At a glance
- Only 31% of financial professionals consider family members needing financial help a significant retirement risk for pre-retirement clients, and 10% call planning for it "very important."
- For plan advisers, the 31% is a number to test against their own book: how many pre-retirement clients are paying out to an adult child or a parent, and is that payment inside the retirement projection?
- Two-thirds of pre-retirees who covered a surprise family expense also paid for a planned one, such as a wedding or a home down payment.
34% of pre-retirees surveyed gave significant financial support to an adult family member over the past 10 years, according to research released Nov. 10 by Jackson National Life Insurance Company and conducted with the Center for Retirement Research at Boston College. Those who gave spent $26,311 on average, and Gen-X carried the heaviest load among pre-retirees.
Only 31% of financial professionals consider family members needing financial help a significant retirement risk for pre-retirement clients, and 10% call planning for it "very important." Adult children were the most frequent recipients; housing, long-term care expenses and job loss were among the leading reasons for giving.
For plan advisers, the 31% is a number to test against their own book: how many pre-retirement clients are paying out to an adult child or a parent, and is that payment inside the retirement projection? The planning question is whether a participant's retirement projection carries a recurring transfer to a child or parent as a standing line item. A transfer treated like a mortgage or a car payment changes the sustainable spending figure in a way a one-off gift does not.
"Once a client's family support becomes a recurring obligation rather than a surprise, it belongs directly in the financial plan next to the mortgage and the car payment, not off to the side," said Glen Franklin, assistant vice president of research, RIA and lead generation strategy at Jackson National Life Distributors.
"In addition to boosting awareness of family needs for financial support, it's equally important to help investors plan ahead for how to handle them—so they don't end up compromising their own retirement security," said Andrew Eschtruth, director of the Center for Retirement Research at Boston College.
Two-thirds of pre-retirees who covered a surprise family expense also paid for a planned one, such as a wedding or a home down payment. By comparison, 16% of investors who had not provided support for unexpected expenses gave for anticipated needs.
Reported by the Retirement Advisers desk from 401(k) Specialist. Published . Corrections