Retirement planning weighs mightily enough on the leading edge of boomers now reaching age 60. A potential complication for many of these aging hipsters, and one that can lead to planning opportunities for their advisors, is another milestone: becoming grandparents.
“This is a new life stage the boomers have never been through before,” says Sandra Timmermann, director of the Mature Market Institute at MetLife, New York. “The birth of a grandchild is a door-opener for a financial planning discussion focused on the newborn and on revised retirement planning needs.”
The U.S. Census Bureau estimates that by 2007, about 32 million boomers will be grandparents. That’s a 60% gain over 2003, when just 20 million boomers, or one-third of grandparents nationwide, fell into this population segment.
Attaining “grandparenthood,” say Timmermann, is a life event that often spurs individuals to reassess financial requirements. While continuing to plan for their own retirement, boomer grandparents may also wish–or will be called upon–to assist adult children and grandchildren. They thus need to seek a healthy balance in pursuing financial objectives.
One way to assist both adult children and grandchildren, says Timmermann, is to establish a college savings fund for grandchildren. The fund would not only lessen the educational burden on adult children, but also have a more lasting impact than other gifts to grandchildren, such as toys or clothing.
“It’s a very expensive world we live in,” says Timmermann. “When boomers help their grandchildren, they’re indirectly helping their adult children. For a financial advisor, talking to a boomer grandparent about establishing a college savings fund is a nice way to segue into other retirement and estate planning issues, including life insurance policy reviews.”
The suggestion is also one that new parents can increasingly appreciate. Annual college tuition costs, which exceed $40,000 at many institutions, are rising faster than inflation. Assuming a 5% inflation rate and annual tuition fees of $42,800 in 2006, a child born today who graduates college in 2023 can expect to dole out $422,816, according to Enterprise Capital Management, Atlanta, Ga.
That’s a hefty sum to contemplate for adult children who have other, and potentially more pressing, concerns: meeting basic living expenses, saving for a new car, or making a down payment on a home purchase. While their children focus on these higher financial priorities, grandparents can provide the “dessert,” the discretionary purchases that can enhance grandchildren’s lives.