JSIT20-02: Impacts of Parental Health Shocks on Adult Children’s Wealth Accumulation

Abstract

Understanding current and future retirees’ financial security requires considering that decision-making and subsequent consequences may extend beyond them to their significant others (or their adult children). Children serve as important safety nets to parents according to emerging descriptive evidence, but this aspect is understudied and frequently unconsidered. This study initiates estimating how the responsibility to financially support parents affects adult children’s financial planning and savings, using parental health shocks as a plausible catalyst. To assess if parental health shocks affect adult children’s wealth accumulation, this study reports tabulations and parameter estimates derived from a pseudo-event study design employing the Panel Study of Income Dynamics. These estimates show that adult children’s retirement savings are not substantially harmed by supporting their parents, although longer parental hospitalizations are related to lower liquid savings. Additionally, parental hospitalizations induce child-to-parent transfers.