The Biggest Threat to Your Retirement? Check Your Basement

It's a parent's worst nightmare - unemployed adult children living in the basement.

Well, if ever you needed a reason to get junior out of your house this would be it. Parents who provide financial assistance to unemployed adult children do so at considerable risk to their own wealth and well-being, according to a new RAND Corporation study. They eat less, work more and, worse yet, save less for retirement.

In short, the decision to provide room and board and cash to unemployed adult children may not result in the best financial outcome for parents. So, what might parents do to avoid or lesson worst-case scenarios?

Help Them Grow

For starters, Sarah Newcomb, director of behavioral science at Morningstar and author of Loaded, says it's important for parents to mentally separate money that is earmarked for their retirement as "off limits" or "untouchable" - even to them.

Two, if there is a pattern of behavior - with your adult child(ren) leaning on you for financial help - then your "help" may actually be hurting their ability to grow into independence, says Newcomb.

Three, look for other ways to help that don't involve giving money, says Newcomb.

Four, hold up a mirror to yourself and ask why you feel obligated to help your children and challenge those stories.

And five, just accept it; it's your job. Helping children when they are down and out - is what parents signed up for, says Meir Statman, a professor at Santa Clara University and author of Finance for Normal People: How Investors and Markets Behave.

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