Are boomerang kids hurting your retirement?

(MoneyWatch) My 75-year old father recently told me, "You can't imagine how many of my friends help out their adult children financially. It's really changed their retirement years!"

Since the recession began, we have been hearing about "boomerang" kids who leave the nest for a period of time, only to return to the fold for financial reasons. Everyone knows a 20-something or two who ran into the brick wall of the Great Recession's sagging jobs market. Despite the recent improvement in overall labor conditions, things are still tough for younger workers. According to the March jobs report, the unemployment rate for those between the ages 20-24 is a sky-high 13.2 percent, versus the national rate of 8.2 percent.

Because it's so hard for the younger generation to land jobs, many of them are scrambling to add unpaid internships to their resumes and camping out at mom and dad's abode. A recent Pew Research Center poll noted that a staggering 40 percent of 18- to 24-year-olds currently live with their parents, and among all 18- to 34-year-olds surveyed, 61 percent say they know someone who had to move back home because of the economy.

In addition to providing housing, many parents are helping with living expenses, providing insurance coverage and doling out spending money. The National Endowment for Financial Education (NEFE) found that 59 percent of parents are providing, or have in the past provided, financial support to their adult children when they are no longer in school. Many of the parents who responded to the poll said that they were helping out their kids because they were worried about their financial well-being, while others did not want to see their children struggle.

Both of these surveys suggest that parents are more likely to help out children aged 18-39. But what intrigued me about my father's friends is that most of their kids are over the age of 40. These "kids" have families of their own, and due to unforeseen events (loss of job, reduction in pay, living beyond their means), they needed parental assistance to maintain their lifestyles.

In some cases, the parents can afford to help out. Whether they should or not, is a different question. As I once said to a former client, "one parent's 'help' is another's 'enabling behavior.'" Another admitted that while he pitches in every now and then, he worries that by doing so his "kids will never learn how to make hard choices."

I am more concerned with the parents who are putting their own financial lives in jeopardy for the sake of their adult children. If you are doling out money to your kids on a regular basis, here's a useful gut check question: Are you making greater sacrifices in your life than your kids are making in their lives? If so, a tough conversation needs to occur.

Parents who assume additional debt or co-sign loans with their children should be aware of the risks involved with these transactions. Remember, co-signing means that if the primary borrower does not pay the debt for any reason, you are responsible for the total amount of the loan. In fact, you have a big bull's-eye on your back, because when the moment of truth comes, the creditor is going to go after the party with the most money -- you!

Co-signing can also negatively impact your credit score. For some, this is irrelevant, but if you were thinking about financing a second home, this could be a big issue. If your kid is late in making a payment, it will damage your credit, and the mere existence of a co-signed loan could change your debt-to-income ratio, making it harder to qualify for future credit.

I'm not saying that you shouldn't help out your children in need, but you should be smart about the financial assistance you provide. Financial independence is a marker of adulthood, and there's a big difference between parental assistance and unhealthy dependency.

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