- Center for Retirement Research at Boston College predicted 50% of today’s workers won’t have enough money to sustain their standard of living when they retire
- Reverse boomerang effect refers to parents moving into adult children’s home
Within just 12 years, the parents of Gen-Xers, Millennials and even some younger Boomers have lived through two major financial calamities…the Great Recession and this current, out-of-the-blue COVID pandemic economy.
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First, the Great Recession – unemployment levels hit 10% and nearly 10M homeowners lost their homes. Additionally, look at how much the Great Recession hurt retirement accounts. According to a story written by Teresa Ghilarduccie for The Atlantic using data from the federal government compiled by Joelle Saad-Lessler at The New School for Social Research, workers who were between the ages of 51 and 59 in 2009 and who had been on the job for 20 years lost approximately 25% of the money they had in their retirement accounts. About 45% of those workers saw their retirement balances decrease by thousands of dollars between the spring 2009 and the fall of 2011 and a significant number of them “simply continued to lose money even after the biggest recession-induced drops.”
Second, this current, out-of-the-blue COVID pandemic economy has caused +33.50M people to lose their incomes/jobs/businesses in just seven weeks and over 3M homes mortgages in forbearance after just three weeks of having forbearance as an option for homeowners who have unexpectedly lost their incomes and/or businesses.
The Wall Street Journal predicts that April’s employment report will show that the coronavirus pandemic has inflicted the largest one-month blow to the US labor market on record, 16.1% unemployment. For comparison purposes, unemployment remained above an average of 14% from 1931 to 1940 during the Great Depression.
In early January 2020 prior to COVID, the Center for Retirement Research at Boston University predicted that 50% of today’s workers will not have enough money to sustain their standard of living when they retire. On top of not having enough money to sustain their standard of living, the AARP Public Policy Institute predicted “…our nation will face a severe shortage in accessible and affordable housing…” to meet the needs of the 20% of our population who will be over 65 by 2030.
So what are the parents of Millennials, Gen-Xers and even some young Boomers going to do as the little they have in retirement savings gets even more depleted by the COVID economy? Move into their adult child’s home. In fact, a growing number of housing experts and economists are predicting that the already 14% of adults living in the house of their adult child (according to the Pew Research Center) will actually turn out to become examples of what trend economists are calling the reverse boomerang effect.
Georgia Lee Hussey, a financial planner in Portland OR, is actually seeing this reverse boomerang effect in real time. Hussey last week told The New York Times, “Most of my clients have at least one parent that needs to be factored into their financial planning.”
Such financial planning may include the reverse boomerang effect of parents moving into the homes of their Millennial, Gen-X or young Boomer child(ren) and/or their child(ren) providing financial assistance to their parent(s).
Perhaps this double whammy of the Great Recession and the COVID economy is making everything old new again. My grandmother split her year into thirds, living with each of her three adult daughters in their respective homes prior to both the Great Recession and this COVID nightmare. (I, by the way, loved having my grandmother live with us.)
Who’s to say at this point how many of you and your clients will have your parents and grandparents living with you simply because these parents and grandparents are now, after two economic wallops in just 12 years, completely tapped out and have no where else to live.
Thanks to The Atlantic, the Pew Research Center, AARP Public Policy Research, Center for Retirement Research at Boston University and The New York Times.