A recent study completed by TD Canada Trust revealed that the boomerang effect is in full swing as many millenials continue to lean on the baby boomer generation for support.
The survey was conducted using 523 millenials (ages 18 to 34) and 365 non-retired Boomers (ages 52 to 70) from October 21 to November 3, 2016.
During a time when the boomers should be preparing for retirement, TD says, many instead have to experience children and grandchildren returning to the family home in need of financial assistance — a trend apparent everywhere across the country, including here in the Columbia Valley. Brendan Donahue, financial advisor at Manulife Financial in Invermere, said this is a problem he can understand as a parent.
“It’s easy to say well ‘why would you do that,’ but I have three kids of my own and if they were in that situation in their young 20s it would be very difficult to tell them to get out of the house,” he said.
According to the study, 62 per cent of the boomer generation is feeling this déjà-boom effect, believing that it is preventing them from saving for their retirement. The survey also revealed that the tradeoff between providing financial support and saving for retirement is placing boomers under a considerable amount of financial stress with one in four Canadian boomers admitting to supporting their adult children or grandchildren.
“While the déjà-boom effect may be an unexpected event in retirement planning, it is important for pre-retirees to remember that it’s not too late to plan for the future and achieve their goals,” Rowena Chan, senior vice-president with TD Wealth and Financial Planning said in the press release. “A lot can be accomplished in the 10 to 15 years before retirement and planning ahead is a key step in making the journey as smooth as possible.”
Donahue said that although few of his clients locally present this need, he understands the pressures it may place on a family and your retirement strategy years down the road.
“There’s that little side of everyone that says if they stay at home and don’t have many expenses, does it really encourage them to hit the pavement and go find a job even if it’s not a good job for a little while,” he said. “It’s easy to say that but when you’re in that situation it can be pretty difficult.”
TD provides boomers with several recommendations including working with a financial planner to determine what options may be right for your specific goals and needs while also negotiating some type of return from potential children or grandchildren who may rely on your financial support. This can mean them covering the cost of some household items such as food or utility bills, Donahue said.
“There’s a difference between doing that and being a little too accommodating running into a scenario where you just enable their inactivity,” he said. “I think it would create a better relationship too, right, where they’re no longer a kid where you have to provide everything for them but you’re trying to help them out financially to get them on their feet.”
Another recommendation TD puts out is to map out a date when you will no longer be financially committed to each other, setting up a number of goals as you approach the date to ensure that it is realistic for the offspring to move out and be self-reliant on that date.