Do These Things for Better Retirement Planning
Retirement planning is at the forefront of a lot of Americans’ minds, considering a top concern is not having enough money. Magnifying this is stock market cycles surrounding COVID-19. Those who felt confident at the beginning of 2020 now have reason to question their preparedness. Moreover, adult children are getting increasingly involved, asking new questions related to economic concerns, healthcare costs and living arrangements.
Are older Americans and their children/caregivers on the same page? We asked more than 1,300 American adults 65 and older to share their perspectives on personal finances, retirement decisions and discussing these matters with their children. We also asked more than 1,300 financially independent adult children the same questions about their parents.
I hope our insights will help you navigate your own conversations with loved ones.
1. Don’t be Afraid to Talk about COVID-19 and Stock Market Gyrations
Many older Americans and their adult children are talking about personal finances during the COVID-19 pandemic and feel similarly about financial security. Both groups similarly report (at 43 percent) being “concerned” or “very concerned” about financial security. However, talking about it now and having these conversations is the first step toward better preparedness.
2. Make Financial Plans to Pay for Future Healthcare
We asked those 65 and older their greatest financial concerns, and affording healthcare was number one. Grown children had the same concern about their parents.
Men in the 65-and-up age bracket have much less concern about having ample funds, with men being far more likely than women to cite no financial concerns (19.6 percent vs. 12.4 percent) and women being more likely to say running out of money is their primary financial fear (25.9 percent vs. 19.1 percent).
As one might expect, financial fears depend largely on income, and those on the lower end of the scale have more urgent concerns like paying for medical care and ensuring they have enough money, while higher-income individuals fear not being able to maintain their current lifestyle.
3. Discuss Finances and POA – Older Americans Are Comfortable With It
For adult children of people at or near retirement age, there is little reason for fear over discussing financial matters with parents — but adult children were far more likely than their parents’ group to report discomfort with the idea. In fact, only about one in 10 people in the 65-and-older group said they were “very uncomfortable” or “uncomfortable” with the idea of discussing their finances with their adult children, while more than 16 percent of the adult children’s group said the same.
A similar disconnect exists between retirement-age people and their adult children when it comes to giving their children (or caregiver) power of attorney. While majorities of both groups indicated that the plan would be to authorize power of attorney, those in the older age group were far more likely to say so (69.9 percent vs. 57.9 percent).
4. Caregivers, Be Prepared to Contribute to Healthcare Costs
How about those 65 and older receiving financial assistance from their children? Two-thirds expect to not need financial help, and just seven percent expect to need help (27 percent are unsure).
This is quite a different answer than their children provide. Just one-third of adult children expect their parents to not need financial help, and 39 percent do expect to provide financial support or already do provide it.
5. Mitigate Uncertainty by Working with a Financial Advisor
Most older adults believe they are prepared to tackle the challenges of retirement, though their grown children may not agree. However, knowing that the adult children of those 65 and older are largely uncomfortable talking to their parents about finances, it’s likely that adult children aren’t all that well-informed about where their parents stand in retirement planning.
About two-thirds of individuals 65 and older say they are prepared for retirement, but a troublingly large group (more than 1 in 10) say they are unprepared or very unprepared for a life without income from their jobs.
Consulting with a finance professional appears to have a considerable impact on the ease with which people think about retirement. In fact, having met with a financial adviser reduced by half the percentage of people 65 and older who feel unprepared for retirement.
By Jeff Hoyt
Jeff Hoyt is editor-in-chief at SeniorLiving.org, a comprehensive directory of living options. SeniorLiving’s mission is to help older Americans age with ease.