Generosity Runs Deep in Boomers

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During the last five years, three out of five Americans age 50 and older have provided financial assistance to members of their family, including adult children, parents, grandchildren, siblings or other relatives, according to a new Merrill Lynch study. Conducted in partnership with Age Wave, “Family & Retirement: The Elephant in the Room” is an in-depth study exploring modern family interdependencies and the challenges Boomers face in balancing them with their own retirement plans and financial security. Conducted in August 2013, the study is based on a nationally representative survey of more than 5,400 respondents.

The average financial assistance provided to family members during the last five years was nearly $15,000 – and significantly more among the nation’s wealthiest families. This support may have been to help relatives meet a onetime need or ongoing assistance over the course of many years, and was often given without expecting anything in return. However, the vast majority of people age 50 plus (88 percent) have not factored such support for family into their financial planning.

“Given the challenging economic climate during the past several years, it’s not surprising that so many Americans have extended financial support to their loved ones,” said Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch. “However, such admirable willingness to assist family members should not place one’s own long-term financial security in jeopardy.”

Additional highlights from the study include:

Are you the Family Bank?

Nearly three in five people (56 percent) age 50 plus believe a member of their family is the “Family Bank,” meaning someone who their extended family is most likely to turn to for financial help. This person is often the one who is most financially responsible, has the most money or is the easiest to approach.

Sacrificing Retirement for Family:

Half of pre-retirees age 50 plus say they would make major sacrifices that could impact their retirement to help family members. Among these pre-retirees, 60 percent would retire later, 40 percent would return to work after retiring, and more than one-third (36 percent) say they would accept a less comfortable retirement lifestyle to help family financially.

Generosity & Inheritance:

Those helping family financially rarely do so because they expect future help or payback. People age 50 plus are 20 times more likely to say they are helping family because “it is the right thing to do” than because “family members will help them in the future” (80 percent vs. 4 percent). They are 5 times more likely to stop support because a recipient is not using the money wisely than because of worries about being paid back (57 percent vs. 11 percent). This generosity extends to a shift in mindset regarding inheritance. For example, 60 percent of people age 50 plus say they would prefer to begin passing on their assets during retirement, rather than waiting until the end of life.

Marriage in Retirement:

Close to half of married retirees say their marriage is more fulfilling (48 percent) and loving (45 percent) in retirement, and just 11 percent say it is more boring or contentious. However, divorce is becoming increasingly common among older adults. One in seven people age 50 and older who were once married are now divorced and single – a seven-fold increase since 19601. After a divorce, average household income drops by more than 40 percent for women and by 25 percent for men2.

Blended Families:

Rising divorce rates, which peaked in the 1980s among all age groups and doubled between 1990 and 2010 among people age 50 plus, have contributed significantly to the rise in blended families. Nearly two in five people (37 percent) age 50 and older are now part of a blended family3. Nearly one-third (31 percent) of people age 50 plus with stepchildren say it complicates financial planning.

“Families are a major source of fulfillment during retirement years – but can also create unforeseen financial pressures,” said Ken Dychtwald, Ph.D., founder and CEO of Age Wave. “Too often, people plan for their retirement without factoring in how they might be called upon to help out their adult children, aging parents and siblings.”

The study found that the vast majority of people age 50 plus have not prepared for potential family events and challenges that could affect their retirement, including:

Perpetual Parenthood & Boomerangs:

One in five parents (19 percent) age 50 plus have at least one “boomerang” adult child who has moved back in with them. More than two-thirds (68 percent) of parents age 50 plus have provided some form of financial support to their adult children during the last five years –among which, 36 percent did so without knowing how their money was being used. Those parents who are aware of how their money is being spent say it is given to help adult children with their rent or mortgage (20 percent), cell phone bills (18 percent), car payments (17 percent), health care expenses (15 percent) and student loans (11 percent), among other things.

Loss of a Spouse through Death or Divorce:

Only one-third (33 percent) of people age 50 and older say they feel well prepared for retirement if everything goes as they expect. Less than one-quarter (24 percent) would feel prepared if their spouse died or they divorced – a troubling statistic given that more than half of women over the age of 70 have been widowed4 and 14 percent of people age 50 and older are divorced5.

Early Retirement:

Less than one in four (23 percent) of adults age 50 plus say they would be prepared financially if they or their spouse were forced to retire early because of a health problem, despite the fact that one-third of people in the U.S. who retire early do so for health reasons6. While younger people consider cancer to be the greatest health-related worry of later life, older adults unequivocally say Alzheimer’s; nearly half of people age 85 and older have Alzheimer’s or related dementias7.

Care Giving & Receiving:

The vast majority of people age 50 plus (91 percent) say they would not be prepared if an aging parent or relative needed extended long-term care. While 37 percent of people age 50 and older believe they may need long-term care in their lifetime, the reality is that twice as many – 70 percent –eventually will8. Most people (86 percent) age 50 plus would prefer to receive care in their own home, if needed.

No. 1 Retirement Concern –Becoming a Burden:

When asked their greatest worry about living a long life, older adults (age 68 to 88) cite “being a burden on family” on par with running out of money to live comfortably (both 31 percent). However, 66 percent of people age 50 plus admit they have taken no steps to avoid having to live with a family member if unable to live on their own.

Troubling lack of discussion

The study also found a significant lack of proactive discussion and engagement between family members on key financial topics. This can negatively impact various aspects of one’s retirement and overall financial security.

Seventy percent of adult children age 25 and older have not had a discussion with parents about their retirement and other issues related to aging. And more than half (56 percent) of parents age 50 plus say they have not discussed any important financial issues – such as a will, health directive, inheritance plans and where they plan to live in retirement – with their adult children. Furthermore, just one in four siblings age 50 plus have discussed how their parents will be financially provided for, or cared for, as they get older.

Across all relationships, the most common catalyst for such discussions is the death or illness of a family member or friend (43 percent), and the top barriers for having an open conversation include fear of family conflict (24 percent) and the fact that such topics are just too uncomfortable to discuss (19 percent). People who do have these discussions with family members are, on average, nearly twice as likely to say they would be well prepared financially if faced with a family challenge.

“Proactive discussions and coordination with family members can be the difference between smooth sailing and significant hardship when confronting financial challenges leading up to and through retirement,” said David Tyrie, head of Retirement and Personal Wealth Solutions for Bank of America Merrill Lynch.

Notes: 1 U.S. Department of Health and Human Services, 2013 2 Retirement Security: Women Still Face Challenges. (2012). United States Government Accountability Office, Report to the Chairman, Special Committee on Aging, US Senate. (GAO-12-699) 3 Pew Social and Demographic Trend Survey, October 2010; Age Wave calculations 4 Number, Timing and Duration of Marriages and Divorces: 2009. U.S. Census Bureau, 2011 5 U.S. Census Bureau, 2013; Age Wave calculations 6 Americans’ Perspectives on New Retirement Realities and the Longevity Bonus. Merrill Lynch/ Age Wave, 2013 7 U.S. Department of Health and Human Services, Administration on Aging; Hebert et al. 2003 8 U.S. Department of Health and Human Services, 2013

Age Wave is the nation’s foremost thought leader on population aging and its profound business, social, healthcare, financial, workforce and cultural implications. Age Wave is not affiliated with Bank of America Corporation. Merrill Lynch Global Wealth Management is a leading provider of comprehensive wealth management and investment services for individuals and businesses globally. Merrill Lynch Global Wealth Management is part of Bank of America Corporation. For more information about the study, “Family & Retirement: The Elephant in the Room,” please visit www.ml.com/retirementstudy.

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