No one ever wishes on their deathbed that they had spent more time at the office.
Not only can we not "take it with us," but neither can we recapture the time we spent gathering it in the first place. Richard Wagner of Worth Living, LLC, contends that people in his profession need to go beneath the surface of the answers people give when asked about their financial goals. For example, When a client says, "I want to retire at age 65," the advisor should ask, "Why?" When a client says, "I want to ensure my family's financial health," the advisor should ask, "What does that mean?"
It's about getting past the merely quantifiable to questions that engage issues of life purpose, duties and responsibilities, and spiritual imperatives. Or, as Wagner puts it, "confronting the essence of money and soul" by asking questions such as:
What's the money for, anyway?
How much is enough?
What do you think you are supposed to do with the money?
When and where do your most deeply felt concerns and values come into play, and how do they relate to your financial resources?
If you had all the money you would ever need, how would you live your life differently?
If you knew you were going to die in six months, what would you change?
These sorts of questions instigate conversations that help people differentiate quantity from quality in money issues. Wagner asks his peers, "What exactly is quantity if we can't acknowledge and identify quality?" These conversations inevitably lead us to other people.
Is all that money you're saving exclusively designated for your personal ride into the sunset? Or will you find other obligations laying a claim to some of your retirement savings? Today's prospering baby boomers will have more responsibilities to consider than the retirees of the past and may find that those responsibilities provide due incentive to redefine retirement at a personal level. Do I support my children or my parents? My children and my parents? My parents and then my children? Today's contemplators of retirement living have more to consider than whether they live on the Gulf side or Atlantic side of Florida. One of the realities of increased longevity is increased responsibility for the children and grandchildren of the entire octogenarian to centenarian population. The reality check that a lot of people in their 50s and 60s are now experiencing has to do with the time and attention they must pay toward aging parents. The freedom they dreamed of and saved for was cruising down the highway in their Winnebago with not a care in the world. This freedom in many cases has been seriously restricted by caretaking responsibilities for aging parents. A growing number of these parents prefer to live in their home, but are frail, in failing health, and require increased degrees of vigilance. For many, the carefree drive down the freeway in the Winnebago has been supplanted by a ride that is interrupted with three calls to the ailing parent a day and an abiding sense of anxiety over the parent's well–being. For others, the ride down the freeway has been postponed indefinitely.
My wife and I always thought we would sell our business, retire at 62, and travel the country and take our sweet time wherever we wanted. When we were 50 and my wife's mother was 83, we really didn't expect that she would be around for another 12 years with the health problems she had. Now we are 62 and she is 95 and quite vulnerable to accidents and injury. It's touch–and–go every day. We're putting off our plans and have resigned ourselves to whatever hand fate deals. Sometimes we feel a bit selfish for thinking about what it would be like to get out and see the world a bit, but you can't help but dream when you saved so many years to be able to do it. We don't blame my mother–in–law for wanting to live at home as long as she possibly can. We certainly wouldn't want our children to convince us to live in some sort of nursing facility unless it was absolutely necessary.
—Darrell, architect, 62
I've seen retirement brochures that displayed beautiful golf courses, alluring beaches, exotic tours, and mountaintop vistas but have yet to see one that shows a boomer driving a legally blind father to his doctor appointment and to the pharmacy. This is not the scenario that is going to be described in anybody's retirement dream book, yet the latter picture looms as a far greater likelihood than the former images for many looking forward to the years ahead. A good number of RVs may be accumulating rust and gathering dust as life presents a "now it's your turn" option to this generation.
A strange phenomenon is shaping up for many of us: life is situating itself squarely in the path of many of our dreams. This decade has been replete with never–ending exhortations about the uniqueness of the baby boomer, how we're redefining retirement, and how we are changing the world.
We are a generation that has been accused of being shortsighted and self–indulgent, cavalier, and irreverent toward the status quos. We've gained a reputation for interrupting business as usual. Now it may be us who are interrupted.
Each year, a part of our work at the Financial Life Planning Institute is to gather information on which life transitions and events are top of mind for the clients of the financial advisers the Institute services. They are given choices of every possible life transition and concern from the cradle to the grave and include a list of over 60 concerns/events.
In 2007, for the third consecutive year, the top transition noted was concern about an aging parent. One year and it's an issue. Two years in a row and it's an issue we had better pay attention to. After three consecutive years at the top of our clients' list of concerns, we are seeing the beginning of a trend that will confront us for years to come.
