Part III: The Family Factor -- Retirement in a New Era of Family Interdependence
This is the third part in a three-part series exploring findings from "Americans' Perspectives on New Retirement Realities and the Longevity Bonus," a landmark national study just completed by my firm, Age Wave, in partnership with Merrill Lynch. The study was conducted by research firm Harris Interactive among representative samples of more than 6,000 respondents age 45 and older.
Family Stresses and Strains
With today's economic uncertainties, many of us have one or more family members who are struggling financially. A brother who lost his job and is at risk of losing his house. An adult daughter who recently divorced and may need to move back in with you, at least temporarily --with her two small children. Another adult child who is anxious about his job security. A parent-in-law who is facing health problems and mounting healthcare bills and doesn't know where to turn.
Meanwhile, you may be nearing retirement and working hard to invest and save so that you'll be financially secure. Or you may be already retired and trying to manage your money and benefits smartly. How do you balance your own retirement needs with the pressing -- and often unpredictable--needs of your loved ones? It's a critical question that more and more of us are facing.
Making things even more challenging, high divorce and remarriage rates over the past quarter-century have made today's family structures and dynamics far more complex. For example, it is estimated that stepfamilies now outnumber original families. Multigenerational households are on the rise, too, doubling since 1980 and now accounting for more than one in five households.
The Bank of Grandma and Grandpa
The term "sandwich generation" was coined in the 1980s to describe baby boomers who needed to simultaneously care for both children and aging parents. Today, the sandwich generation is morphing into a kind of Rubik's Cube puzzle of connections and arrangements. It's not uncommon for people to find themselves extending one type of support or another to parents, in-laws, siblings, children, step-children, and grandchildren--sometimes at the same time!
It's important to note that Americans are not turning their backs on family members in need. In our "New Retirement Realities" survey, we found that fully half of parents over age 45 expect to provide support to their adult children sometime in the years ahead, and more than a third expect to provide support to grandchildren. This was particularly true of higher net worth grandparents, 41% of whom anticipate that they'll be helping to fund their grandchildren's college tuition. And because the average grandparent has four grandchildren, that can add up to a quite a lot of money.
The Four Mainstays of Family SupportSupport for family members can take many forms. Our study revealed that beyond the love and care that flow steadily, there are the four mainstays of support common among today's American families:
- Financial. 43% expect to provide direct financial support to family members, such as writing a check or providing a loan, to help them pay off looming credit card debt or just keep up with the bills.
- Housing. 38% expect to provide or help a family member pay for a place to live. For example, "boomerang kids"--adult children who move back in with their parents--are a growing population. Research shows that nearly 40% of twenty-somethings move back to their parents' home.
- Education. 30% expect to help pay education expenses for a family member. The average college tuition increased by more than 70% in the past decade, and more and more grandparents, uncles, and aunts are stepping in to help fund tuition needs.
- Healthcare. 25% expect to help manage a family member's healthcare or long-term care needs. This can include paying medical bills or providing caregiving for an aging relative. As life expectancy increases, it is far more common for parents to live into their 80s, 90s or longer--sometimes with good health, but sometimes with disabling chronic disease. A growing number of us find ourselves in the role of caregivers. In fact, the percentage of adult children providing care to their aging parents has tripled over the past fifteen years.
A New Era of Family Interdependence
For most of us, retirement planning and preparation can be challenging enough without factoring in the support we may find ourselves giving to family members. But what we are seeing is more and more people sacrificing some of their own comforts and luxuries to help family members in need, whether it's downsizing a home to have the resources to help fund a grandchild's college education or buying a less expensive car in order to help out an adult child in a period of financial distress.
"For so many people, being able to support and help loved ones in need is a priority," says David Tyrie, Head of Personal Wealth & Retirement for Bank of America Merrill Lynch. "As a result, anticipating potential family needs is becoming an important part of retirement planning," he says.
The virtues of personal independence have always been important in American culture--particularly during the 20th century, when we transitioned from family farm-based lives to become industrialized city- and suburb-dwellers. But it appears that, whether because of our recent economic hardships or simply from the realization that sometimes it is too hard to go it alone, we are seeing an awakening of greater family interdependence. While I both applaud and respect families for coming together to be more caring, supportive, and secure in difficult times, I also recognize how important it is that these changes be factored into smart and strategic retirement planning.
This is the third in a three-part series based on this new research. In case you missed Monday's or Tuesday's blogs about "The #1 Retirement Wildcard," and "The New Retirement Lifescape," here are the links to Part 1 and Part 2. And, if you like, you can download the entire report at www.ml.com/2013retirementstudy/.
In addition, in case you'd like to watch me giving a presentation on the transformation of retirement (or you've got a family member or friend who's sorting their way through the challenges and opportunities of this stage of life), here's a link: http://www.huffingtonpost.com/ken-dychtwald/the-transformation-of-ret_b_3048327.html