Family duties can threaten retirement

Your baby boomer clients are retiring during a period of prolonged market volatility, high unemployment, rapidly rising health…

Your baby boomer clients are retiring during a period of prolonged market volatility, high unemployment, rapidly rising health care costs and plummeting home values. You know how this has affected their retirement plans, but have you considered the effect that these economic conditions have had on members of their families?

According to recent research commissioned by Ameriprise Financial Inc., 58% of boomers assist their aging parents in some way, and 93% provide financial support to their adult children. What fewer boomers recognize is the impact that this support may be having on their own retirement security.

Ten percent of boomers acknowledged that helping their parents has slowed down their retirement savings; 34% feel the same about the support that they have provided to their adult children.

Understanding how your clients are supporting their parents and adult children, as well as what may be asked of them in the future, can play an essential role in helping them plan for retirement.

It isn’t uncommon for clients to have conflicting values and priorities when it comes to balancing their families’ needs and their own.

Determining the right way to approach these discussions with them is crucial.

Here a few strategies to consider:

Encourage couples to discuss their expectations openly. Financial advisers play an important role in helping clients define their goals and plans for retirement. As part of this conversation, encourage couples to discuss how likely it is that they will be asked to provide financial support to their adult children and aging parents, as well as their ability and willingness to do so. Couples may be surprised by each other’s expectations, but openly discussing these issues now, before they face difficult trade-offs, can help them avoid disagreements and hasty decisions.

Highlight the importance of having frank financial discussions with their adult children. It is essential that your clients talk to their adult children about money, especially if they are among the 71% of boomers who have provided assistance with college tuition or loans, the 55% who have allowed their children to move home and live rent-free, or helped cover other basic expenses such as rent and utilities. Understanding their children’s financial values and challenges can help your clients set appropriate limits and realistic expectations for the future.

Prompt them to speak with their parents about health care costs. Faced with contributing to their own retirement savings or helping a parent pay for long-term-care insurance, 57% of boomers said that they would help their parent. Assisting a parent with health care expenses is admirable and sometimes necessary, but it can also represent a significant expense that is difficult to fund on short notice. Have your clients ask themselves the following question: “Are my parents prepared to meet the emotional and financial challenges concerning their health, and can I say the same for myself?” Honest conversations between children and their aging parents are imperative so that both parties can plan accordingly.

Stress the value of sharing their own retirement plans with family members. Encourage your boomer clients to communicate openly with their children and parents. Topics that they may want to discuss include: where they want to live during retirement, if and how they anticipate helping their grandchildren fund college, whether they are able to provide assistance with child care or elder care, and if they have an LTC plan. Demonstrating a willingness to share their own plans and concerns may open the door to more-frequent and in-depth conversations.

Financial discussions don’t come easily for many families, but in light of economic conditions, and rising health care and education costs, they are increasingly important. Understanding the dynamics within your clients’ families and the pressures that they may face can help you better prepare them for both the expected and unexpected financial obligations that they may encounter during retirement.

Craig Brimhall is vice president of retirement wealth strategies at Ameriprise Financial Inc.