According to an ABC News/Gallup poll, 41 percent of baby boomers who have a living parent are helping to take care of them with personal help, financial assistance, or both. Of those boomers who aren't providing care for parents now, 37 percent think they will someday, and half of them voice their doubts about their ability to do so.
A study by Campbell Ewald Health of 815 boomer caregivers aged 40 to 60 and caring for parents aged 60 to 90 reported that 56 percent provide assistance at least once a week and 25 percent play a caregiving role every single day. The concerns that the caregiving boomer faces are manifold and, according to the study, intensified for those whose parents live with them. Table 16.1 lists the concerns caregiving boomers face.
Clearly, the concerns are holistic in that the caregiver feels taxed emotionally, financially, and in career advancement in many cases. MetLife's Mature Market Institute says its studies indicate that these "informal caregivers give up not only an average of 25 hours per week but substantial earning potential as well." According to one
Table 16.1. Boomers' Caregiving Concerns
Concern | Live with parents (Percent) | Don't live with parents (Percent) |
|---|---|---|
Source: Campbell–Ewald Health | ||
Emotional well–being | 58 | 43 |
Personal relationships | 43 | 33 |
Physical well–being | 40 | 27 |
Parent's needs will surpass own capabilities | 40 | 25 |
Cost of parent's care on own family's finances | 34 | 19 |
Own career development | 33 | 16 |
Own retirement plans | 32 | 16 |
study on the issue, people who took on the caregiver role for their parent gave up more than $650,000 in lifetime earnings potential. It has been estimated that the United States spends more than $300 billion caring for the frail and elderly but that over a third of that—$103 billion—represents what children personally pay out in their efforts to help.
According to ABC News, most caregivers are women (69.5 percent) and they most likely work full–time (53.1 percent). Professional help for the elderly is not cheap. The average hourly rate for home health assistance was $19 in 2006. Many of the frail elderly are financially frail as well. The median older adult with severe disabilities had household assets of only $7,800. (This measure looked at assets that could be easily liquidated to pay for care and other needs.)
Bill is a bank executive in his 40s whose 70–something widowed father (legally blind), just moved in permanently, "Not what I had planned," Bill told me, "but I'm grateful for the chance to pay Dad back."
Heather and Chuck, whose parents are both near 80, just sold their house and bought a sprawling rambler that had separate living quarters so her parents could move out of their two–level condo where climbing stairs had become too difficult and risky. "The hardest part," Heather explained to me, 'was convincing my folks that we really wanted this, that they were not a burden to us."
Vince and his wife were building their dream home when it became apparent that his parents were not doing well in maintaining their home located in the same city. After consulting with his parents, they decided to build a casita on the property, with a living room, bedroom, reading room, and bathroom, that was a short, 100–foot stone pathway walk from the main house, where all the meals would be served. "After talking with my folks, Vince explained, "it became apparent that some semblance of independence was critical in this setup and that living under our roof just wouldn't cut it."
My brother and I, and others like us have created "parental pensions" to supplement our parents' retirement incomes in the years ahead and to ease the stress of inflationary times.
Susan's day starts at 4:30 AM and ends around 11 each evening as she cares for her live–in mother, works full–time, and tries to give herself an hour at the end of each day to unwind. She's been doing this for two years now and knows that she must continue to work to be able to help her mother, even though she is approaching retirement eligibility.
These are not money issues. They are very visceral life issues, but money is involved. What can you do? Being sandwiched between a parent and a child can present untold challenges and may seem to put a crimp in your style, but if you approach this challenge the right way, not only will your life be richer, so will your parents'.
To help clients prepare and deal with their caregiving issues, the Bank of Montreal has recently formed a partnership with BEST in CARE Inc., an organization that provides a comprehensive, impartial advisory service that helps families understand and navigate through the maze of elder care services within their local communities. BEST in CARE also provides support to the caregiver for the emotional issues that often arise. All of these services are available through Internet, telephone, and one–on–one coaching.
Dan Taylor is the developer of the Parent Care Solution, a proprietary process for advisers to help them develop expertise in the arena of parental care. According to Taylor, "the single greatest threat that the boomers face is the disintermediation of their life path and process by the care requirements of aging parents. The threat is not that aging parents will spend the boomer's inheritance. In many cases that will automatically happen due to increased mortality and additional health care cost on the part of the parents. The real danger is that the parents spend the boomer's retirement because they run out the inheritance."
