Generations Apart: Talking Retirement And Estate Planning Over Turkey
Adult children and their parents recognize the need to talk about inheritance, eldercare and retirement planning issues, but nearly one in two adult children do not feel like they’ve had sufficient conversations with their parents about these issues, according to a recent study by Fidelity Investments. Making matters worse, there’s substantial disagreement between the generations on details and even when the conversations should take place. Talk about a disconnect.
“There are implications of not having those conversations,” says Joe Madden, a Fidelity spokesperson. “Both parents and their adult children make assumptions, and they’re not going to be based in reality, and they won’t be the best decisions for their family.”
Another misconception: the adult children underestimated the value of their parents’ estates by more than $100,000 on average. (Parents in the study had to be at least 55, have an adult child older than 30, and have investable assets of at least $100,000, and the child had to have had at least $10,000 in savings.)
So get talking! Fidelity has put together a series of conversation starters around retirement, your job, kids, and now parents here. They’re designed to help people facilitate these sometimes difficult conversations. “We recognize it’s not always easy,” says Madden.
When should we talk? One-third of the parent-child teams in the study didn’t even agree on this one. Parents were more likely to say the time to talk is when they’re near or entering retirement while the adult children were more likely to say they’d like to talk before their parents retire.
As to barriers to initiating the talk, 40% of adult children said the top barrier is that they feel like it’s none of their business to ask their parents about this stuff. But only 15% of parents said that money issues are private. So kids, start asking questions.
What should we cover? Here’s a basic list for starters: wills and trusts, insurance policies, retirement accounts, pensions, powers of attorney (parents might want to name an adult child to make financial and healthcare decisions for them later in life), and living wills to cover end-of-life decisions.
Beyond the paperwork, families should have plans – and contingency plans – for where mom and dad will live, how they will pay for their living expenses, and who will take care of them when the need for care arises. And if it’s clear parents are well-provided for, there’s loans or gifts to adult children, college savings for grandkids, maybe a multi-generational family vacation to discuss.
End result: Peace of mind. Having detailed conversations appears to have a positive effect on both parents and adult children alike. Peace of mind of parents jumped from 61% to 91% when comparing parents who have not had detailed conversations with those who have. A copy of the Fidelity Intra-Family Generational Finance Study is here.