Americans are risking their own financial security to provide for their children and other family members. According to a new study conducted by and Age Wave, Baby Boomers gave an average of $14,900 to family members over the past 5 years, including adult children, grandchildren, parents, siblings and other relatives. That jumps to an average of $34,100 for people earning between $500,000-$5 million.
“We salute the generosity, but we need to realize the risks of such generosity,” says Andy Sieg, head of global wealth & retirement solutions for Bank of America Merrill Lynch. The study found half of pre-retirees (aged 50 and older) say they would be willing to make major sacrifices that could impact their retirement to help family members. Why? Approximately 80 percent of respondents say their top reason for providing such support is that it’s the right thing to do, compared to the 4 percent that said it was because they expected future help in return.
Ken Dychtwald, president and CEO of Age Wave, compared Boomers’ generosity to the public service announcements about oxygen masks on airlines: “secure your mask on first, and then assist the other person.” Boomers need to ask themselves “how’s that going to affect their long-term savings for retirement?” he says. “They give almost too much with no boundaries.”
And the study found that over half ofbelieve one member in particular is taking on the role of “family bank.” This comes amid a background where only a third of people feel prepared for retirement if all goes according to plan. “The role of financial advisors, among other things, is to bridge this dialogue,” Sieg says.
“Family is going to have to be front-and-center in all financial discussions,” Dychtwald adds. It’s crucial for advisors to focus on overall life priorities, not just financial priorities, says David Tyrie, head of Merrill’s retirement & personal wealth solutions group. Advisors should be prepared to budget for clients’ desire to provide for family before and during their retirement.