Parents in their 50s and 60s think they’ve done a bang-up job talking with their adult kids about their estate and retirement plans. Their kids think just the opposite. It’s the new Generation Gap.
That’s the upshot of the Fidelity Investments Intra-Family Generational Finance Study
At the heart of this money mixup: a failure of many parents in their 50s and 60s to have critical conversations about finances with their grown kids.
(MORE: What to Teach Grown Up Kids About Money)
“Money is definitely a taboo subject for parents and silence can be costly,” said Lauren Brouhard, senior vice president of personal investing at Fidelity Investments. “But our study showed that taking the time to have these conversations can really increase peace of mind and reduce anxiety for families.”
Fidelity surveyed 1,058 parents 55 and older with investable assets of at least $100,000 and 159 adult children older than 30 with at least $10,000 in an IRA, 401(k) or another investment account.
Six highlights from the survey:
1. Neither generation feels comfortable talking to the other about money. Only 51 percent of parents and 54 percent of adult children say they’re very comfortable discussing their personal finances with each other.
2. Nearly two thirds of parents and adult kids (64 percent) disagree on the best time to start talking about things like wills, estate planning, eldercare and covering retirement expenses. Parents prefer to wait until they’re retired; their adult kids want the conversations to happen before their folks retire or experience health issues.
“We side with the children,” said Brouhard. “It’s better for families to have these conversations when they’re not under stress or duress.”
(MORE: How Not to Talk to An Adult Child About Money)
3. In many families, serious financial conversations aren’t happening at all. Some 40 percent of parents haven’t had detailed talks with their adult kids about their retirement, health or eldercare expenses. And just 41 percent of parents have discussed their wills and estate planning.
The top reason parents said they haven’t discussed their retirement plans with their grown kids: They don’t want them to count too much on their future inheritance.
And the No. 1 reason the kids said they haven’t talked with their parents about the subject: They feel it would be upsetting to both parties.
4. Parents think they’re doing a better job filling in their kids about their estate plans than they are. A full 60 percent of the parents who have had such conversations said they shared the logistics and details about their wills and estate planning, but just 42 percent of the adult children said they did.
(MORE: How to Tell Adult Kids About Their Inheritance)
5. Many parents don’t expect to need help from their adult kids, but lots of their grown children think they will. While a striking 96 percent of parents said they won’t need financial assistance from their grown children, 29 percent of the kids believe they'll need to pitch in.
Who’s more likely to be right? “Time will tell,” said Brouhard. “People are living longer. And in their earlier years of retirement, they’re often traveling and spending money. So the children may have a valid fear.”
Similarly, just 6 percent of the parents surveyed think their grown child will need to provide eldercare for them, but 43 percent of the kids surveyed think either they or a sibling will.
6. The kids may be more nervous about their parents' finances than necessary. Only 23 percent of parents surveyed said they worry about their financial future a few times a month or more, yet 56 percent of adult children thought they did.
Brouhard surmises that this misapprehension may be a reflection of the financial worries the adult children are facing themselves. Many of their parents have pensions and Social Security, she notes, but the kids are likely under more pressure to save on their own without a pension safety net.
The Takeaway For Parents
To me, and to Fidelity, the survey's numbers spell things out clearly: If you’re nearing retirement and have grown kids, it’s time to begin having serious, detailed talks with them about your financial plans and concerns.
“Not a one-and-done conversation,” said Brouhard. “Talk with your children periodically about important topics related to your retirement planning, making sure the right documents are in place — like a power of attorney — and that everyone knows where they are.”
In a previous blog post I wrote, Lori Sackler, a Morgan Stanley financial adviser and author of The M Word: The Money Talk Every Family Needs to Have About Wealth and Their Financial Future, told me that in her experience, one of the most common conflicts about family members arises when they’re probating an estate that hasn’t previously been discussed.
Yes, talks about your financial future may be uncomfortable at first. “But if you break through the barriers of the initial stress, you’ll have greater peace of mind and better financial consequences in the long run,” noted Brouhard.