It’s one of those rare and wonderful times when the family has gathered together. There are stories, laughter, and good cheer. There’s just one thing wrong: No one seems to want to break the ice and talk about the elephant in the room—your parents’ future health and financial security.
Those are the findings of a new Intra-Family Generational Finance Study by Fidelity Investments. Parents and their adult children are struggling with communication on key topics that include income in retirement, caring for ill parents, estate planning, and inheritance. As a result, adult children are not only anxious about their own retirement, but also their parents’ future.
Often, just sitting down and chatting about such issues in detail is the biggest obstacle, the study showed. (See below for tips on Conversation Starters)
Does your family need help communicating?
While 95% of adult children and their parents agreed that it’s important to have frank conversations about wills, estate planning, or health care, there was little agreement on when to talk. What’s more, both parents and their children disagreed on the depth of those conversations, with adult children saying the discussions they’ve had with their parents have lacked sufficient detail.
“With parents living longer and the increasing financial complexity that this generation faces, it’s critical that families break down the barriers and have these important conversations to make informed decisions and take control of their finances, rather than reacting to a crisis and when it’s too late,” says Kathleen A. Murphy, president of Personal Investing at Fidelity Investments. “Families need to discuss these topics earlier in greater detail and plan accordingly, as it’s possible that adult children may have to make financial and healthcare decisions for their parents later in life.”
Only one-in-three (34%) parents and their children agreed on the best time to have those conversations. Parents (37%) lean toward delaying those conversations until they are near or in retirement, while their children (37%) felt it was important to have those talks earlier, either before their parents retire or experience health issues.
A top barrier to conversations was that the parents (30%) don’t want their children to over rely on an inheritance, while 40% of adult children feel like it’s not their business to ask about these topics. As a result, the children think their parent’s worry about their financial future more often more than the parents actually do.
"Sometimes, the mere fear of not agreeing with one another can keep people from having potentially difficult conversations,” says Tim Habbershon, Managing Director for Fidelity Investments, and advisor for Fidelity Family Office Services. “We are emotional creatures, and unless we intentionally and effectively share feelings during a conversation, those feelings go underground, fester, and often come out at inopportune times—perhaps right when you have to discuss a difficult wealth transference, financial, or care giving issue.”
Some of those gaps were uncovered in the Intra-Family Generational Finance Study. For example, only 10% of children believe that their conversations with their parents about the parents' health and eldercare were very detailed, and 97% of parents and children disagreed on whether the children will take care of the parents if the parents became ill. Likewise, one-fourth of children believe that they will have to help their parents financially, while nearly all (97%) of parents say they will not need help.
Both parents and their adult children in the study also disagreed on the depth of the conversations they had about inheritance and estate planning, and on the value of their parents' estate. In fact, the children underestimated the value of their parents' estate by more than $100,000.
Keep in mind that the study looked at parents aged 55 or older and their adult children 30 years of age or older. To be included in the study, the parents had to have at least $100,000 of investable assets, and the children had to have money in an IRA or 401(k) or other investment account, and at least $10,000 saved. To see more details of the study, see Fidelity® Intra-Family Generational Finance Study Executive Summary.
Learning to communicate
"Making sure that your goals are in line with your children’s goals is important, and when they’re not, gaining a clear understanding of the other party's views is critical to future unity,” Habbershon says. To get started, consider our conversation ice-breakers below.
Using these conversations tools can go a long way to having those effective, but important, family conversations.
- Read Viewpoints: How to talk to your family about your estate plan and Eight habits of successful family communications.
- Learn about estate tax strategies in Viewpoints: Prepare for estate tax changes.
- Read Viewpoints: Retirees estimated medical costs.
- Get more information on managing your Personal Economy.