Financial Planning Across Generations: Wants vs. NeedsStuart Kirk, CIM®, Wealth Advisor
In many cases Baby boomers not only have to plan for their own financial future, but also that of their parents. Not all Baby boomers are going to inherit money from their parents; many will have to assist their parents both financially and personally. There is a distinct gap between the level of financial assistance that parents of adult children think they want, and what they really need.
Toronto-based, Bayshore Home Health conducted a survey in February 2018 that revealed the following:
- Almost one in four adult children didn’t know their parent’s annual income
- One-quarter of adult children think their parents will ask them for financial help to get through the recession, though only 5% of parents plan to ask for assistance
- Two-thirds of grown children are more willing to give financial help than their parents think they would be
- 73% of aging parents felt they didn’t need help around the home, only 43% of their adult children agreed
- Those aged 65 to 85 will do whatever it takes to avoid moving into nursing homes or extended-care facilities. Three out of four children say they’re willing to care for their parents to help them avoid moving to such institutions
- While 88% of aging parents don’t want to be a burden to their families, 65% of the adult children would accommodate them moving in, and 32% think their parent is too embarrassed to ask for help.
Clearly there is a gap between what adult children and their parents believe about the level of financial assistance they need. This can probably be attributed to a lack of communication, which exists due to the nature of the topic. For many parents of Baby Boomers, discussing their personal finances is taboo.
Advantages of Planning Early
As a general rule of thumb, planning early always make sense. By planning early you can take advantage of many opportunities and avoid some missed ones. A recent example was an adult child that found out that their aging parent cancelled a life insurance policy that they had for many years because they believed that their adult child did not need the proceeds. The adult child was prepared to pay the insurance premium as they still had some debts.
Open up a Line of Communication
Open a line of communication in your family. The earlier these discussions can start the better, and a financial advisor is a good resource to use as a third party and facilitator of these discussions. Here are some items to discuss:
- Health – specifically care options if health deteriorates
- Estate Planning – wills, power of attorney
- Life insurance – potential for children to assume existing policies
- Personal balance sheet – showing all assets and liabilities
- Income requirements – considering all sources of income
- Property tax deferral – to free up additional income
- Tax reduction strategies
If you are a Baby boomer with aging parents, or if you are a parent with Baby boomer children, then you need to start having dialogue about financial assistance and planning.