Millions of older Americans are providing
financial support to adult children
August 4, 2020 By Mary Beth Franklin
Despite
COVID-19’s severe health impact on aging adults, older Americans report they
are coping far better both emotionally and financially than younger adults,
according to a new Edward Jones and Age Wave study released Tuesday.
“COVID-19’s
impact forever changed the reality of many Americans, yet we’ve observed a
resilience among U.S. retirees in contrast to younger generations,” said Ken
Dychtwald, CEO of Age Wave, in unveiling the new joint research project, The
Four Pillars of the New Retirement.
The
extensive study of more than 9,000 people across five generations in the U.S.
and Canada uncovered a new definition for retirement that encompasses far more
than simply the end of work. The majority of U.S. retirees — 55% — defined
retirement as a whole new chapter filled with new choices, freedoms and
challenges across four interconnected areas of their lives: health, family,
purpose and finance.
Increasing
longevity means more people have longer retirements, making retirement a more
important stage of life. As the outsized baby boomer generation moves into
retirement (about half are already retired), they are swelling the ranks and
the economic importance of retirees.
COVID-19’s
initial dramatic impact on the U.S. economy and personal finances may have
long-lasting implications for families and their financial advisers. And there
is a lot of money at stake.
“Men and
women age 50-plus control more than 70% of total wealth, representing the
greatest concentration of wealth in human history,” said Dychtwald. “This stage
of life is about to get busy and take up a bigger footprint.”
Two-thirds
of Americans said the pandemic has brought their families closer together
emotionally, even if they had to remain physically apart. Reflecting the
enhanced intergenerational connectivity, the study found that 24 million
Americans have provided financial support to adult children as a result of
COVID-19, and an overwhelming 71% of retirees said they would offer financial
support to their family even if it could jeopardize their own financial future.
Older
generations — including both retired baby boomers and members of the silent
generation that preceded them — have fared better during the pandemic both
emotionally and financially as most have fewer responsibilities around work and
family and they rely less on income from employment.
Retirees
tend to be more insulated from financial shocks through Social Security and Medicare.
Individuals receive an average of $1,500 per month in Social Security benefits
while couples receive an average of $31,000 per year.
Most
retirees also have the security of home ownership. More than three-quarters of
retirees own their own home with 60% of them having paid off their mortgages.
And older Americans are more likely to be receiving guaranteed defined-benefit
pensions from their former employers.
In
contrast, the pandemic has significantly reduced the financial security of a
quarter of Americans, with the greatest impact on younger generations,
particularly those who have lost jobs and health insurance coverage.
Those
planning to retire are feeling less
confident now about how much they are saving for retirement,
with only 46% expressing confidence, compared to 58% before the pandemic
struck. And 20 million Americans have stopped making regular retirement saving
contributions.
“We’ve
certainly seen COVID-19’s disruptive force on finances, with the pandemic
influencing retirement timing and financial confidence,” said Ken Cella,
principal in the client services group of Edward Jones. “However, this could
has brought several silver linings in terms of family closeness and important
discussions about planning earlier for retirement, saving more for emergencies
and even talking through end-of-life plans and long-term care costs.”
As
Americans redefine retirement in new broader terms, the majority of U.S.
respondents described their ideal financial adviser as a guide who can
understand them and help them achieve their goals. And more than 80% of those
working with a financial adviser said that professional relationship gave them a
greater sense of comfort regarding their finances during the pandemic.
But
figuring out how to tap
their savings in retirement can be confusing and retirees need
help. More than one-third of retirees surveyed (36%) said managing money in
retirement is more confusing than saving for retirement. More than half of the
retiree respondents (52%) cited health care costs, including long-term care, as
their most common financial worry.
And
despite the high risk that many older adults face during the pandemic, it isn’t
COVID-19 that scares them. It’s Alzheimer’s and other forms of dementia.
“Beyond
finances, we can help our clients envision and truly realize a holistic
retirement which we know includes decisions about their health, family and
purpose,” Cella said.
Check out
Mary Beth Franklin’s Retirement
Repair Shop podcast.
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