More and more boomers are being too generous to family members, doling out wads of money and jeopardizing their own retirement security, according to a newly released study by Merrill Lynch Wealth Management and Age Wave.
The study, “Family & Retirement: The Elephant in the Room” conducted in August by Merrill in partnership with Ken Dychtwald’s Age Wave, found that during the last five years, three out of five (62%) Americans age 50 and older have provided financial assistance to members of their family, including adult children, parents, grandchildren, siblings or other relatives.
On average, the study found that the financial assistance provided to family members during the last five years was nearly $15,000—and significantly more among the nation’s wealthiest families.
While the support may have gone to help relatives meet a one-time need or provide ongoing assistance over the course of many years, it was often given without expecting anything in return, the study notes. However, the study warns that the vast majority of people age 50+ (88%) have not factored such support for family into their financial planning.
Andy Sieg, head of Global Wealth and Retirement Solutions for Bank of America Merrill Lynch, said in releasing the study that “Such admirable willingness to assist family members should not place one’s own long-term financial security in jeopardy, and can be a hidden risk to retirement that must be considered and planned for.”
The survey included a nationally representative sample of 5,415 respondents age 25+, including 2,104 among the boomer (age 47-67) and silent (age 68-88) generations, 250 millennials (age 25-36), and 252 respondents among Generation X (age 37-48).
But the study also notes the “dangerous absence of proactive discussion” and boundaries among family members as they navigate financial interdependence.
When respondents were asked if one of their relatives was “the family bank,” nearly three in five people (56%) age 50+ said they believe a member of their family is the “family bank”—someone who their extended family is most likely to turn to for financial help. This person, the study said, “is often the one who is most financially responsible, has the most money or is the easiest to approach.”
Nineteen percent of the 50+ age group who are parents also said they are supporting, in some form, at least one “boomerang” adult child who has moved back in with them. More than two-thirds (68%) of parents age 50+ have provided some form of financial support to their adult children during the last five years—among which, 36% did so without knowing how their money was being used, the study says. Those parents who are aware of how their money is being spent say it is given to help adult children with their rent or mortgage (20%), cell phone bills (18%), car payments (17%), health care expenses (15%) and student loans (11%), among other things.
When asked to name their No. 1 retirement concern, 31% of older adults aged 68 to 88 cited both “being a burden on family” and running out of money to live comfortably. Yet, 66% of those older than 50 admitted they have taken no steps to avoid having to live with a family member if unable to live on their own.