Ep. 11 suddenly single

Ep. 12: Family & Retirement – The Elephant in the Room

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Hi there. Welcome to this week’s episode of Walk the Talk. I am Lynn Toomey, your host, and also the founder of Her Retirement. So this week, I want to talk about the elephant in the room. And what I mean by that is family and retirement. And this is going to be based on a report from Merrill Lynch and Age Wave. And the survey included a total of about 5,400 respondents age 25 plus, including 2100 respondents among the boomer age and the silent age. And we also had millennials and we also had Generation X. In addition, select findings are based on an oversample of 2,800 affluent respondents age 50 and over, with at least $250,000 in investible assets. Among the affluent respondents, 2,500 had assets from 250,000 to 5 million. And over 300 had assets of 5 million or more. And although this survey was conducted about seven years ago, it is still very relevant today because none of the things that it talks about have changed. In fact, they may be even more exacerbated.

And so I’m going to be quoting from this survey, I’m going to also be throwing in some of my own perspectives. And like this podcast is called Walk the Talk, I’m often experiencing a lot of the things that I talk about in my podcast. So it makes it very real to me, but it also should lend some credibility because it is in fact happening to me or has happened to me in the past. So with that, let’s just jump right into kind of what I call the executive summary of this elephant in the room of family and retirement. For most, family is life, right? And life in retirement is made more richer and more enjoyable with family, studies have proven that. But family can also complicate retirement or at least for some preparing for retirement. Retirement planning has traditionally centered largely on the needs of an individual or couple. However, this study reveal that the impact of today’s family complexities and interdependencies, what effect they have on retirement outcomes and they can be pretty significant.

So we’ll talk about those and I will talk about a few ways that you can try to avoid some of these situations that will potentially adversely impact your retirement and your ability to save retirement. And we will talk about how pre-retirees and retirees can better plan and communicate, collaborate, and engage with their family members, so that there’s a nice balance between family priorities and your own long-term retirement security, and articulating that to family members is really important, but oftentimes it’s a very hard conversation to have, because if you are a giver and you’re generous, like I am, you want to help people, you want to be there for them, but there is a line in the sand that you must draw so that you can protect your own future in retirement.

There’s three converging trends that really complicate the lives of retirees and pre-retirees. One, is parenthood doesn’t retire. So in today’s uncertain economy, adult children and other younger relatives are sometimes struggling with career stalls and financial difficulties. And they increasingly turn to older family members for helping them through these periods. Number two, extended lives and extended needs. So at the same time, rising longevity is introducing new twists in our retirement. While it can be a blessing to have longevity, there’s also some potential pitfalls of it. And parents of today’s, pre-retirees and retirees are living longer. So for instance, my father-in-law and his significant other are, he’s 91 and she’s in her late seventies. My parents are both in their mid-eighties and all are doing, knock on wood, very well and relatively speaking, healthy, thriving, and surviving. And I think that’s pretty commonplace these days. We, Gen Xers and early baby boomers are having parents that are living longer, and in some cases, these parents need financial support.

So in my particular case, my significant other slash husband, he helps his mother out financially. So the money that he helps her out is not going toward our retirement. So this very often requires, this longevity of our parents requires greater emotional, physical, and financial support. And thirdly, what’s called stretched and stressed. Many retirees and pre-retirees have insufficient savings, putting them on really shaky ground as they attempt to balance the competing priorities and trade-offs of preparing for and financially managing their own retirement while also helping family members. So this major study from Age Wave and Merrill Lynch identifies these pitfalls. And I’m going to review some of the pitfalls that fall within these trends. And one is finding oneself in the role of family bank, the impact of providing family support and what that can have as an impact on retirement. And why ground rules and boundaries are more important than ever when providing support for family members.

