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The Great Wealth Transfer was supposed to be about baby boomers passing down wealth to Gen X and millennials. Increasingly, though, wealth is moving in the opposite direction.
Adult children are supporting cash-strapped boomer parents, helping them pay off debt and cover living expenses, including the cost of long-term care.
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Boston University economist Laurence Kotlikoff sees the challenge as president of Economic Security Planning Inc. (1)
“If you’re not taking care of yourself, you’re forcing your kids to be your insurance company,” he told Business Insider (2).
The situation is compromising younger generations’ own financial future, as they dip into their nest eggs, spend more of their income or forgo employment opportunities to care for aging parents.
Boomers dealing with debt
How did things get this way? A lot of it boils down to boomers’ mortgage and consumer debt — $4 trillion worth, according to a new Visa U.S. Economic Insights report (3) entitled The Great Wealth Transfer Reality Check*.
The report found that 41% of boomers aged 65 to 79 still have mortgages, as do 31% of Americans 80 and older. Half of them spend upwards of 50% of their income on housing.
Meanwhile, boomers are carrying significant balances on credit cards, car loans, personal loans and business loans. As Wayne Best, chief economist at Visa, told USA Today (4), they “have more liabilities than I think a lot of people realize.”
Carrying so much debt in later life comes with two challenges. First, it’s hard to pay down debt that continues to accumulate interest while living on a fixed income. Nearly 44% of older Americans rely exclusively (5) on Social Security for all of their income.
Second, unexpected expenses are inevitable. Whether it’s a major home repair or mounting medical bills, those costs can quickly overwhelm a fixed budget. The Center for Retirement Research at Boston College estimates (6) that about 40% of retirees don’t have enough cash to cover these kinds of expenses, even drawing from their retirement savings.
Boomers’ retirement savings are often smaller than those of younger generations because 401(k)s and Roth IRAs became widely available later in their workplace lives. Even those lucky enough to have workplace pensions (7) or annuities often receive modest payments. According to the Pension Rights Center, the median annual benefit from private pensions or annuities was $11,440 in 2024.
Faced with longer lives, mounting debt and limited retirement savings, some boomers are turning to their children for financial help. Even when they don’t ask directly, many adult children feel obligated to step in.
Brandon, 39, told Business Insider his mother is on the cusp of retirement but spends more than she earns and has begun hinting that she hopes he’ll help support her in the future.
“I feel a great deal of guilt for her future because I want my mom to be OK,” he said (2).
Bank of Mom and Dad makes way for Bank of Kids
To be fair, many parents have helped their adult children pay for college or make down payments on homes — a phenomenon often called the Bank of Mom and Dad.
Now, that trend is increasingly being replaced by the Bank of the Kids as aging parents enter new stages of life, including moving into long-term care. The median monthly cost of assisted living is $5,419 a month (8), while memory care (9) averages $6,690 a month.
It’s no wonder adult children are feeling the pinch.
According to AARP research (10), 22% of family caregivers have taken on debt to support older loved ones, spending (11) $7,000 or more out of pocket each year. Among them, 31% have depleted their savings, 19% have fallen behind on bills and one in five can’t cover their own basic living expenses.
For adult children providing hands-on care, the financial burden can be especially severe. AARP notes that government assistance is available for some family caregivers through Medicaid (12), the Department of Veterans Affairs and certain state programs. Payments typically range from $40 to $50 a day.
While an older parent can’t suddenly double their retirement income, it’s worth sitting down with them — and potentially a financial advisor and estate lawyer — to discuss ways to improve their financial security. That could include downsizing to eliminate mortgage debt or exploring financial aid programs.
J.P. Morgan also recommends (13) talking with your parents about estate planning, including whether they want to preserve an inheritance or draw down their assets if they need extensive care later in life.
The goal is for parents to enjoy their golden years without jeopardizing their children’s ability to enjoy theirs.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
Economic Security Planning (1); Business Insider (2); Visa (3); USA Today (4); Seniors League (5); Center for Retirement Research at Boston College (6); Pension Rights (7); A Place for Mom (8), (9); AARP (10), (11); U.S. Government (12); JPMorgan Chase (13)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
