But can they afford it? An increasing number of both baby boomers nearing retirement and current retirees find themselves in precarious financial situations.
Mike Hennessy crouched behind a large beach ball to deflect a deluge of rubber balls delivered by his 5-year-old grandson, Braeden. Playing daily rounds of a made-up game his grandson named "Dude Brother Russell" wasn't how Hennessy, 58, imagined spending his retirement days.
But when his daughter didn't have thousands of dollars to pay for day care, Mike and his wife, Joan, willingly stepped in.
Grandparents helping their children and grandchildren is nothing new; that's what family is for. But the extent of the support -- whether it's providing a place to live, caring for young grandkids, covering back-to-school shopping or paying college tuition -- has increased with the fragile economy.
At the height of the Great Recession, nearly two-thirds of America's grandparents were providing an estimated $370 billion in financial support to their grandkids over the previous five years, according to a survey by the MetLife Mature Market Institute. That averages out to $8,661 per grandparent household.
"Grandparents are filling the gaps," said Amy Goyer, a grandparents expert with the AARP. "They're paying for the school trips, the sports, the costs of extracurricular activities."
But can they afford it? An increasing number of both baby boomers nearing retirement and current retirees find themselves in precarious financial situations. With the winding down of traditional pensions, people are more reliant on their own retirement savings to pay the bills. But many have failed to save enough.
The median balance of retirement accounts for 55- to 64-year-olds is about $100,000, which would buy a retiree an annuity that pays $4,500 a year, calculates Anthony Webb, an economist with the Center for Retirement Research in Boston.
Consider declining home values, higher debt levels among seniors and rising medical costs, and "a lot of people are going to face the prospect of a very significant drop in their standard of living at retirement," Webb said.
According to the MetLife survey, two in five reported providing "general support," a catch-all category that includes expenses such as purchasing a computer, taking a family vacation or stocking a young adult's fridge. One in four assisted with educational expenses, while one in five contributed to a major life event such as buying a house or getting married.
The dollar amount doesn't include money given to support adult children, an amount that trickles down to grandkids. This implies that grandparents are spending even more than the $370 billion figure suggests. A quarter of 1,077 grandparents surveyed said they were providing more financial assistance to their grandchildren than they had previously because of the tough economy.
Patrick Hagan, a Golden Valley-based certified financial planner with Ameriprise Financial, has listened as his aging clients wrestle with the desire to help their children, even if they can't afford to do so.
Hagan said it's a common refrain:'If my kids are having a hard time making their house payment and they could lose their house, we'd rather help them now.'"
Convincing grandparents that they can't afford to tap their nest egg to help is "a tough conversation to have," Hagan said.
Baby boomers are also wrestling with the possibility that their kids may never be as financially successful as they are, said Goyer. That's a key element of the American Dream, and one that's hard to give up. "They want to help," she said. "They want the best for their grandkids."
More than three-quarters of grandparents in the MetLife survey responded that it's more important to provide smaller bursts of financial assistance when needed than to leave a lump sum inheritance at the end.
That's concerning, said Sandra Timmerman, director of the MetLife Mature Market Institute, the research center on issues of longevity and aging for insurer MetLife.
"Grandparents need to think about their own retirement before giving away too much money to their adult children and grandchildren, because it will come back to bite the family eventually," she said.
Timmerman is referring to a fear of most retirees -- running out of money. One estimate of the cost of health care in retirement is close to a quarter million dollars. Inflation is a worry. And there's the uncertainty of investment returns and how much money one can safely withdraw each year from retirement funds. No child wants to see their parents struggling to make ends meet. No parent wants their children to take care of them in their later years. Yet for many families, the focus is on their kids' current standard of living, not what will happen if they deplete their nest egg too soon.
Mick Endersbe, an adviser with SagePoint Financial in Duluth, has taught more college planning seminars than he can remember. In every one, there are well-meaning grandparents who remember when a college degree didn't cost more than a starter home and want to contribute. While he appreciates their desire to help, he says many haven't thought it through. "They haven't analyzed their retirement situation and in many cases they don't have a disciplined plan for helping the kids," he said in an e-mail.
The amount they are contributing is growing. Tuition paid for by family and friends spiked from $5,496 on average for the 2008-09 school year to $9,243 the next year, according to a report by student lender Sallie Mae. The report doesn't break down the makeup of that group, but the student lender assumes the majority are grandparents.
The gift of time
What the MetLife report doesn't measure is the amount of non-monetary help provided by grandparents, especially child care. According to research conducted last fall by the Wilder Foundation, seven in 10 Minnesotans who need child care rely on family and friends for some help. Of that group, 52 percent are grandparents. Just 38 percent of these caregivers are paid.
Amy McDonough's mom watches her three kids every Monday. The 40-year-old from Stillwater estimates savings of $24,000 over the past eight years.
"The monetary benefit is one thing, but the emotional side is huge," said McDonough, whose mom cooks dinner on Mondays, serving up chicken and rice, goulash and other favorite meals from Amy's childhood. McDonough thinks having her mom, who started weekly child care after retiring from teaching, has also allowed her greater success at work, giving her a day each week where she can work late, and someone to help with sick kid duty so she doesn't miss too many days in the office.
Timmerman said grandparents typically want to be more involved and don't look at baby-sitting their grandchildren or taking them back-to-school shopping as a burden.
"It's a stage of life that's very important to the baby boomers," she said. A Pew Research Center report found that grandparents the center surveyed ranked spending time with grandchildren and more time with family as what they valued most in old age.
Hennessy, who retired from an IT career in 2006, said the time he spends with Braeden makes up for the years he spent climbing the corporate ladder, when he had less time for his own kids. He and his wife, who live in Plymouth, don't have a line item in their budget that tracks money they spend on their grandson. But he estimates it's "easily thousands" per year.
Joan, who stayed home to raise their three kids, has postponed her plan to enter the workforce part time. Still, Hennessy thinks their finances are on track because the money they'd expected to use for travel to Europe and Mexico goes to trips to the Minnesota Zoo and stocking the pantry with brownie ingredients instead.
"There will be time for us to travel," Mike said. "We have zero regrets about doing what we're doing."
Kara McGuire • 612-673-7293