How Can Family Fit Into Your Retirement Plans?

By: Anna Rappaport
Anna Rappaport is an internationally recognized actuary, consultant, author, and speaker and founder of Anna Rappaport Consulting.

The extended family is an important part of retirement planning for many Americans.  Indeed, in the past, family members frequently helped fill in gaps when people grew older. Yet today, people increasingly reach their senior years with few — or no — family members who can help. I believe that family concerns are often given inadequate consideration in retirement planning, and this article offers some facts and ideas to consider.

Photo by O.C. Gonzalez on Unsplash

Some older family members help younger family members

A recent study by the Employee Benefit Research Institute showed that 51% of Americans age 50-64 provide financial help to their family members. The proportion dropped at older ages: 39% of those age 65-74, 33% of those age 75-84, and 28% over age 85.  But only a small handful of older households — 5% — received financial transfers from younger family members.

What long-term retirees report 

The Society of Actuaries (SOA) has conducted detailed focus groups with people in the US and Canada who retired 15 years or more. Several interesting results have emerged, including the fact that many long-term retirees have managed their finances in retirement quite well. Yet some financial shocks proved particularly unsettling, including needing long-term care and getting a divorce in retirement

 Seniors help children but did not plan to

The research found that some retirees did not want to rely on their children for support, while others perceived their children as a potential resource to fall back on. Today most seniors do not plan on having their children help them, and many work hard to avoid it. Nonetheless, many family members can and do provide help.

A problem frequently mentioned by the long-term retirees arises when adult children need help, for instance due to mental illness. Some seniors also have dependent children or grandchildren living with them, and some help pay for their offsprings’ education.

Long-term care and the family

Women provide the majority of long-term care to relatives, often their spouses. What people fail to recognize that there is a high price paid by the caregiver.  For instance the wife often serves as caregiver of her (often older) husband, often depleting financial assets and physical health. When the husband dies, she is often left alone with reduced income due to loss of some benefits based on her husband’s employment. Nevertheless, most couples today do not purchase long-term care insurance for the wife.

Special issues later in life

Our research has also shown that adult children are often called on to help their elderly parents. This is not surprising, as cognitive and physical decline are more likely at older ages. SOA research on people age 85+ shows substantial informal family support being provided, including children helping their elders manage their finances day-to-day.  Interviews with people in assisted-living facilities and in their 90’s showed that adult children commonly take on an active role in helping their parents manage their bills.

What key questions should you ask?

In planning for retirement, I believe that every adult should address the following questions – ideally in advance of need. There are no generally accepted right answers to these questions, but the discussions will be informative:

  • What do my elder and younger family members, including children, expect of me in terms of retirement help and support?
  • If I am asked for help by family members, will I be able to provide it without jeopardizing my own financial and personal security? How can I set appropriate limits so the help does not undermine my own resources?
  • If I need help, will others help me? How will my family support me when I need help managing my affairs?
  • Which family members will be supportive and how can I approach them to provide such help?
  • In couples, how might the caregiving spouse be affected when the other member of the couple needs support? What will happen to the survivor?

For people having no close family members, the questions should focus on how they can develop a substitute support system. Both friends and government services should be considered – ideally ahead of time. Some cities, including Boston, have an Aging in Place Council which can assist with this type of planning.

In sum

Families can be a source of personal support for the elderly, and in turn many older Americans offer financial help to adult children and other family members. These factors should be a critical component of long-term financial and physical retirement planning. People lacking close family members who can help should think ahead, to consider potential substitutes.

For more information see “Don’t forget the role of families in lifetime financial security”.


This piece was originally posted on June 2, 2017, on the Pension Research Council’s curated Forbes blog. To view the original posting, click here.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.