I was talking to my brother as he was doing the math needed to see when he could retire. As part of the conversation, he told me that his son was soon going to be in a position to start to pay back the loans my brother had given him to get his degree. I have another friend that also had helped his daughter to finish her degree and then to get resettled after her divorce.
I started to wonder how many Boomers act as the family bank. I know that I have helped support my son and have paid for trips to come home for my daughter and her family. For most Boomers, a family makes life, and life in retirement, richer and more enjoyable. But family connections can also complicate retirement. Retirement planning has traditionally centred largely on the needs of an individual or a couple. Our lives and the lives of pre-retirees today are complicated a few converging trends. One of which is that Parenthood Doesn’t Retire. In today’s uncertain economy, adult children and other younger relatives, struggling with career stalls and financial difficulties, are increasingly turning to us for a helping hand.
According to a Merrill-Lynch Study six in ten people ages 50 and over are providing financial support to family members. This support may be to meet a one-time need, or it could be ongoing assistance over the course of many years and is often offered without expecting anything in return. But those providing support to family members are often not accounting for it in their retirement planning, nor are they talking with family members about it, which can pose a hidden risk to retirement.
Financial help extends in multiple directions, including adult children, grandchildren, parents and in-laws and siblings. The amount of support provided by Boomers to a family can be thousands of dollars a year and averages $14,900 among people with less than $5 million in investable assets
Three out of five people (56%) age 50+ 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.
The role of the Family Bank is often assigned to those who saved and invested responsibly. In fact, the more financially responsible you are, the more likely other family members will consider you to be the Family Bank
Half of the younger Boomers say they would make major sacrifices that could impact their retirement to help family members. Three in five say they would retire later, four in ten would return to work after retirement, and more than one-third say they would accept a less comfortable retirement lifestyle to help the family financially Family
We are willing to make major sacrifices to our own retirement and financial security in order to support family members, without knowing why the money is needed. We don’t expect to be paid back but we hope that at some point if we need assistance or help our family will be there for us. We believe helping family “is the right thing to do” and our “family will help me in the future”. If we think that the money we are given is being misused, we are more likely to stop helping. When we give the help, we do not expect to be paid back although if that happens it nice.
Unfortunately, very few of us have prepared financially for potential family events and challenges. The vast majority of people of us have never budgeted and prepared for providing financial support to other family members, caring for an ageing parent or relative, or helping to pay for their grandchildren’s education. We have not prepared but we still provide such support. This lack of preparation extends to end-of-life issues as well. Among Boomers only about half of us have a will, four in ten have a healthcare directive and just one-third have both a will and a healthcare directive. We have to plan better.
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