Many of our dreams and plans may be on hold as life asserts itself in a way we had not predicted. Golf matches, fishing and hiking trips, and beach chairs may be yielding to doctor and pharmacy visits and reminders to parents to take their medicine. But it is not really bad news. Something wonderful is happening in all of this. While the responsibilities loom large, the emotional payoffs are extraordinary as caregiving boomers talk about feeling appreciated; feeling the rewards of meeting familial responsibility; feeling loving, grateful, and proud of themselves. Let's take a closer look at a few ideas for melding these responsibilities into your own New Retirementality.
Some, whose parents were subsisting on Social Security, part–time earnings, meager pensions, savings, or a combination of these, created annuity–type funds that paid their parent(s) a monthly subsidy. I like the concept of a parental pension for these types of situations. Many would agree that we owe a great deal to our parents for the sacrifices they made for our benefit. I think of my own father's decision to turn down higher–paying, more prestigious jobs in many cities because those cities were experiencing racial tumult in the late 1960s. He chose instead to restrict his career advancement so he and my mother could raise us in a small, quiet midwestern city. Many of our parents are stunned at the financial opportunities we have access to today. The kind of money we take for granted was rare in their prime working years, even when adjusted for inflation. Some of you reading these accounts may be inspired to do something of this sort for your own parent(s).
My sister and I had talked many times about how unjust our father's retirement situation was and wondered if there wasn't something we could do to make his retirement years more enjoyable. He had worked loyally and earnestly for the same company for 30 years. Because of numerous ownership changes over those 30 years, the end result was that his pension was basically worthless, something like $60 a month. Now Dad is 65 and working odd jobs (some he likes and some he doesn't) to make ends meet. We could see the anxiety in his eyes even when he said he was quite content. My sister and I talked together about the fact that we had both prospered in our respective professions. Neither of us was yet at the point where we were set for life, but we figured out a way we could help. We had agreed years ago that we would take care of Dad's needs in his later years should he become ill or frail, but now we realized that the best thing we could do was contribute now while he was still healthy, vibrant, and full of life. Why wait until a parent's life is limited before you help?
What we came up with was the parent's pension. It worked this way. We both contributed $30,000 of our own savings for a total of $60,000 into a mutual fund that had averaged 15 percent returns over the last 15 years. We had it arranged for a disbursement of $500 a month to be sent to our father's checking account. Even though our father receives the distributions, the fund itself is in our names so we, in effect, both still own the $30,000 we contributed. This was all quite easy to arrange. The fund will need to average a net return of 10 percent a year to keep up with the $6,000 yearly distribution to our father. My sister and I agreed that if the returns did not keep up, we could add more principal down the road. But we think there's a pretty fair chance the returns will keep up. Basically, all we are sacrificing is the interest on our savings to help our father rid himself of his financial anxiety. We feel it was the best thing we ever did.
—Andrew, 41
In the preceding example we see how two people discovered a way to give a parent a margin of comfort and security while he is still vital and mobile enough to enjoy it. Many baby boomers have already prepared themselves, at least mentally, for the possibility that they may need to subsidize and support their aging parents' later years. Some of these people, like Andrew and his sister, have decided to accelerate that subsidy to lessen the economic anxiety of their parent's retirement years. Bruce Bruinsma, founder of the Christian Retirement Coalition and Life Stages, Inc., says that the children of retirees would be surprised to learn how far a little extra income can go for most retirees. The $250 to $500 per month, more than anything, buys peace of mind. It really isn't important what parents do with the money; they may even put some of it in the bank. What is important is that they feel a sense of security and a margin of safety in their retirement years.
I have met those who took a portion of the windfall they received from the bull market run of the 1990s and created an annuity for parents who were living exclusively on Social Security payments. These parents had already adapted their lifestyle to the level of income they were forced to live on and enjoyed great freedom and liberty with the added income.
Recently, I needed a house repair and the servicemen who came were a 40–year–old and his 74–year–old father. I told them what a great thing I thought that was. The 74–year–old said, "All my friends at the retirement community are jealous. I have something meaningful to do. I still get to fix things and be productive. If I didn't have this, I'd probably end up dying like a lot of my friends who had nothing to do."
It is becoming all the more common to see children hiring their retired parents into their business. Both sides win. The parents get meaningful work, extra income, and a chance to do something that contributes to their child's success. And the child gets help they know they can trust. My father has been working with my company part–time for the past few years, and it has been a great reciprocal arrangement in both tangible and intangible terms.