Next, the financial challenges of blended families and divorce. So in my case, we are a blended family. He’s got three children, he’s got a big family, I’ve got three children, I’ve got a big family. And that extended family, siblings, so on and so forth, periodically they’ve needed our help. And we both have wanted to help them. And then certainly, the impact of divorce, which is probably one of the greatest impacts, negative impacts on preparing for retirement. And again, in our cases, we both have been divorced and it definitely caused some issues. But in addition to that, people that have been married for a very long time are finding themselves getting divorced as they enter in retirement, or in retirement, they call it the graying of divorce. And that has also had a significant impact on people’s livelihood and relationships with their family in retirement.

Also, what does it mean to be a burden on one’s family and how is that changing? What steps are people taking or not taking to avoid becoming a burden on family? And the impact family challenges and crises can have retirement preparedness is another very important pitfall that is revealed in this study. And then how discussing planning and coordinating with family members around important financial topics really can increase everyone’s peace of mind, but those conversations are extremely difficult for many people to have. And we believe, and I believe that it’s very, very important to have these conversations. In fact, our two youngest are now adults, so we have six adult children. And very soon I do want to have a family meeting with all six children and just explain everything going on in our financial lives.

What is our goals, what do we hope to achieve, and what are our expectations for them as adults. And I guess explain to them that we’ll always be there for them emotionally, but that we will prioritize our retirement and that we have to prioritize our retirement, and their job as adult children is to be independent, be self-sufficient, and in some cases, figure it out on their own. Certainly, we’ll be there to give them guidance, but we will probably draw the line on some financial support and making them understand as well that we are planning to be financially independent so that they won’t have to worry about us as they become… As they do later into their lives, we want them to understand that our plan is not for us to be financially dependent on them when we are no longer working, and to articulate what we plan to do as far as our independent living and healthcare and those types of things, and also wills and that type of thing. I want to be very open with my six children, stepchildren and my own biological children.

So I think it’s important to consider having that family conversation. I actually am working on a guide to how to have those family conversation. So if you’re interested in that you can email me at lynnt@herretirement.com, and I’d be more than happy to get you that guide as soon as I have it completed. And I will be my own guinea pig. I will be testing it with my family and also doing some research from some other experts who have gone before and have had these conversations. So I want to give you the statistic, six in 10 people age 50 plus today are providing financial support to family members in need. And the support is often leniently and generously given. Half of pre-retirees age 50 plus say they would make major sacrifices to help family members.

So with this statistic, I’m not sure if you’re surprised by that statistic, I am a little surprised by the major sacrifices. Some of this support may be to meet a one time need, or it could be ongoing assistance over the course of many years, and it’s often offered without expecting anything in return, but those providing support to family members are often not accounting for in their retirement planning, nor are they talking with family members about it, which can pose a hidden risk to their own retirement. So back to my comment about talking about it, that is key. Talk about it. Okay? Talk about it with your spouse, with your significant other, talk about it with your kids, talk about it with your parents. So financial help can go off in many different directions, including adult children, grandchildren, parents, in-laws, siblings. The amount of support provided by people age 50 plus to families can be thousands of dollars a year. And averages right around $15,000 among people with less than $5 million in investible assets, according to the study.

So my question is, are you the family bank? And three out of five people, 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. And I know prior to meeting my significant other, he probably provided more help than he does now. He has differing priorities, he has myself and my children, and we created a new family. But I think if you would ask, he may have been seen as the family bank. The role of the family bank is often assigned to those who have saved and invested responsibly or who a family sees as someone that has the means to help out, and therefore they’re asked for support more often.

In fact, the more financially responsible you are, the more likely other family members are or will be likely to consider you the family bank. And there’s generational generosity, it’s called. So half of pre-retirees age 50 plus say they would make a major sacrifice as I stated earlier. Among these pre-retirees, three in five say they would retire later in order to help that family member or make that sacrifice. Four in 10 would return to work after retirement. And more than one third say they would accept a less comfortable retirement lifestyle in order to help families financially. Another concept I want to talk about is the family bank being open 24/7 and very lenient terms. In addition to being willing to make these major sacrifices to their own retirement, financial security in order to support family members, many pre-retirees and retirees also cite that they give support without even knowing how the money is being used.

