Raised in a family where his divorced parents rarely discussed financial matters, and only began saving for retirement recently, Brandon Welch is deeply concerned. Now a 40-year-old financial manager at Newport Wealth Advisors, he fears that his parents are inadequately prepared for their retirement. Drawing upon his professional knowledge, he is eager to aid them in planning effectively.
“I am at a stage in my career where I’m contemplating my retirement. From my viewpoint, I’m putting myself in their position, wanting them to have enough. They’ve given their best throughout their lives; they deserve it,” shared Welch.
Welch isn’t alone in his concern. A recent Edward Jones survey, which polled over 12,000 North American adults across five generations, found that nearly 70% of millennials fear their parents may not have sufficient funds for a comfortable retirement. Interestingly, more than 80% of the younger group prioritized their parents’ retirement comfort over any potential inheritance.
These findings could help dispel myths about younger generations relying financially on their parents during adulthood. The study also highlights the shared challenge millennials and their parents face in achieving financial security.
“Often, the younger generation is accused of being self-centered. That is far from the truth,” says Lena Haas, head of wealth management advice and solutions at Edward Jones, during an interview with Yahoo Finance. “One fascinating insight that defies generational misconceptions is the profound advice millennials often give their parents.”
In a recent Bankrate survey, over two-thirds of parents confessed to making financial compromises for their adult children, with half having depleted their emergency funds to support their offspring. These findings align with previous surveys on the subject.
The Edward Jones survey indicated that numerous retirees find it taxing to simultaneously support their adult children and maintain their own lifelong financial security. According to the report, 63% of study participants are decreasing their financial support for their children.
However, there could be some financial advantages for parents through their generosity, suggests Landon Tan, a financial planner at Query Capital, and a millennial himself. He also acknowledges some compromises for the younger generation.
Tan points out that parents often “offer the maximum gift tax exclusion to their kids each year to reduce their estate tax burden.”
Tan acknowledged the mixed feelings clients often have about receiving such support due to their desire for independence and the possible power dynamics that could arise. He added that parents might also expect to move in and receive support in their later years in return for their financial help.
“Any of these dynamics can be positive as long as they work for everyone involved.”
While 83% of retirees report that they seldom or never solicit retirement-related advice from their adult children, millennials do have recommendations for their parents’ retirement. The Edward Jones study revealed that 37% of millennials hope their parents will adopt a more frugal spending approach, and 26% wish their parents would extend their working years or return to work.
Vaughn Kellerman, a millennial and associate wealth advisor at HCM Wealth Advisors, believes this isn’t ill-advised. Many Americans tend to overspend, which can jeopardize their retirement plans.
Kellerman also points out a prevalent tendency among his clients to overestimate when they can afford to retire.
Welch also emphasized the advantage of extending one’s career.
If financial uncertainty between millennials and their parents becomes a hindrance, they may require external assistance to balance each other’s financial objectives.
“Families who find themselves in financial turmoil might benefit from a multi-generational financial plan that encourages dialogue about the needs of each member for successful outcomes,” said Landon Tan.
Tan insisted on the importance of communication. He believes that managing expectations and maintaining honesty about personal needs can prevent feelings of resentment or sudden withdrawal of support that could damage relationships.
Echoing Haas’s sentiment, Tan believes millennials genuinely wish their parents a successful retirement.
“In my opinion and based on the approach of my clients, the narrative that parents are sacrificing excessively for ungrateful children doesn’t hold,” Tan said. “In general, there’s a strong sense of loyalty to their parents, and everyone wishes for the others’ success.”
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