Hiring a parent can be the saving grace for many retirees who want either extra income or meaningful work, or both. If you have a business, it can be the optimum way to give back, while parents get the chance to contribute to your life. I have found out it's not just about money and being able to work. It can add a whole new and intriguing dimension to a parent–child relationship as you build an enterprise together.
From a philosophical and values perspective, the decision to support a parent or a child can create a dilemma for those who don't have the material substance to do both. For example, financial services companies have been promoting college tuition as a chief motivation for investing to baby boomers for many years. How much should you provide for your children's education? Can you divide support between a parent and a child? Who needs or deserves the support more at their respective stage of life? Opinions and views on these questions are as varied as the individuals being asked. One clear trend I picked up is that not everyone is buying into the establishment view that we should provide everything we possibly can for our children.
Karen Ramsay, in her book Everything You Know about Money Is Wrong (Regan Books, 1999), states that we don't need to buy into the idea that we should provide all the college tuition and expenses for our children. The baby boom generation is notorious for giving their children everything they want—and the best of everything. Some would say that we have created a generation of ingrates with an entitlement mentality. They expect to get what they want without any special effort on their part. Whether your children have this entitlement mentality depends entirely on the values you have promoted regarding money, self–initiative, the work ethic, and responsibility. In Chapter 18, I share some examples of very wealthy people who have discovered crucial keys to raising financially responsible and industrious children.
My husband and I were facing a financial dilemma between our high school–aged child's upcoming college costs and finding a way to help my mother, who had raised our family as a single mother and was struggling in her later years. She worked long hours in jobs she didn't particularly enjoy while most of her friends were enjoying more relaxed lifestyles. All of our friends took it for granted that they would supply every penny of their children's education. Some of them were planning on sending their kids through private schools that would cost over $100,000 for a four–year degree.
My husband and I felt like we were the oddballs in these conversations because we never fully bought into the idea that we should provide every penny of our children's preparation for the future. Because of our experience (both of us had worked and paid our own way through college because our parents couldn't afford to pay our way), we felt we had gained some valuable character development and a strong work ethic by having to plan and work our way through our college years. We both had witnessed many college classmates on what we called the 'Budweiser scholarship'—those whose parents paid every penny and didn't seem to take the educational opportunity all that seriously. This experience, combined with our increasing concern about my mother, caused us to rethink the idea of following everyone else on the 'pay your kids way' path.
If we did what everyone else was doing, it would be at the expense of my mother, who we thought had done more in life to deserve a financial subsidy than our children had. We decided to offer our children the family matching grant tuition program. We told our children, 'For every penny you save toward college, we will match. If you save $1, with our contribution you will have $2. If you get really serious about work in the summers and save $4,000 each year, we will match that amount. We also expect you to pursue any kind of grant and scholarship you can, and we will be happy to help with that process, but we will not do it for you. If you are still short after this, you may have to look at a student loan.'
We decided to take this path to teach our children that all goals worth pursuing require hard work, discipline, and determination. We also explained the economic and moral realities of balancing their needs with their grandmother's. We were quite pleased with their response to our proposal. One, a junior in high school, got a job working 20 to 25 hours a week and opened a savings account. His brother, 13, started investing the money he earned on odd jobs along with the birthday and holiday monies he received. Within a year, he had saved over $1,000.
We are now sending a monthly check to my mother, which has allowed her more free time and greatly reduced her stress. We feel good about these decisions all the way around. We feel that both my mother and our children are getting what they deserve.
—Sandra, 44
When considering a life transition that could last up to 30 years, or roughly one–third of your life, it would be foolish to consider that transition through a selfish lens. Although financial support for ourselves is crucial, it is no more crucial than other considerations that successful living demands. We must consider this transition through many lenses: a philosophical lens, a family lens, a values lens, a spiritual and ethical lens, and a personal fulfillment lens. This is not about retirement planning; it is about life planning.
Our decisions go beyond ourselves. Others are and will be affected by the decisions we make. Whether it is our own family members or those affected through our charitable efforts, the decisions we make with our money and life can send ripples that are felt by many others for many years.
If you have been thinking about your New Retirementality, start thinking about the responsibility that you believe comes with your money. Your life is bigger than the balance of any account you own. And the fact that you own it doesn't mean it will benefit you alone.