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

The Social Security Administration has indicated interest in understanding current and future beneficiaries’ financial security, including considering that decision-making and subsequent consequences may extend beyond beneficiaries to their significant others [or their adult children]. Children serve as important safety nets to parents, but this aspect is understudied and frequently unconsidered. This study seeks to examine intergenerational financial transfers in relation to resulting retirement wealth as provoked from family shocks. Any changes to future beneficiaries’ private retirement savings will also affect their eventual reliability on and adequacies of Social Security benefits, especially among economically vulnerable individuals and households. Accordingly, this study investigates a potential link between parental shocks and adult children’s financial outcomes by examining whether parental shocks may induce financial transfers, which in turn may impact an adult child’s savings. This study relates to a larger unaddressed inquiry concerning how the sudden responsibility to financially support parents affects adult children’s long-term financial security, including retirement preparedness. This study uses data on parental health shocks, intergenerational transfers, and wealth accumulation from the Panel Study of Income Dynamics and employs a pseudo-event study design that exploits the timing of parental health shocks relative to when reported money transfers between parents and adult children occurred. This study examines how parental health shocks directly affect adult children’s liquid and retirement savings, as well as how parental health shocks directly affect intergenerational financial transfers to and from their adult children.