U.S. parents are more and more finding themselves providing financial support to adult children, undermining their readiness to successfully put enough away for retirement.

Experts say investing early in a 401(k) plan will not only get employees in the habit of setting money aside for retirement but will also use the power of compounding to get the most bang for the buck.

According to a recent LIMRA Secure Retirement Institute study, a majority of parents are financially supporting their grown children.

Also see: Slices of the sandwich generation

“Research shows that millennials have weathered the most significant repercussions from the recent economic downturn,” said Deb Dupont, associate managing director, LIMRA Secure Retirement Institute. “While millennials are the most educated generation in history, nearly four in 10 are unemployed and many more are underemployed. Parents of millennials, even those over the age of 22, are providing considerable support to their children at a time in their lives when saving for retirement should be a priority.”

According to LIMRA, some of the bills parents are most likely to help out with include cell phones, rent/mortgage, and college expense/loans debt. However, 37% of U.S. households with adult children did indicate that they did not provide any financial support.

Also see: Why employers should care about student loan debt

Prior research from the trade association notes that more than 50% of pre-retirees have less than $100,000 in financial assets — an amount that “may not be enough to fund the 20 to 30 years these individuals are likely to face in retirement,” the group notes.

“I think people miss the compounding of earnings and that’s an important message to get out there,” says Joe Ready, director of institutional retirement and trust with Wells Fargo. “Then you get to the sandwich generation: adults with aging parents and kids in college … it becomes really hard to save.”

Also see: Sandwich generation drives need for child, elder care benefits

Dupont notes that only 45% of those that have financially supported their adult children in the past year say it has negatively impacted their retirement savings. “We believe people are likely to underestimate the collective impact of incremental costs,” she says.

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