Are You Supporting Multiple Generations in Retirement?

​​When it comes to saving for retirement and taking care of other generations, Abigail Gunderson knows a thing or two about that. The 56-year-old senior wealth advisor at Tanglewood Total Wealth Management has to juggle maximizing her retirement savings with taking care of both her mom and mother-in-law, who are in different stages of their retirements.

Add the fact that her husband has already retired, which means the household is functioning on one less income, and it’s understandable why it’s such a balancing act for Gunderson.

Take Gunderson’s mother-in-law, who is 96, for starters. While she has enough money saved to fund her retirement, in recent years she has suffered from dementia, leaving Gunderson and her husband with a big decision. Do they move mom into their home or put her in an assisted living facility where there is staff on-site 24/7 for emergency responses and help with daily living?

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They opted to go the assisted living route after she broke her hip and needed expensive 24/7 in-home care. That in-home care costs about $15,000 to $20,000 per month.

"If this were continued indefinitely, given that my mother-in-law is in overall great health, there's a real possibility that she could outlive her money, so we started doing our homework and looked for alternative options,” says Gunderson. “Eventually, after looking at all the options, we decided assisted living was a good choice for her.”

To make it work, the couple sold her mother-in-law’s home, and the proceeds were added to her portfolio. “A lot of financial planning goes into it, even with people who have the funds,” says Gunderson. “We picked a facility close to us, and my husband visits her almost every day.”

Then there’s Gunderson’s 80-year-old mother, who lives overseas with one of her two siblings. Her mother doesn’t have enough money saved for retirement, so her three adult children contribute about $400 a month each to cover her expenses, and they pitch in for occasional medical expenses. While they are more than willing to do it, it is an added expense Gunderson has to navigate at the same time she is saving for her retirement.

“That takes away from my savings,” says Gunderson, who is trying to maximize her 401(k). “She can live another ten or 15 years, so it has to be part of my planning to make sure mom is ok. Who is to say the cost is not going to go up over time due to inflation, or if she needs more medical care?”

Without a doubt, it's a balancing act for Gunderson. To ensure there is still money left to support her lifestyle, Gunderson and her husband minimize their spending, find ways to save, and are more aware of where their money goes. “You give up a few things to make sure you can accomplish everything,” she says.

Taking care of multiple generations in retirement is becoming more common

Gunderson isn’t alone. As of 2020, there are an estimated 53 million Americans who provide care for an older adult or someone with an illness and a disability. Let’s not forget the sandwich generation, or people taking care of their children and aging parents at the same time. That, by some estimates, makes up about 26% of the U.S. adult population.

Both groups are supporting loved ones and, at the same time, saving for a retirement that can easily last more than twenty years. Retirement could last even longer as advances in medicine and technology make it more common to live to 100 and beyond, creating a situation where people are supporting multiple generations.

“When we talk about multi-generational retirement, we are talking about the fact that people are living longer. They are going to be living until 100, 110, and 120, and we aren’t planning properly,” says Salvatore Capizzi, executive vice president at Dunham & Associates Investment Counsel Inc.

Rewind a few decades, and it used to be enough to have a 35% stock and 65% bond portfolio at age 65 because people weren’t living beyond 75 or 80. But with lifespans now reaching into the late 90s and beyond, that type of planning won’t be enough, he says.

“If I run out of money and I’m 100 and my kid, who is 70, is now retiring, he or she will need to support me and themselves in retirement,” says Capizzi. When their child, who is 30, turns 70, he or she may have to support themselves, parents, and grandparents, he says.

Facing the prospects of a multi-generational retirement? Here’s what to do.

Whether you are faced with planning for your retirement and taking care of your parents or are thinking about how you’ll manage multiple generations in retirement, the good news is that there are ways to prepare.

For starters, Capizzi says there has to be a shift in the way retirement portfolios are constructed. Sure, you want to preserve more of your savings the closer you get to retirement, but having too conservative a portfolio could set you up for a retirement shortfall.

“People need to evaluate their portfolios,” says Capizzi. “Are they sitting on a bunch of low-risk investments? Is the portfolio really geared toward a couple that may live to 100 or 110?”

It’s also important to have conversations with your parents about their savings, investments, health, and wishes in advance of a potential disease or illness that could leave them incapacitated or unable to make decisions for themselves.

The conversations should include how much money is available, the type of insurance they may have, whether or not they want to age in place, and who should be named the power of attorney, says Gunderson.

The sooner and more often you have those often difficult but necessary money conversations, the more you can plan for.

Planning for retirement includes compromise

It’s also important to be willing to compromise when you are planning for a retirement that could include multiple generations.

If you're planning to support your children in college, you may have to accept that you’ll need student loans, a scholarship, or other aid to bankroll it.

If it’s about taking care of your parents as you age and you don’t think you can afford it, it could mean working longer to amass more in your retirement savings. Even if you can afford it, you may have to leave the workforce early or take a less stressful job to care for someone at home.

“It's important to realize there may be some give and take when you are planning for a retirement in which you will have to take care of more than yourself,” says Chelse Stevens, a certified financial planner and VP, consultant at Fidelity Investments.

While self-sacrifice is often called for, don’t forget about your retirement planning along the way. “You have to take care of yourself first to help take care of others,” she says.

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