So, basically it’s kind of like an ATM. An ATM doesn’t know how your money is being used. It just dispenses the money to you. So, these people that are the family bank are dispensing the money and they’re not even asking how it’s being used. That to me, is an issue. If you are going to extend financial support, I would definitely ask how it’s being used. But again, it’s a very personal decision. I’m here just to give you my perspective and to give you some ideas for how you can change some of these behaviors, because my job at Her Retirement is to help you know more and have more. So those helping family members really do so because they expect future help or financial payback. Older adults are 20 times more likely to say they’re helping family because it is the right thing to do, then because family members will help me in the future. They are five times more likely to stop family support because the recipient is not using the money wisely, then because of worries about being paid back.

So one of the focus group participants in this story, in this survey said, “I’m not looking to get back the money I loaned my daughter. I’m just happy I could help her when she needed it.” And I think that’s great. It gives me great pleasure to help my kids when I can. And to be honest, I do get nervous when I’m looking at how I could help a child or a sibling and saying, “I just need to make sure that I am taking care of my future and my retirement.” And in some cases, that might be seen as being selfish, but I think there is a level of selfishness you need to have. And then once you have your needs covered, then you can be as generous as you want. That’s my perspective.

I was actually raised by two very different parents. Although, actually I wasn’t even raised by my father. He was somewhat present in my life, but he was not generous at all. He did not help me with anything other than giving me some money for my wedding. And it was a very small amount, to be honest. My mother on the other hand has given her family, her children, the shirt off her back, literally. But in her case, she didn’t really have a lot of money to give, but she has less now as a result. And fortunately for her, she has a pension, so she’s still able to live a comfortable retirement, not an affluent retirement by any means, but she has a cute house, she has a new car, she has what she needs and she’s comfortable and happy.

Does she have extra at this point? No. She has given away some of her extra. Would she change anything? I’m not sure. I’ve never asked her. I think she would, say at this point she’s saving $200 or $300 a month. And every time she tells me she’s doing it, she just says, “I don’t know what I’m saving it for. I should be giving it away to my family.” But anyway, those giving money to family members are three times more likely to feel appreciated than taken advantage of. So I guess if you’re going to be generous and you’re going to be giving, it’s better to feel appreciated than taken advantage of. And hopefully the family members that you are helping out are showing that appreciation to you.

So this generational generosity also extends to a shift in mindset regarding inheritance and giving to family. Three in five, or 60% of people age 50 plus say it is better to pass on their assets now rather than waiting until the end of life. So in my mother’s case, like I just said, she doesn’t have assets per se to give away, but her feeling is, I’d like to help out. I’d like to help out people with a couple hundred dollars here and there rather than taking it with me. I’d like to see them happy. My father-in-law is kind of in a similar boat. He’s been very generous. He’s helped his children and grandchildren quite a bit. And I, again, I’ve never asked him per se, but I feel like he gets pleasure in helping them and seeing them use the money to put themselves in a better position or help themselves through a tough situation. But again, in his situation, he has a pension, he has social security, he is able to do it without impacting his wellbeing, his retirement.

So again, I’m all for it if you can do it and you have the extra, do it. But I am against it if it’s going to put you in a bad way financially. So let’s talk about family support, unforeseen and unprepared. Unfortunately, very few people have prepared financially for potential family events and challenges. The vast majority of people age 50 plus have never budgeted and prepared for providing financial support to other family members. So let’s talk about blended families after the face of retirement. Rising divorce rates, which peaked in the 1980s have created more complex families among today’s pre-retirees and retirees. Roughly three quarters of people who divorced remarry, often introducing stepchildren, step parents, and step siblings into the family and the financial mix.

