Do Parents Live It Up When Children Fly the Coop?

Anthony WebbNorma B. Coe Zhenya Karamcheva

IB#10-18

The brief’s key findings are:

  • Estimates of retirement security depend crucially on the assumption of what parents do with the money that is freed up when their children leave home.
  • The Health and Retirement Study’s consumption survey is used to determine whether parents save it for retirement or spend it on consumption.
  • The results show that households whose kids move out increase spending by about 50 percent per person relative to other households.
  • Such changes increase the risk that households will be unable to maintain their pre-retirement living standard once they retire.