The FINANCIAL — During the last five years, three out of five (62 percent) Americans age 50 and older have provided financial assistance to members of their family, including adult children, parents, grandchildren, siblings or other relatives, according to a new Merrill Lynch study.
This is a reminder of the generosity that runs through our culture, and of the importance people place on helping family, especially during challenging times.
The average financial assistance provided to family members during the last five years was nearly $15,000 – and significantly more among the nation’s wealthiest families. This support may have been to help relatives meet a one-time need or ongoing assistance over the course of many years, and was often given without expecting anything in return. However, the vast majority of people age 50+ (88 percent) have not factored such support for family into their financial planning. The study also found a dangerous absence of proactive discussion and establishment of safe boundaries among family members as they navigate these interdependencies.
Nearly three in five people (56 percent) 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. This person is often the one who is most financially responsible, has the most money or is the easiest to approach, according to the Bank of America Corporation.
Half of pre-retirees age 50+ say they would make major sacrifices that could impact their retirement to help family members. Among these pre-retirees, 60 percent would retire later, 40 percent would return to work after retiring, and more than one-third (36 percent) say they would accept a less comfortable retirement lifestyle to help family financially.
Those helping family financially rarely do so because they expect future help or payback. People age 50+ are 20 times more likely to say they are helping family because “it is the right thing to do” than because “family members will help them in the future” (80 percent vs. 4 percent); and they are five times more likely to stop support because a recipient is not using the money wisely than because of worries about being paid back (57 percent vs. 11 percent). This generosity extends to a shift in mindset regarding inheritance, with 60 percent of people age 50+ saying they would prefer to begin passing on their assets during retirement rather than waiting until the end of life. Women age 50+ are even more likely than men to feel this way (65 percent vs. 53 percent), according to the report.
Close to half of married retirees say their marriage is more fulfilling (48 percent) and loving (45 percent) in retirement, and just 11 percent say it is more boring or contentious. However, divorce is becoming increasingly common among older adults. One in seven people age 50 and older who were once married are now divorced and single – a seven-fold increase since 19601. Divorce in maturity, or “gray divorces,” often creates substantial financial hardship, especially for women. After a divorce, average household income drops by more than 40 percent for women and by 25 percent for men2.
Rising divorce rates, which peaked in the 1980s among all age groups and doubled between 1990 and 2010 among people age 50+, have contributed significantly to the rise in blended families. Nearly two in five people (37 percent) age 50 and older are now part of a blended family3. Nearly one-third (31 percent) of people age 50+ with stepchildren say it complicates financial planning, a percentage equal to those who say they and their spouse have different financial priorities for their own children than they have for their stepchildren (32 percent).
The study also found a significant lack of proactive discussion and engagement between family members on key financial topics. This can negatively impact various aspects of one’s retirement and overall financial security.
Seventy percent of adult children age 25+ have not had a discussion with parents about their retirement and other issues related to aging. And more than half (56 percent) of parents age 50+ say they have not discussed any important financial issues – such as a will, health directive, inheritance plans and where they plan to live in retirement – with their adult children. Furthermore, just one in four (24 percent) siblings age 50+ have discussed how their parents will be financially provided for, or cared for, as they get older.
Across all relationships, the most common catalyst for such discussions is the death or illness of a family member or friend (43 percent), and the top barriers for having an open conversation include fear of family conflict (24 percent) and the fact that such topics are just too uncomfortable to discuss (19 percent). People who do have these discussions with family members are, on average, nearly twice as likely to say they would be well prepared financially if faced with a family challenge, according to the Bank of America Corporation.
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