This is another reason it’s very important to have that plan, have that will, have that trust, so that that blended family, everybody knows what they get, what they’re going to have access to at the passing of their family members. So nearly one third of people over 50, who have stepchildren say it definitely complicates financial planning. Three in 10 also say that they and their spouses have different financial priorities for their own children than they may have for their stepchildren. And those with stepchildren are less likely to divide their assets equally than those without stepchildren. And fathers are more likely than mothers to say that their financial plans treat their stepchildren exactly the same, and that they feel financially responsible for their stepchildren.

So now I want to talk about gray divorce. Divorce is becoming increasingly common among older adults, which can have a significant impact on retirement savings and plans. Overall, the percent of people who divorced per year in the U.S. among all ages was essentially unchanged between 1990 and 2010. However, during this time period, the divorce rate among those age 50 plus doubled. One in seven people age 50 plus who were once married are now divorced and single, a seven fold increase from 1960. Divorce and maturity often creates substantial financial hardships, especially for women. And I was recently listening to a webinar on how to become a millionaire. And basically the gentlemen giving the webinar said, “One of the most important things is don’t get divorced.” So clearly he was talking to younger people, but in this case he could be talking to older people as well, that if you have quote, a gray divorce, it can leave you very financially vulnerable.

In fact, we have a certified divorce consultant in our network, and I always encourage women to talk to such a person, in addition to a divorce attorney, because a certified divorce consultants can look at the financial aspects of your divorce and make sure that you are protecting your financial situation through that divorce process. And the attorneys will look at it, but not to the level of a certified divorce consultant. So where was I? Overall, the percent of people who divorce per year in the U.S. among all ages, like I said, was essentially unchanged. Oh, I know what I was talking about. I was talking about women, that they are experiencing financial hardships because of divorce. Household income drops by more than 40% for women, and by about 25% for men after divorce. That is a pretty significant difference.

So one of the things I talk about in Her Retirement is that women have these financial challenges and divorce is clearly one of them. And that’s because there’s that 15% gap. But now on the other hand, let’s talk about marriage. Marriage gets better in retirement. So while divorce may be becoming more common later in life, overwhelmingly retirees are more likely to say their marital satisfaction has improved, not diminished since retiring. Close to half, say that their marriage is now more fulfilling and loving in retirement.

So let’s talk about being a burden. I know this is something my mother talks about frequently that she never wanted to be a burden. Her mother used to tell her that she didn’t want to be a burden. And she says that all the time to me, “I don’t want to be a burden.” Even if I offer to stop in, she’ll say, “No, you’ve got your busy life. I know how it was when I was your age. I can take care of myself. I don’t want to be a burden.” As people age, being a burden on family and running out of money, become top concerns. Older adults are most likely to define being a burden as having family members providing hands-on care. Well, the number one choice for long-term care, if needed, is in their own home. Two thirds of people age 50 plus admit that they have taken no steps to maintain their independence.

So again, we want these things, but we’re really not addressing them. And this is another clear case that we want to have that independence as we get older, but a lot of people aren’t addressing it and preparing for it. So let’s talk about retirement’s two greatest worries. There are two top worries in retirement, which could change in priority as people age. Younger generation say their greatest worry about living a long life is running out of money to live comfortably. But in later life, another worry weighs just as heavily. Older adults say being a burden on family is of equal concern. Women age 50 plus are even more likely than men to say being a burden on family is their greatest worry.

What it means to be a burden on family. Older adults are most likely to define being a burden as having family members physically take care of them. The need for elder care can have repercussions across generations. While family members may need to pay for or coordinate care, asking family members to provide hands-on care is a top anxiety. So now let’s talk about parents moving in with you, and that fathers are more likely to feel they will be a burden. Among those age 50 plus, men are likely to have greater anxiety about how their adult children would feel about the moving in later in life. Fathers are more likely than mothers to believe their children will feel burdened by such responsibility. And more mothers and fathers believe their children would say they are fulfilling their obligation.

