School’s Back! Why Aren’t All Moms Rejoicing?
“School days, school days, Dear old Golden Rule Days”
Alas, the good old school days. Finally the kids are gone and we can enjoy some much needed “me” time. Right? Unfortunately, not all moms have that luxury. You see, there is a new social phenomenon in town called boomerang kids. No, it’s not the newest hip-hop band or video game. Boomerang kids are adult children who refuse to sever the family financial umbilical cord.
Yes, they went to school and graduated, maybe even got a job, but somehow boomerang right back into your home and pocketbook. According to VibrantNation, 44% of surveyed women admit to financially supporting their adult children. And because of the recession, they are doing so at a much higher level than they anticipated. And how are they doing this? Not the smart way. 33% of the surveyed women confess withdrawing retirement funds (IRA, 403b, 401k, etc.) to support their adult children. This is a big mistake for several reasons.
One mistake of tapping into your retirement account now is because of the recession. When you withdraw money during a down market, you immediately lock-in the losses, which then erodes valuable retirement income. Yes, you have the money for Junior today, but what about your tomorrow? As a woman, you need to be prepared to live well into your 80s and beyond. Without sufficient retirement income, you are setting yourself up to become dependent on the government, your children, or both. Support your boomerang today or let them support you tomorrow? It’s your choice. Another mistake of withdrawing retirement funds is the tax consequence. If you are younger than 59 1/2, you will pay a 10% penalty plus income tax. If you’re older, you still have to pay the income tax. Now on top of losses, you have added penalties and taxes to your own financial suicide cocktail. So what’s a mom to do who loves her boomerangs, but doesn’t want to drink the deadly poison?
1. REFUSE to withdraw any retirement funds.
2. Be ALERT. I recently overheard my daughter talking about a friend whose parents had given her a gas credit card for (believe it or not) gas. Instead the boomerang used the card at the gas station for snacks and other vices.
3. COMMUNICATE. Your boomerang – not you, should create a plan. Your job is to provide suggestions. You should both agree on a time frame and stick to it.
4. ENCOURAGE, but don’t enable. There’s a difference. You can help them network through your contacts, but your child should do the rest. Allow them to live in “the real world” instead of fantasy land. As a result, they will become better spouses and parents.
And last is to LOVE. We all want to help our adult children and are willing to sacrifice for them. Just don’t do it to your own determent. And by the way, my own twenty-three year old just called and asked to use my credit card for a ten-dollar hold on her graduate school account. I told her, “Of course, it’s only ten dollars”. Her reply? “Thanks mom, I appreciate it. And oh, I’ve been meaning to ask you. I’m short on rent this month. I promise to pay you back, if you could only help this month, and then I will… ” Ah, yes – the good old school days!