Empty Nest Means Empty Wallet for Many Parents

Older Americans are finding their retirement savings threatened by various economic forces, but according to a new study, they may be surprised to find one of the biggest threats to their retirement accounts is their own spending behavior, specifically after their adult children leave home.

A brief published last week by researchers at the Center for Retirement Research at Boston College said its results show that households increase discretionary spending significantly once their children leave home, compared to other households.

The brief found that compared to households that have never had children and households who still have dependent children in residence, households that recently had children move out increased their “non-durable consumption” – spending on home goods, clothing, vacations, electronics and not including fixed housing expenses – by 51 percent.


This challenges the notion that parents maintain an even level of spending over time, and save the difference once their adult children leave home.

The researchers point out that people whose adult children move out and become financially independent should use this opportunity to take newly freed-up money and peak income to shore up their retirement savings.

This could benefit parents in two ways: rapidly building savings, and keeping their per-person consumption low so they do not need as much to sustain their lifestyles in retirement. Since people are not choosing to do this – perhaps this is due to “impatience or inertia,” researchers say – it unfortunately puts them in a position to underfund their nest egg and not be able to sustain their current lifestyle in retirement.

While there is some disagreement as to the level of unpreparedness of older Americans for retirement, there is urgency to these findings because now more than ever, the responsibility to fund retirement falls largely on the individual.
To view the complete brief, see here.

Written by Clare Pierson

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  • Studies of this nature help defrock the social science preachers who pontificate dogma with no evidence backing their simplistic and idyllic assumptions.

    Of course there are no absolutes. Some will become frugal or become more so when they also become empty nesters. Some will downsize in an attempt to bring costs under control. But what this study points out is the propensity to continue spending at the same levels despite family situation or retirement needs.

    Humans do not tend always to respond in what may appear to observers as a rational or reasonable manner when circumstances change. With age comes less flexibility both physically and psychologically; it also brings responsibility beyond the immediate family. The other problem is most social scientists have treated empty nesting as if it existed in a true vacuum; real life is not that way.

    What this brief document does not address is the sandwiched generation. Even though adult children move out, many of those who are sandwiched find the cost of caring for the older generation rises. Even though sandwiching has been with us for decades, its frequency is on the rise and will continue to be on the rise for at least the next three decades if not much longer.

    As one who has just seen his last child get a bachelor’s degree, parents put off home maintenance, car purchases, vacations, new clothes, costly charitable activities, and costly activities in order to help their children leave the nest. By then other children are starting their families and need help. The financial demands on empty nesters do not necessarily drop; sometimes depending on the educational costs of their children, their costs can rise.

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