Now let’s talk about Alzheimer’s, the case, excuse me, the cost of longevity. So worries about Alzheimer’s disease escalate as people age. Well, younger people consider cancer to be the greatest health-related worry of later life. Older adults unequivocally say Alzheimer’s is their worry, because it can require years of caregiving and cause tremendous distress and rapid depletion of financial resources among close family members. And Alzheimer’s is far too common in later life. Nearly half of people age 85 plus have Alzheimer’s or related dementias. Currently there are over 5 million people with Alzheimer’s, but as we continue to live longer, and as the age 85 plus population increases, more and more people will suffer from this disease unless a cure or treatment is found. So let’s talk about home, and that being the number one choice for long-term care. The vast majority of older adults say they would prefer to receive care in their home, if needed. Just 2% say their first choice would be to receive care in a family member’s home. A choice is unpopular as moving to a nursing home.

Although nearly all older adults say they would prefer not to have to move in with family members, two thirds of people age 50 plus admit that they have taken no steps to avoid having to live with a family member, if unable to live on their own. In part, inaction, maybe driven by lack of awareness or worse, denial. Well, 37% of people age 50 plus believe they may need long-term care in their lifetime. The reality is that 70% will eventually need some type of long-term care. So I believe silence is not golden, and proactive communication is really key to preventing catastrophes.

So let’s talk about the family factor. Family challenges and crises can derail years of responsible retirement preparation. While already a mere one-third of people age 50 plus say that they feel well prepared for retirement if everything goes as they expect, less than a quarter would feel prepared if they are the spouse needed to retire early for health reasons, or if a spouse died. Only about one in 10 would feel well-prepared if they had to provide extended care or support to a family member. Unfortunately, family related events can create financial hardship in retirement. And let me give you a few examples. Half of women over age 70 have been widowed. One third of people who retire early do so for health reasons. One in five people age 50 plus have boomerang adult children who’ve moved back in with them. And there are 66 million people in the U.S. providing extended care to loved ones.

So I believe there’s a troubling lack of discussion, and like I said earlier, lack of communication. There’s a dangerous absence of planning, discussion, coordination, and establishment of safe boundaries as people navigate these new family interdependencies. This lack of proactive engagement, discussion, collaboration, can negatively impact every aspect of your retirement. Very few people talk with close family members about important financial topics, such as a level of financial security, plans for living arrangements and retirement inheritance or longterm care. So in the case of my parents, I have one parent, my mom, who’s very open. We’re having conversations, we’re meeting with an attorney, I’m talking to her about Medicare, Medicaid, what her wishes are. In the other hand, I have a father who I have never really had much of a relationship with, let alone talking about his plans. When I’ve mentioned a nursing home or those types of decisions, he simply says, “I have no plans to go to a nursing home. I am just going to drop dead.”

So he has a plan. His plan is to drop dead and not require any of these long-term care facilities or help. I do not know if his multiple properties are in a trust or protected. I know nothing. And it’s sad, but I have to respect his wishes, but I’ve learned from it and it’s something that I don’t want to do to my kids. I want to be an open book. I want them to know everything. I want them to be a partner in my future. I am their parent, and I want them to be a part of my life, of my financial planning, of my priorities, and to be honest, they could be very much a part of that process someday, because the likelihood is that I will outlive my significant other, and I will be a woman, an elderly woman, and I will potentially need their assistance.

So like I said, very few people talk about this. Very few people talk with close family members about these topics, and they don’t talk about financial security, plans for living arrangements, inheritance. 70% of those age 25 plus have not had an in-depth discussion with their parents about these retirement issues. More than half of those age 50 plus have not had such discussions with their adult children and nearly one third, 50 plus have not even had a discussion with their spouse. So step one, talk to your spouse. Step two, talk to your parents, if your parents are still living. Step three, talk to your children or reverse that order. But most importantly, talk to your spouse, but perhaps even more important than that, is have a conversation with yourself first, right? Understand what it is that you want, then talk to your spouse or your partner, so that you can find out what he or she wants and then you can come to some planning together.

