Author ORCID Identifier

https://orcid.org/0000-0002-7568-529X

Year of Publication

2019

Degree Name

Doctor of Philosophy (PhD)

Document Type

Doctoral Dissertation

College

Agriculture, Food and Environment

Department

Family Sciences

First Advisor

Dr. Jason D. Hans

Abstract

A slight majority of American households headed by 55–64-year-olds do not have any savings for retirement, and those who have retirement savings have a median of around $109,000 saved, which is equivalent to an inflation-protected annuity of $405 per month (i.e., well below the official poverty level). Among the main reasons cited for the lack of retirement savings among parents is a desire to provide financial support to their young adult children. Indeed, on the whole, parents spend twice as much on financial support of their adult children as they save for retirement (Merryl Lynch, 2018). Understanding the precursors and predictors of this spending behavior may provide insight into decisions that lead to a lack of self-sufficiency in retirement, and hint at opportunities for prevention and intervention efforts aimed at bolstering retirement savings. To that end, this project was designed to examine the extent to which these financial decisions vary by context and belief systems.

Specifically, three studies were developed to investigate motivation for providing support to young adult children in lieu of retirement savings. A sample of 496 respondents who were 40 years of age or older was recruited using the online Amazon Mechanical Turk (MTurk) platform. Respondents were presented three factorial vignettes in which hypothetical parents were deciding whether to provide support to their adult child with a major expense—a car (Study 1, Chapter 2), college tuition (Study 2, Chapter 3), and a house (Study 3, Chapter 4)—and respondents were asked on a four-point Likert-type response scale whether parents should (definitely yes, probably yes, probably no, definitely no) provide financial support to their adult children in the given context, and to provide a rationale for their response. In each study, key contextual variables were randomly manipulated within the vignette across respondents (e.g., adult child’s gender [female vs. male], parents’ age [early 60s vs. late 40s], source of money [withdrawal from vs. under-contributing to retirement savings], college major [social sciences vs. business degree], and number of siblings [one vs. three]). Ordinal regression models were used to estimate the effects of the randomly manipulated variables on endorsement of parental provision of financial support to adult children, and content analysis was used to identify the most common rationales respondents provided for the beliefs they espoused in the closed-ended items.

Endorsement of parental use of retirement saving for financial support varied depending on whether the stated purpose of the money was for purchasing a car (67% endorsed), paying for college tuition (34% endorsed), or paying the down payment on a house (31% endorsed). Across the three studies, only older parents (in their early 60s [Study 1]) and withdrawing money from a retirement account (Studies 2 and 3) had negative effects on endorsement of parental support; responses according to the other randomly manipulated variables did not statistically vary in these data, suggesting norms that supersede the other manipulated variables. Among respondent sociodemographic characteristics—gender, socioeconomic status, clarity of retirement goals, having adult children, and helping them with large purchases similar to situations described in the vignette—only ownership of a retirement savings account or a pension plan had a consistent negative association with endorsement of parental support across all three studies, indicating that people with retirement plans were more conservative in their attitudes about financially supporting young-adult children than were those without retirement plans. Major rationales for the provision of parental financial support included (a) responsibility for the child (i.e., a solidarity belief system), (b) a belief that children pay back their parents (i.e., a reciprocity belief system), and (c) a belief that parents should make sacrifices for their children (i.e., an altruistic belief system). Given that the majority of studies investigate retirement planning from an individual perspective, as if workers were making their decisions rationally in isolation from their family context, future studies may benefit from a more inclusive approach that takes into account the complexity of family relationships and also social perception of parental financial obligations toward their children.

Digital Object Identifier (DOI)

https://doi.org/10.13023/etd.2019.271

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