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Are You the Family Bank?


In the last five years 62% of Americans age 50 and older have provided financial assistance to family members, but most didn't plan for retirement with factoring in helping children, parents and siblings.

In the last five years 62% of Americans age 50 and older have provided financial assistance to family members, according to a new Merrill Lynch study.

“Family & Retirement: The Elephant in the Room” conducted in partnership with Age Wave, people age 50 and older with less than $5 million in investable assets are providing an average of $14,900 a year.

“Given the challenging economic climate during the past several years, it’s not surprising that so many Americans have extended financial support to their loved ones,” Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch, said in a statement. “However, such admirable willingness to assist family members should not place one’s own long-term financial security in jeopardy, and can be a hidden risk to retirement that must be considered and planned for.”

According to the survey, half of pre-retirees age 50-plus said they would make major sacrifices that could impact their retirement if it meant helping family members — 60% would retire later; 40% would return to work after retirement; and one-third would accept a less comfortable retirement lifestyle.

Only 15% of respondents said they provided financial help to family members because “they helped me in the past” and just 4% said they did it so they would get help in the future if they ever needed it. Half of respondents provided financial help because they felt it was their family obligation and 80% did it because “it was the right thing to do.”

Unfortunately, many pre-retirees and retirees (36%) admit that they give money without knowing how it will be used. Knowing that it isn’t surprising that the majority (57%) of those who stopped giving financial help did it because they felt the money was not being used wisely. Only 11% stopped because they worried family members wouldn’t be able to pay the money back.

“Families are a major source of fulfillment during retirement years — but can also create unforeseen financial pressures,” Ken Dychtwald, PhD, founder and chief executive officer of Age Wave, said in a statement. “Too often, people plan for their retirement without factoring in how they might be called upon to help out their adult children, aging parents and siblings. In this new era of extended longevity and increased family interdependencies, retirement planning is no longer about just an individual or couple, but also about the needs and hopes of our loved ones.”

The majority of people age 50 and older didn’t budget for issues like financially supporting family members (88%), caring for an aging relative (91%), or helping to pay for their grandchildren’s education (91%). Furthermore, only half have a will, 42% have a health care directive and just one-third have both.

The study points out that retirement planning can be even more difficult considering the rising divorce rate has created more complex families — introducing stepchildren, stepparents and stepsiblings into the financial mix. Today, 37% of 50-plus-year-olds are part of a blended family.

Although, they are financially supporting family members now, the greatest worry of older adults is “being a burden on family.” Half consider being a burden has having family members physically take care of them, 30% say it means taking care of them interferes with their family’s own lives and 28% consider being a burden as need to ask for money or help to pay bills.

The study also found that there is a troubling lack of financial planning, discussion and coordination. Three-quarters of those aged 25 and older have not spoken with their parents about issues like living arrangements in retirement, inheritance and long-term care. Even one-third of those aged 50-plus have not had these discussions with their spouse.

The main reason these discussions have not taken place is to avoid family conflict (24%), followed by the fact that the issue is too uncomfortable to discuss (19%). However, 13% admit their family members don’t want them to know how much money they have and 11% admit that they don’t want family members to know how much they have.

“Proactive discussions and coordination with family members can be the difference between smooth sailing and significant hardship when confronting financial challenges leading up to and through retirement,” David Tyrie, head of Retirement and Personal Wealth Solutions for Bank of America Merrill Lynch, said in a statement. “Although many of these topics can be difficult to discuss, there is a clear benefit to having family conversations and planning ahead.”

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