My adult son (single, no kids) was laid off from his job about 6 months ago and hasn't found work yet. His financial situation has reached a place where he needs help. My husband and I have offered him the option of moving back home if he would like as a way to save money, but am wondering if that is the best option. Having an extra person in the house is going to increase our expenses anyways, so we have been thinking about instead of him moving home, offering to cover his student loan payments until he's on his feet again. My husband and I traditionally max out our allotted contributions to our retirement plans, but with this option we will need to cut back on our saving efforts. I don't think this is a unique situation in this day and age, so I'm just wondering if there are any words of wisdom or even other options that we haven't considered. Thanks.
You are correct; your situation is not unique in today’s environment. I think that offering him to move in is a viable option and so is covering his student loans if that would allow him to remain on his own. One thing I would caution is that having him move in may start a slippery slope for the future. Sacrificing your retirement saving is a tough pill to swallow and avoiding that at all costs is advisable. Who is going to help finance your retirement if you do not save now?
There are some benefits to having him at home, namely the fact that he will reduce his housing costs substantially. Assuming this savings, perhaps he could actually help with the increased household expenses such as the food and utilities. Secondly, if you pay for lawn service, he could pick up that chore while living at home. This will reduce the amount of out of pocket expenses for you and your husband.
If he does not wish to move back in and is looking for financial assistance, before providing any funds I strongly urge you to take a hard look at his budget. Anytime you are faced with helping out a family member, especially an immediate family member, I think it is reasonable for you to sit down and discuss that person’s budget. You do not want to put yourself in a position of being a family bank account. There has to be some level of personal responsibility. In this situation, I would want an itemized budget before I proceed with providing any level of financial assistance to determine if the situation is a dire as advertised. This may be a great learning experience.
In an effort to keep your retirement savings schedule intact, I would not proceed with financial assistance until you have done your due diligence. In today’s environment, anything short of that may put you in a precarious financial position.
While it may not be unique for parents to be called on to help out adult children, the Great Recession certainly has made this more prevalent. And it has put more pressure on parents who may also be facing their own financial uncertainty about their job security, benefits, real estate values and debts.
If you are going to allow your son to become a "Boomerang Kid," you should clearly outline your expectations and time frame. For instance, you may want to put a time limit or have some clear metrics for what will be considered "back on his feet." This may mean regular updates about his job search efforts or measurable changes in increased savings or debt paid off once he does get a job.
You should note that you may be able to defray some of the increased expenses you noted if your son can be considered a dependent for income tax purposes. There are tests for determining whether someone is a dependent and if he meets them then you can expect to at least get the additional exemption that reduces your taxable income. You can check with your tax professional or www.IRS.gov for further details.
I would encourage him to check with his student loan servicer about submitting a claim for a hardship forbearance. While interest will continue to accrue, your son will get to relieve some of the pressure on his cash flow and resources. And you won't necessarily need to pick up the tab.
Without knowing more about your family and the financial facts and circumstances that you and your son are facing, it seems to me that allowing or encouraging your son to move back into your home will represent a net savings to the family unit as the incremental costs to you and your husband are likely to be significantly less than your son's current housing costs. Of course, this presumption is dependent on your son's lease obligations if he rents or carrying costs if he owns a home.
With regard to your son's student loan payments, I do not recommend jeopardizing the retirement plans of you and your husband by reducing contributions in order to make your son's student loan payments. Your son should contact the servicer of his student loan(s) and ask for any payment relief that they can provide.
In any event, these measures should all be considered temporary until your son finds a job, which should be his primary focus and responsibility.