Parents Work Less After Kids Leave Home

When children grow up and become financially independent, how do parents adjust their finances? Are they finally spending money on themselves? Saving more for retirement? Paying down debt?

No one has come up with a convincing answer yet. Especially puzzling is that past research has shown that parents seem to reduce their consumption after the adult children move out. Yet there’s no evidence that much of the extra money is going into 401(k)s. So what’s going on?

A new study for the first time finds a missing puzzle piece: parents, freed from the obligation to support their children, are choosing to work less.

Parents work one to two hours less per week after their adult children leave home for good, according to researchers at the American Enterprise Institute and the Center for Retirement Research.

Consistent with this finding, their household income declines roughly 4 percent because they’re working fewer hours or finding less demanding jobs with lower pay.

Reaching this conclusion required a series of steps. First, the researchers broadened the definitions of saving and consumption used in earlier studies to see if that shed any light on the issue. Finally, they looked at the parents’ decisions about work.

In the past, the estimates of saving had largely been confined to putting money in 401(k)s. Perhaps something could be learned by counting paying off a mortgage or other debts as a form of saving. But the researchers still found no evidence parents are paying their debts off faster after the kids leave.

So where is that extra money going?

Another possibility is that past research showing that empty nesters spend less might be overlooking something. It’s possible that they are still helping their ostensibly independent adult children with rent, down payments, or student loans. But even under this broader definition of spending, parents, on average, give little or no money to the kids after they move out.

After many years of working and raising children, empty nesters seem to be taking advantage of their freedom to choose leisure over work. So that’s one reason they are spending less, but not saving more.

To read this research brief, authored by Andrew Biggs, Anqi Chen, and Alicia Munnell, see “Do Households Save More When the Kids Leave? Take Two.”

The research reported herein was derived in whole or in part from research activities performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Retirement and Disability Research Consortium.  The opinions and conclusions expressed are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the federal government, or Boston College.  Neither the United States Government nor any agency thereof, nor any of their employees, make any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report.  Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof.