Some of your employees may be supporting their grown children instead of saving for retirement.

Yes, you read that right. According to a report by Merrill Lynch and Age Wave, U.S. parents spend $500 billion a year on their 18- to 34-year-old adult children—twice the amount they contribute to their retirement savings.

Seventy percent of adults between the ages of 18 and 34 received some sort of parental financial support in the last year, and more than half of those between the ages of 30 and 34, the report states. This is alarming because almost 25 percent of U.S. adults don't have any retirement savings or pension, and 64 percent of U.S. adults know they aren't adequately preparing for retirement, according to the 2018 Report on the Economic Well-Being of U.S. Households.

Parents Supporting Millennial Children

The Merrill Lynch and Age Wave report found that 58 percent of millennials acknowledge that they could not afford their current lifestyle without the financial support of their parents. Another survey by CreditLoan shows that 87 percent of this age group have been broke in the past year.

What are parents paying for? The report shows that they aren't just helping their grown children with emergencies. They are covering:

• Food/groceries: 60 percent
• Cell phone: 54 percent
• Car expenses: 47 percent
• Education: 44 percent
• Vacations: 44 percent
• Rent/mortgage: 36 percent
• Student loans: 27 percent

In addition to helping their children as adults, parents of millennials may have also taken out Parent PLUS government loans or private loans to pay tuition when their kids were in college. Though the data on private loans is more difficult to assess, what we know about Parent PLUS loans is staggering: Currently, 3.6 million parents owe at total of $88.9 billion.

What Does This Mean for Parents?

Most parents of millennials are 55 or older. They should be slowing down and preparing for retirement. However, in 2018, the Bureau of Labor Statistics shows that those over the age of 55 made up almost half of the new hires for job gains that year.

Why are so many new hires in this age group? A recent Bankrate report shows that almost half have used retirement funds in order to help their children. To make up this new deficit, many parents plan to work into their retirement years.

The problem is that although the sentiment is good, the plan is not. Working past the typical retirement age may not be practical. Keep in mind that older adults:

• Have more illnesses that could require them to stop working before making up the retirement fund deficit
• May need to stop working to care for an elderly spouse
• May no longer have the skills needed to work in their current occupation, leading them to take other jobs at lower wages
• Have less time to make up the missing retirement funds
• Must begin taking money out of retirement funds by age 70.5

Even though the Age Wave study shows that 82 percent of millennials plan to help their parents in retirement if needed, experts say that parents should focus on their own needs before helping out their adult children.

Employer Financial Wellness Programs Help

Financial wellness programs can help employees make appropriate decisions about their finances and retirement to help them stay on track. For example, they can learn how to:

• Convert parent loans to another recipient
• Refinance student loans to take advantage of good credit and lower interest rates
• Find loans, scholarships, grants, and other programs that can help their millennial child
• Determine the effects of removing money from a 401(k) or IRA, before taking that action
• Create a plan that allows them to remain financially sound while helping their children

By providing a financial wellness program, employers can help employees who are nearing retirement make good decisions. They can simultaneously help millennial employees get on a path to fiscal responsibility.

Kris Alban is executive vice president of iGrad, a San Diego-based company that provides interactive, personalized financial wellness solutions to employers, financial institutions, colleges and universities. Its Enrich platform is used by more than 300 employers, banks and credit unions.

From: BenefitsPro