Millennials are worried about their parents’ retirement, too

Brandon Welch grew up with divorced parents who seldom discussed their finances. Only recently have they begun to save for retirement. Welch, a 40-year-old financial manager at Newport Wealth Advisors, is concerned they’re failing to plan properly. Eager to help, he draws on his own expertise to help them prepare. “I’m at a point in my career where I’m considering my retirement. I want to make sure that I have enough and so from my perspective, I’m putting myself in my parents’ shoes. I want that for them,” Welch said. “They’ve worked hard and they deserve it.” Welch is not alone. Nearly 70% of millennials worry that their parents may not have enough money to live comfortably in retirement, according to a recent survey from Edward Jones of over 12,000 North American adults across five generations. More than 80% of the younger cohort value their parents’ comfort in retirement over a potential inheritance. The study results may help dispel stereotypes about younger generations who rely on their parents financially in adulthood. It also underscores how millennials and their parents have to try to balance their needs to both be financially secure. “Oftentimes they say, ‘oh, the younger generation, maybe they only think about themselves.’ That is absolutely not true,” Lena Haas, head of wealth management advice and solutions at Edward Jones, told Yahoo Finance. “I thought that was a really interesting finding that kind of debunks myths about the generations.” She added: “Millennials offer their parents a lot of really sage advice.”

‘These dynamics can be healthy’

A recent Bankrate survey found that more than two-thirds of parents have made financial sacrifices for their adult children, with half of parents giving up their emergency savings for their children. Those findings echo earlier surveys on the subject. But older parents may have had enough. The Edward Jones survey revealed that many retirees “find it challenging to balance continued support of their adult children with maintaining their own lifelong financial security.” According to the report, 63% of Edward Jones study participants are curbing their financial support for their children. Still, there can be some financial benefits for parents for their generosity, according to Landon Tan, a financial planner at Query Capital and a millennial himself, as well as some trade-offs for the younger generation. For instance, he noted that millennial parents often “give the maximum gift tax exclusion to their kids each year to reduce their estate tax burden.” “Clients often feel mixed about receiving this or other types of support because of the desire for independence and the power dynamic and strings that may be attached,” Tan said. “He said parents also might give money to their children but also “expect to move in later and receive support as they age.” “Any of these dynamics can be healthy as long as they work for the people involved.”

‘Sage advice’ from millennials

Millennials also have ideas for how their parents should navigate retirement, even though 83% of retirees said they rarely or never ask their adult children for retirement-related advice. According to the Edward Jones study, 37% of millennials want their parents to spend more conservatively and 26% want their parents to work longer or go back to work. Vaughn Kellerman, a millennial and associate wealth advisor at HCM Wealth Advisors, said this isn’t bad advice. Many Americans tend to spend more than they should, which can derail their retirement plans. “People are spending more than they earn,” Kellerman said. “And after doing that for 10, 20, 30 years, these people have a hard time, even in retirement, flipping that switch and saying, ‘okay, now I’m going to spend, let’s say fifty grand less a year because I don’t have my income, [only] Social Security.'” Kellerman also said his clients tend to think they can retire sooner than they can actually afford to. “I’ve talked to prospects and clients in the past who have this goal in mind of 60 years old to retire.” Kellerman said. “When really, we’re projecting out and they probably shouldn’t be retiring until 66, 67 when full Social Security kicks in and they have savings compounding for the next five, seven years of their life.” Welch also highlighted the benefits of working longer than planned. “It is amazing when you’re talking about retiring at 65 versus 66,” Welch said. “In those ranges, one more year of savings, one less year of drawing on that portfolio, it does make a considerable difference in the outlook for their retirement and their ability to actually live the lifestyle that they hope to live in retirement — if they’re right on the borderline of it working.”

‘A multi-generational financial plan’

If financial insecurity is getting in the way between millennials and their parents, they may need outside help to balance each others’ priorities. “Families that really struggle may benefit from doing a multi-generational financial plan that facilitates the conversation about what everyone needs to be successful,” Landon Tan said. He added that communication was key. “Managing expectations and being honest with themselves about what they need so that they don’t give to a point that makes them feel resentful, or pull back support abruptly in a way that ruptures the relationship,” Tan said. Ultimately, Tan thinks, like Haas, that millennials do want to see their parents succeed in retirement. “I think there is a narrative that parents are sacrificing too much and giving to ungrateful children, and that’s not something that resonates [with] me and the approach of my clients,” Tan said. “They generally feel a lot of loyalty to their parents and all parties want the others to do well.”