source: Forum Financial Management, LP

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