As more and more adult children opt to stay at home longer, parents can face new challenges in making ends meet.

Say so-long to the days of "empty nesters," when parents would make life changes once their children had moved out and moved on. It is more likely that parents today are dealing with a "full nest."

It is estimated that 85% of this year's college graduates are planning to head back to live with mom and dad.¹

And, a study in 2010 by researchers at Columbia University using the U.S. Current Population Survey found that 52.8% of 18- to 24-year-olds were living at home, up from 47.3% in 1970.

The study also showed that one-in-seven young adults is emerging from their teenage years with no pathway to financial and economic independence.²

For parents it can be trying. While it's important to respect the independence of full-grown children, it's not that easy when they are exercising that independence under your roof. What's more, it can also be a drain financially.

Food, heating, gas, electricity, and many other daily expenses can be a lot higher when they include another mouth or two.

If you find yourself with a full nest, here are a few tips to help make ends meet:

Make a budget:

Tracking what you spend and comparing it with a monthly plan will help you to identify where the money is going, and where you can cut back. It can also show what costs are truly shared and what ones relate to specific family members.

Share the common costs:

Most live-at-home adult children are there for a reason, often due to lack of a job or inability to afford a place of their own. But that does not mean they should not shoulder a portion of household expenses. Work out a realistic rent or cost-sharing arrangement and stick with it.

Separate the individual costs:

Is your live-at-home son or daughter a finicky eater? Do they demand certain foods or sundries that you would not buy otherwise? Then let them pay for them. They'll learn to appreciate what their tastes are actually costing, and avoid resentments on your part.

Share the chores:

Assigning chores and responsibilities may seem obvious, but often it's overlooked, leaving mom and dad to do all the work. Garbage, lawn, housework -- make it clear to all who is responsible for what task.

Don't make it too comfortable:

If your goal is to eventually nudge your fledglings out of the nest, you need to provide incentive. That means not treating them as permanent guests, but as temporary live-at-home adult children, with obligations and responsibilities of their own. In the end, they will appreciate it as much as you.

If you have any questions, please feel free to contact your Capital Advantage, Inc. advisor at 925.299.1500.

¹Source: Harper's Magazine, August 2011.
²Source: Columbia University, National Center for Children in Poverty, "A Profile of Disconnected Young Adults in 2010," December 2010.

Your Old Retirement Accounts:
Stay or Roll Over?

1. First check your current plan rules to confirm that rollovers are permissible (the vast majority of workplace retirement plans accommodate rollovers).
    
2. Check with your new plan's administrator to see if they offer a rollover service. If not, contact the adminstrator of your old plan(s) (you can find this information on your statements) to start the process.

Comparison Shop

Before you initiate a rollover, be sure to compare the investment options of your old and new plans -- and/or any IRA option you are considering -- and their associated fees.

Diversification:
Were you able to properly diversify your assets in your old plan?1 If your investment choices were limited, you may want to move your money.

Fees:
Are the investment fees in your old plan higher or lower than in your new plan? If you were paying more for the investments in your old plan, it could help save you money to move your assets.

Distributions: A Last Resort

Be sure to understand the difference between a rollover and a distribution. A rollover allows you to transfer your money from one qualified retirement account to another without incurring any tax consequences. A "qualified" account can be either your new employer's plan or a rollover IRA.

A distribution is essentially a withdrawal from your account. If you request a distribution, the account administrator is required by law to withhold 20% of your account balance to pay federal taxes. State taxes, if applicable, are also due. If you are under age 59½, you could be subject to an additional 10% federal early withdrawal penalty. You can roll over assets from a distribution within 60 days of receipt and reclaim those tax withholdings. If you wait longer than 60 days, a rollover is not permissible.

If you have any questions about your retirement accounts, please feel free to contact your Capital Advantage, Inc. advisor at 925.299.1500.

This column is provided through the Financial Planning Association, the membership organization for the financial planning community, and is brought to you by Capital Advantage, Inc., a local member of FPA.

¹Asset allocation and diversification do not ensure a profit or protect against a loss in a declining market.

It's not your imagination: The stock market is bumpier than normal. The U.S. economy can't find its footing -- and every piece of bad news, whether at home or abroad, has the potential to send the markets reeling. All that volatility can make it tough on investors to stay the course.

Historically speaking, the market today is about three times more volatile than it has been in the past. Specifically, the S&P 500 rose or fell by 2% or more an average of 5 times per year from 1950 until 1999. Since 2000, however, that average jumped to 12.5 times per year for advances and more than 14 times for declines.¹ What's more, 10 of the 20 largest daily upswings and 11 of the 20 largest daily drops since the beginning of 1980 have occurred within the last three years.²

Who or what deserves the blame for heightened market volatility is difficult to say. On the economic side, uncertainty about when and how fully the economy will recover is a major factor. So are factors such as the heightened reliance on government monetary policy, unsustainable fiscal trends, and the apparent lack of collaboration among legislators in Washington. On the investment side, high-frequency trading, hedge funds, and inverse and leveraged ETFs all contribute to the volatility.

What Can You Do?

Regardless of the drivers, heightened volatility requires individual investors and their advisors to exercise specific investment strategies. While many of these strategies are basic investing concepts that can be applied at any time, they are particularly important in a volatile environment.

Don't follow the herd: Don't sell into a rapidly declining market and don't buy into a rapidly rising market. You'll just be following the herd and locking in losses. Panic selling also runs the risk of missing the market's best-performing days. For example, missing just the 5 top-performing days of the 20 years ended December 31, 2010, would have cost you more than $19,000 based on an original investment of $10,000 in the S&P 500. Missing the top 20 days would have reduced your average annual return from 9.14% to 3.00%.2

Keep a long-term perspective: It is all too easy to get caught up in the stock market's daily roller-coaster ride. This type of behavior is natural, but can easily lead to bad decisions. Instead, focus on whether your long-term performance objectives, i.e., your average returns over time, are meeting your goals.

Take advantage of asset allocation: During volatile times, more risky asset classes such as stocks tend to fluctuate more, while lower-risk assets such as bonds or cash tend to be more stable. By allocating your investments among these different asset classes, you can help smooth out the short-term ups and downs.

Consider buying opportunities: Although you may be rightfully gun shy in the wake of the recent market turmoil, one strategy you should seriously consider is selectively adding to your portfolio. This is especially true when prices are low versus historical averages.

If you have any questions about our current investment strategy, please feel free to contact your Capital Advantage, Inc. advisor, as well as review our current and previous quarterly letters on our website, located under the client login section.

¹Standard & Poor's Equity Research Services, "Shaken and Stirred," August 29, 2011.
²The New York Times, "Market Swings Are Becoming New Standard," September 11, 2011.
³Standard & Poor's.