Just one in four of the survey participants have discussed how their parents will be financially provided for or cared for as they get older. One of the survey participants said, “I just have never wanted to talk about things with my sister. It was the elephant in the room. We both knew mom’s health was failing, but it was like we pretended it really wasn’t happening. Then when she gets sick, we wish we had talked about it sooner. It was an absolute nightmare.” Worry about causing family conflicts is the top reason for not discussing important financial issues with family members. In fact, these discussions often don’t start until confronting the crisis such as a death or an illness. Unfortunately, the lack of proactive discussion today can cause even more difficulty in conflict when a family crisis arises. It can also lead to people becoming a burden on their family, the very thing they want most to avoid.

So let’s talk about the payoff of proactive planning and discussion. Certainly, there is a need and there’s a payoff. There’s a payoff for thoughtfulness and discussion and collaboration and communication about retirement as pre-retirees and retirees and as you plan for how you’re going to support your family as you move to and through retirement. Those who have had financial discussions with their spouses or their adult children are almost twice as likely to say they would be well-prepared if they were to face family challenges. People age 50 plus report that having a retirement specialist or an advisor engaged with multiple generations within a family has various benefits, including helping family members communicate better on important financial issues. And most of all, it increases financial peace of mind for the entire family. So let me wrap up today’s podcast because I know it’s going a little bit longer than some of my other episodes, but this is such an important topic.

Our families are a source of happiness, fulfillment, and pride, but also sometimes financial stress when planning for and living in one’s retirement years. It’s in these challenging economic times, older adults are increasingly playing a role in supporting their family members, not only emotionally, but financially as well. They often do so generously and under lenient conditions. And too often family challenges are neglected or unanticipated during retirement planning. This podcast and this study by Merrill Lynch and Age Wave reveals some very important insights and recommendations to prepare you and your family for your hopes, your dreams, and your needs in connection with retirement. And I want to go over six things that I think are important to be done, and this study concludes these things as well.

So like I like to say at Her Retirement, a lot of what we talk about and articulate to you through this podcasts, through blogs, through our classes that we teach, is that it’s all research-based and this is just, it’s definitely sponsored by Merrill Lynch, but the point of this is that it’s based on what people are saying, it’s based on survey data, research. And that’s why it’s really important for you to pay attention to this. And look at your own life, right? Are you prepared? Have you had these conversations? Do you have a plan for long-term care? Do you know how being generous is going to affect your retirement? Are you contemplating or in the middle of a great divorce? And do you know how that’s going to affect you? Have you talked to your children, to your parents?

So let’s go over these six things. Anticipate and budget for support you may provide to multiple family members, adult children, parents, siblings, and grandchildren, before and during your retirement. So if you have a budget or you’re putting down your expenses, set aside some money for that, adjust in case fund, right? Two, the more financially responsible and secure you are, the more likely you are to be considered the family bank, something to keep in mind. Balance your family needs with your own retirement financial security. Giving too much without accounting for your future needs may jeopardize your retirement, and ultimately require you to rely on family support.

Number four, recognize and plan for the unique challenges that blended family and divorce can have on retirement preparedness and family financial decisions. Five, prepare early to avoid being a burden on family, especially regarding help and your care needs. Too often, the default is relying on family members to coordinate or even provide care. And six, discuss, plan, and coordinate with family members to effectively prepare for family challenges. Reduce their emotional and financial costs and create greater financial peace of mind for both yourself and your loved ones. So I appreciate you taking the time to listen to today’s episode of Walk the Talk. I am your host Lynn Toomey. I looked forward to recording this podcast and presenting it because it is a very important topic. It is something I am experiencing myself and I really like sharing things that can help you avoid pitfalls. And it’s all about communicating, and it’s all about making sure you go out and you’re proactive in preparing. And that’s why I like to say, go out and get her done. Until next week, have a great day. And we’ll talk to you soon.


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