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December 14, 2022
As if saving enough to pay for your own retirement isn’t worrisome enough, research from Merrill Lynch and Age Wave suggests that most people over 50 (6 out of 10 in fact) are providing financial support to family members in need – either on a one off basis or as continuing regular support. Giving money to family can be rewarding, but at what cost?
Here are 6 interesting facts from the study about supporting family members:
Most people – around 90% – are not including support for family members in their retirement budget. This is a pretty massive mistake. Forecasting what you are going to spend in retirement is one of the most important steps you can take for having a secure future.
What you spend determines how long your savings will last and how much you can safely withdraw each month.
However, budgeting does not need to be onerous. The NewRetirement Planner is an easy to use online system that – after an initial set up – lets you set different spending levels for different phases of retirement and plan for big one time expenses. Make sure you can afford to give to family members what you want to give.
…A LOT! For people with less than $5 million in investment assets, the average amount given to family members each year is a whopping $14,900.
Here are the exact averages for support provided to family members over the last 5 years by invest-able assets:
Half of the over 50 pre-retirees say that they would make major sacrifices to help family members.
Of those who would help:
Eighty percent of those helping family members say that they do it because it is the right thing to do and 50% feel that it is a family obligation.
And, giving money to family members seems to have a positive emotional impact:
Only 18% said that they feel taken advantage of.
The study also found that among people 50 years and over, only half have a will and a mere 40% have a healthcare directive. These are documents that should be created by almost everyone. Here is a guide to the most critical estate planning documents.
Among those over 50, nearly 2 out of every 5 are now part of a blended family which may include stepchildren, stepparents, and step siblings.
This can be especially complicated and a source of friction in a relationship since people generally feel less responsibility toward a step relative than they do to their biological family.
As one focus group participant said, “I am very happy we are able to help our stepson. He is having a difficult time. But to be honest, I want to help my own daughter more and it is a hard thing to talk about with my husband.”
Create a Detailed Retirement Plan: Before you give money to family members (or as soon as possible), it is important for you to document a comprehensive plan for your finances in retirement.
The NewRetirement Planner makes it easy to get started with fast but highly personalized answers about your financial health. This tool has been named a best retirement calculator by the American Association of Individual Investors (AAII).
Communicate Clearly: If you are giving money to family and it is a financial burden to you, you might want to sit down and discuss this with your family members.
Not saving (or spending your retirement savings) will have a profound impact on both you and your family. Will family take care of you in the future the way you are taking care of them now? Do you want them to have that responsibility as you age? Do you want to give up your own autonomy and be beholden to them?
The research shows that those who have discussed financial topics with their spouse and adult children are more than twice as likely to feel prepared for retirement than those who do not.
Be Tax Efficient with Your Giving: Meeting with a financial advisor about what, when and how you want to give money to family can make your generosity more tax efficient. For example:
A CERTIFIED FINANCIAL PLANNER™ is another great resource for year-end tax advice (and proactive tax planning)! Look for one that specializes in retirement planning. NewRetirement Advisors are a low-cost option that uses the power of technology to deliver better advice.
FREE Discovery Session: Interested in learning more about financial advice? Learn more here. Or, book a FREE Discovery Session with a CERTIFIED FINANCIAL PLANNER™ to talk about your needs and what you can do to be wealthier and more secure.
Create an Estate Plan: Estate Planning is a term broadly used to describe a variety of end of life planning issues including:
Explore estate planning 101 — the four documents everyone needs.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
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The holidays can be an important time to discuss finances with your family. Get tips for how to have a productive talk with those you love!
The following account of charitable giving comes from Henry K. “Bud” Hebeler. Bud is a frequent contributor to the Wall Street Journal, Kiplinger’s Personal Finance, Market Watch and NewRetirement. He also runs the Analyze Now web site. Over my 26 years of retirement, I must have done some things right because I have been able…
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