Role reversals

(June 2006) To retire comfortably, many advisors will say clients need at least 70% of their pre-retirement income. And that figure may increase substantially for high-net-worth clients, since they are least likely to compromise their current lifestyles.

But for those people who don’t have that 70%, it isn’t necessarily stopping them from retiring. Some will simply adjust their expectations. And if they do, in fact, find themselves low on funds, one solution for these folks is getting their kids to return past favours.

This may come as a news flash to the adult children, but a recent HSBC Holdings PLC study found 43% of older adults feel their kids should help support them financially in retirement. And why shouldn’t parents expect this? Over the course of 18 years, they spent hundreds of thousands per child.

In certain cultures, child-as-supporter isn’t seen as a worse-case scenario. It’s expected and engrained from an early age. One person I know in this situation frequently worries how exactly to do this on his modest salary.

For others, the reality of parents getting older and not being able to care for themselves hasn’t even registered as a possibility. Many refuse to contemplate their own — let alone their parents’— mortality.

Some baby boomers are at an age where they’re planning their retirements and, at the same time, are busy helping their kids get a head start in life. If a parent comes to live with the adult child, major renovation costs — such as a ramp or elevator installation — may be needed to accommodate that parent. Factor long-term nursing care or assisted living costs into the equation and you’re looking at a significant financial commitment.

On top of that, there can be considerable emotional implications. If the parent is suffering from Alzheimer’s or dementia, for example, the child may have to give up his job to become the parent’s primary caregiver. Talk about role reversals.

Currently, much media attention is focused on the oldest baby boomers turning 60, which, as it turns out, is also the average retirement age. But there hasn’t been much discussion about their aging parents, or the fact that for the first time in our lifetimes, there may be at least two generations that are retired.

How does this affect the baby boomers and subsequent generations? Have boomers factored aging parent costs into their overall retirement plans? Have they had discussions with their parents about care-giving expectations?

More on eldercare…

Want to learn more about the issues clients may face as they grow older? Visit our latest special report that looks at eldercare and working with clients as they age. To go this report please click the link below. Coming of age: Your guide to working with aging clients

We tackle some of the answers to these questions in this month’s cover story of Advisor’s Edge on page 16 by assistant editor Heidi Staseson. We see eldercare as a hot issue, so look for more articles in upcoming editions that address tax implications and solutions to financial challenges.

Your aging clients also affect how you do business. We already know that some of you have increased the typeface on all your correspondence, so those clients can better read your materials. We’ve also heard about the need to display more patience, since some clients have difficulty remembering phone conversations, when the last meeting took place or even why certain financial decisions were made.

What other changes have you made? Send me an e-mail and we’ll publish your responses.

Deanne N. Gage is the editor of Advisor’s Edge. deanne.gage@advisor.rogers.com

(06/15/06)