“In 2017, 49% of adults from the ages of 55 to 66 had no personal retirement savings, according to the U.S. Census Bureau’s Survey of Income and Program Participation.” – Erin Lowry, Bloomberg Opinion columnist covering personal finance.
Let that sink in for a minute. Sorry folks, this will not necessarily be one of my feelgood, bright and cheerful columns as we are going to tackle one of the toughest topics we all face at one time or another. The reality is that we simply don’t like to talk about it, often leading to family squabbles and can result in dire consequences.
As Erin Lowry describes in her recent Bloomberg Editorial Column, “Are you ready to take care of your boomer parents?” the 2022 personal retirement savings figures that include the COVID years are presumably worse. The Boomerang Effect, as Erin calls it, is ready to descend upon Gen Xers and Millennials in the form of Baby Boomer parents (born between 1946-64) in need of financial assistance from their adult children. In many cases, it includes elderly parents moving in with adult children.
There was a time, and in many cultures an expectation still exists, that multigenerational households were the norm. Families look out for one another all the time and in many cases around the world, they still do. In the U.S. however, there seems to be an expectation that elderly parents should have their financial lives in such great shape that they are able to move seamlessly from their longtime homes to a retirement community, to assisted living, to nursing homes, and perhaps into a continuing care retirement community (CCRC).
Why don’t people talk about this important subject? Embarrassed at their lack of financial acumen? Self-conscious? Feeling unprepared for the difficult conversations? “We just don’t talk about that in our family?” Well, get over it. Block out intentional and deliberate time right now to collect all the necessary information, develop a plan and schedule time to talk with your family. It will save even greater anxiety and angst than if you avoid this life skill.
Why are we in such dire straits as a society? I am going to stay away from addressing the very wealthy and the very poor for the sake of this column. I am going to address those of you who are in “low middle income” through “low high income” categories, as that is still where the bulk of our country’s population falls. I’m not going to comment on politics, taxes or wage disparity. Different discussion for a different day. I want to address what most of us can do to be better prepared and to be less of a burden on those who need help from the government, charities, and churches.
Education Is Key
It starts with education and if you follow my column, you know what’s coming next. It’s high time we make personal finance mandatory for graduation from public schools and a formal part of any college or technical/trade school curriculums as well. It passes the common sense test.
We are making significant progress on getting more states to mandate personal finance in publicly funded high schools. As of fall of 2022, there are 27 states where personal finance (or financial literacy) classes are accepted toward graduation and 15 who have voted for it to be mandatory. The most recent state to mandate financial literacy for graduation is my new home state of South Carolina.
Communicate Early and Often
My advice to all of you is to have the tough conversations now. You will be prepared, and grateful, down the road if you don’t keep putting off these commonsense discussions.
“Unfortunately, this is an area in which many parents seem reluctant to have a vulnerable conversation with their adult children. It’s understandable given that a boomer parent could’ve worked hard their entire life and done what they thought was right in terms of building a retirement fund and caring for their family — and yet the coffers may still run dry early. No one wants to feel shame or embarrassment.” – Erin Lowry, Bloomberg Columnist
Start Early
The earlier you start saving the better your chances of having a nest egg. In 1982, I was fortunate to meet one of my lifelong mentors, Janet DeBlasio, who taught me key financial principles such as paying yourself first (invest a set % of every paycheck), max out retirement contributions (if possible and at least up to what your employer will match), live beneath your means to save money and don’t rack up credit card debt living a status lifestyle that you can’t afford. Thankfully, I married someone who had the same foundational beliefs.
By following this sage advice, we were able to put three kids through college, own our home, retire early and still enjoy a good quality of life in the process. We think we did a good enough job planning and saving for retirement to not be a burden to our children and that we will also be able to help future grandchildren.
In hindsight, because I took an economics class in high school and a personal finance class in college (and had a mother who was a great role model), I was a ready pupil when Janet DeBlasio reiterated and reinforced a practical plan for saving and investing.
I listen to the Money Guys and Dave Ramsey podcasts regularly. Dave was talking to a caller who has a $750 a month payment on a tricked-out pickup truck, but lives in a double wide trailer. That, folks, doesn’t pass the common sense test. If you can’t afford it, don’t buy it.
A few savings hacks for you youngsters:
- Have a plan, whether you seek the advice of a financial planner or do it yourself. Thirty-second “get rich” videos on social media don’t count.
- Get roommates, share the cost of your housing when you are young.
- No, you don’t “deserve” to go on a fancy vacation every year, you must earn it.
- If you bet on sporting apps or want to go to the casino or race track, then have the self-discipline to set limits. Playing the lottery is not a retirement strategy.
- If you want to drink the $50, $100, $200 bottles of wine, then you better have the financial resources to pay for that lifestyle.
- Don’t spend $45 to see the same Marvel movie three times. Go see it once, then take that other $30 and put it in a Roth IRA.
- Sacrifice. Learn to say no to get to your yes, especially on expensive impulsive spending.
- For those of you, or those you know, who come from lower income levels, aspire to break the chain of poverty by changing your mindset and educating yourself. Seek help but not handouts.
- Have an emergency fund… save for the rainy day.
I am hoping I won’t be around to see another financial collapse like 2008. But I’m not as optimistic anymore. We seem to be teaching kids that anything goes and the standard of living we were once willing to sacrifice for is somehow now expected. We have created a sense of dependent entitlement or entitled dependency, whatever you wish to call it.
Personal financial security takes self-control, self-discipline and self-awareness, regardless of your age. If your parents genuinely need your help (because $#!t happens) then you do what you must do to help them. Those of you Baby Boomers who lived a status lifestyle above your means and then expect your adult children to bail you out for appearance-sake, shame on you. Not only is that unfair to your adult children, but to their children, your grandchildren, as well.
If you’re a young adult, please heed my advice. Learn to live beneath your means, including factoring in giving to those less fortunate than you (if practical). Have the tough talk with your elderly parents now. It might be uncomfortable in the short run, but it will save you a lot of headaches down the road and you won’t have to fight your parents for the remote.
