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Financial Planning > Behavioral Finance

The Latest News on Caregiving Costs, Millennial Wants and America's Financial Fitness

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While many aspects of caregiving have been previously studied, financial caregiving remains largely unexamined. A Merrill Lynch study, conducted in partnership with Age Wave — “The Journey of Caregiving: Honor, Responsibility and Financial Complexity” — finds that 92% of caregivers say they also are financial caregivers, performing at least one aspect of financial caregiving during their caregiving journey.

“Money may not be the first thing that comes to mind when we think about what caregivers do and who they are,” the report states. “But financial relationships are an integral and necessary part of caregiving, and they’re part of almost every caregiving situation.”

In fact, according to the report, after two years of receiving care, 88% of care recipients are no longer managing their finances independently. The report defines financial caregiving as potentially two different roles. A “financial contributor” is a caregiver who pays for care, and a “financial coordinator” is a caregiver who oversees and organizes other aspects of their care recipient’s finances, such as paying bills, managing investments, preparing taxes, handling insurance and monitoring accounts.

The report also finds that financial coordination, not direct financial contribution, is the most common form of financial caregiving. According to the report, 88% of financial caregivers are financial coordinators and 68% are financial contributors.

The financial contributor and coordinator roles are not always mutually exclusive, though. According to the study, financial caregivers are responsible for a wide variety of tasks, including paying bills from their recipient’s account (65%), monitoring bank accounts (53%), handling insurance claims (47%), filing taxes (41%), and managing invested assets (21%).

Plus, caregivers spend an average $7,000 on caregiving per year, which goes toward paying for personal, medical and household needs. “Yet, many are contributing far more,” the report notes.

Caregivers for people with Alzheimer’s and other forms of dementia spend, on average, 54% more than the average caregiver, the report finds. In addition, caregivers for a spouse spend 68% more than the average and those who are caregiving from a distance spend 71% more than the national average. In total, the report estimates that financial caregivers collectively spend an estimated $190 billion per year on their care recipients for out-of-pocket, care-related expenses.

Despite covering these hefty financial costs, the report finds there is little discussion of their ramifications. According to the study, 75% of financial contributors and their care recipients have not discussed the financial impact of these contributions. And 66% of caregivers feel they could benefit from financial advice.

“While some caregivers may feel compelled to contribute financially, not knowing how much they’ve spent makes it difficult to plan and can have ripple effects throughout their lives,” states the report, which was based on a nationwide sample of more than 2,200 respondents, including 2,010 caregivers.

What Millennials Want

In a new survey, millennial workers indicated that they are more confident making investment decisions on their own vs. members of older generations and also are very receptive to professional financial help, reports Schwab Retirement Plan Services.

Despite the financial demands they face, millennials are taking positive steps with regard to their saving and investing habits, especially with their 401(k)s, the survey found, and 80% said they would like personalized 401(k) advice.

Schwab notes that workers in the 25-to-36 age group are especially reliant on 401(k)s for the money they will need in retirement, with 78% reporting that a 401(k) is their largest or only source of retirement income.

The Schwab survey reveals that millennials are disproportionately affected by money-related stress. Thirty-five percent say it has affected their job performance, compared with 18% of Gen Xers and 11% of baby boomers.

Twenty-four percent of millennials cite student loan debt as a source of financial stress. At the same time, 80% of millennials state they are caught up on bills and have some money left over at the end of the month.

“It’s heartening to see that saving for retirement has become a priority for so many workers, especially the youngest generation of workers, for whom retirement can seem like a lifetime away,” Steve Anderson, president of Schwab Retirement Plan Services, said in a statement. “Our findings show that, inspite of — or perhaps because of — the financial challenges they faced as they entered the workforce, millennials know how critical it is to keep on top of their finances today with an eye toward tomorrow.”

Koski Research conducted the online survey of 500 U.S. workers who were saving in a workplace 401(k) plan; they were not asked at which institution they have their accounts. Respondents work for companies with at least 25 employees and ranged in age from 25 to 70.

Twenty-five percent of millennial respondents say they invest the money they have left over each month in the stock market; in addition, 34% of millennials put extra money toward their 401(k), compared with 20% percent of Gen Xers and just 8% of boomers. Recent research by the Investment Company Institute finds that mutual funds are the most popular investment for U.S. households to meet retirement and other financials goals.

Millennials in the Schwab survey are savvier than older generations about the fees they paid for their retirement investments. Fifty-one percent say fees influence their choice of 401(k) investments “a lot,” compared with 40% of Gen Xers and 38% of boomers.

They are also more confident making investment decisions on their own, with 64% of millennials saying they are very or extremely confident making investment decisions solo, compared with 47% of Gen Xers and 39% of boomers.

Add a financial professional to the mix, and all respondents’ confidence rises. Eighty-five percent of millennials, 73% of Gen Xers and 72% of boomers feel the same level of high confidence with the aid of a professional.

Lessons from a Bus Tour

Investopedia and American Century Investments want to spread the word about financial planning while also learning about the financial fitness of the typical American consumer, so top executives from each firm (plus licensed reps of American Century) embarked on a bus tour across much of the Midwest in October.

The Financial Coach, a 45-foot-long tour bus, stopped in six cities in five states, targeting local events attracting big crowds, such as the Chicago marathon, Indiana University Homecoming and Financial Planning Association annual meeting, in Nashville, Tennessee.

What its riders found after talking with thousands of people, including more than 2,200 who took a three-question financial quiz, is how little people know about financial markets, investing and saving for retirement even though those polled across a variety of generations say retirement planning is their number one financial issue. Over 50%, for example, don’t know the definition of a bull market or that they should save for an emergency fund. Those under 40 are also concerned about paying off their student loans.

Despite the focus on retirement, many people have no idea about how to calculate how much they need to save for retirement or the size of the company match for their 401(k) plans. More specifically they don’t know if they’re saving enough to take full advantage of their company’s match.

But those same people who waited in line to speak with reps on the tour bus about their financial situation won’t necessarily seek out the counsel of financial advisors, according to Jay Hummel, American Century’s senior vice president of direct sales and service, who was on the recent bus tour.


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