Parents do save more for retirement after their children have left home than before, as might be expected, but the increase typically is not enough to make a substantial difference in their retirement preparedness, a study by the Center for Retirement Research found.
“When children become financially independent, parents often have a substantial amount of extra money on hand. In this case, they have two basic choices: spend more on themselves or increase their saving for retirement,” it said.
To find out if money once spent on goods and services for children instead is diverted to spending by the parents for themselves, the authors examined tax data to analyze how investing in retirement savings plans differs.
The results showed that households increase their saving when the kids leave by 0.3 to 0.7 percentage points, depending on the definition of children being out of the house—for example, does a child away attending college count or not.
In addition, even that increase may not account for financial assistances that parents may provide to children even after they have left home.