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Silence Could Be Costly in Family Financial Planning
Posted By Katie Levingston On July 9, 2014 @ 9:02 am In Money Talk | No Comments
Parents and their adult children say they want to have honest conversations about finances and retirement issues, but they just don’t agree on when to talk, according to a survey released today by Fidelity Investments.
Lauren Brouhard, senior vice president of retirement at Fidelity, urges families to bite the bullet and talk – before parents retire – about how best to handle family assets in the future.
“From this study we really concluded that initiating family discussion is better,” she said. “Parents would generally prefer to wait for after retirement to talk about health care plans, whereas children want conversations to happen before parents retire to put themselves at ease. Neither is thinking about how everyone can work together to have greater peace of mind.”
The Fidelity Intra-Family Generational Finance Study surveyed 1,058 parents and 159 adult children.
The survey found that people aren’t having these conversations because parents worry that their adult children are counting too much on a future inheritance while adult children don’t want to upset mom and dad. Money still tends to be a taboo subject in many families.
About 4 out of 10 parents haven’t had in-depth conversations with their children about covering living expenses in retirement as well as health care and eldercare costs. As a result, many adult children aren’t aware of their parents’ financial situation. For instance, more than half of adult children say their parents worry about financial security, when only 23 percent of parents had such concerns, Fidelity found. (It seems parents might need to worry more: 70 percent indicated they don’t know exactly how much money they have to retire with ease, according to the survey.)
Brouhard encourages discussions to revolve around making sure parents have what they need to live successfully in retirement. Important documents such as wills, power of attorney forms and health care directives should be addressed as well. While adult children can remain sensitive to a parent’s financial privacy, “there are some key things that children should be aware of and need to know if they need to take on responsibilities,” Brouhard said.
To get the conversation started, it’s easiest for families to understand their roles in financial planning. Children and parents should implement the “voice not vote” rule, where financial planning is not necessarily a democracy, but where family members play a role in the process, Brouhard said. Ultimately, parents make the decisions on how to manage and disburse their assets.
Just having the opportunity to weigh in and engage in a dialogue on issues such as health care and retirement is beneficial – often leaving both parties feeling less uncertain about the future.
“We want parents to take the time now, because if something comes up in the future, if someone becomes ill or loses a job, you’re not being forced to make those decisions at highly emotional times in your life,” Brouhard said.
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