Much has been made and continues to be made about the issues Boomers face in relation to retirement and their money. Indeed, reports are issued routinely which emphasize the “retirement crisis” faced by Boomers with insufficient savings and inadequate retirement planning who face difficult markets and uncertain futures. Many look forward to the oft-cited “largest wealth transfer in American history” in the relatively near future. Whether that will have much real impact remains a controversial question (see here and here). However, because of continuing advances in healthcare leading to the continuing growth of longevity, that transfer, such as it is, is often delayed. In the meantime, Boomers face some unique challenges.
1. Caring for aging parents. Diseases that once were terminal are now often chronic, requiring that Boomer children provide care and assistance in many instances. Long-term care insurance is one obvious solution, but many resist purchasing it because of (a) the expense; (b) underwriting difficulties (including carriers leaving the market); and (c) the expectation (hope) that they are paying for something they may never use. One potential solution (other than self-insuring) is to purchase a Pension Protection Act qualifying life insurance policy or annuity that allows a purchaser, when necessary, to use the policy or annuity proceeds for LTC expenses pre-tax.
2. Boomer Boomerang. More and more children are returning home to live with their Boomer parents. The difficult job market today makes such “boomeranging” even more frequent. In a MonsterTRAK survey of college students and recent grads, 48% said they planned to boomerang home for at least a little while as the unemployment rate for young adults has reached its highest point in over 25 years. These tough economic times also make it harder for adult children to care for their parents. Dollars are being stretched tighter and tighter all over. This trend provides its own set of problems and challenges. One is when parents, who have often already sacrificed to rear their children and to provide for their education (often at great expense), ruin their own retirement plans in order to continue to provide financial assistance to these now adult children. Obviously, it’s difficult for parents not to help a child in need, but children may be less likely to seek parents’ help when they are aware that doing so will increase the likelihood that the parents will be dependent upon them some day.
3. Being “Sandwiched.” Over 20 million Americans find themselves “sandwiched” today. They are simultaneously taking care of aging parents while rearing their children. The problem can be exacerbated by the “boomerang” kids highlighted above. Parents are wise to help their children plan, adjust, prioritize and restructure their lives, but are ill-advised simply to bail them out.
4. Going Back to Work. Boomers who have retired with inadequate financial planning in place or who take excessive market risk with their retirement money (sometimes to disastrous consequences), are often forced back into the work force. That isn’t usually how they envisioned their “golden years” and they typically find that it’s a more difficult and a less accommodating transition than they might have hoped. The best way for Boomers to avoid a fate of spending days wearing a blue Wal-Mart vest (or something like it) is to prepare a good, solid and realistic retirement plan.
The “retirement crisis” is real and the challenges Boomers face are enormous.