Wednesday, June 01, 2016

Does the Empty Nest Boost Savings?

To save enough for retirement, empty nesters are supposed to put the money they once spent on children into retirement savings. Do they? The results of a Center for Retirement Research analysis show empty nesters do save more, but the increase is miniscule.

Analyzing data from the Health and Retirement Study and the Survey of Income and Program Participation, CRR researchers determined how much a household's 401(k) savings increased after their children left home. Theoretically, 401(k) savings should climb by 12 percent once the nest is empty. But the analysis of the HRS data found an increase of only 0.3 to 0.6 percent, and the analysis of the SIPP data found an increase of just 0.7 percent.

The researchers conclude: "Although this finding is not the last word on the subject—perhaps parents assist children financially even after they have left home—it does suggest that we should be concerned about households' preparedness for retirement."

Source: Center for Retirement Research at Boston College, Do Households Save More When the Kids Leave Home?

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