1 / 24

Children and Retirement: A Financial Advisor’s Perspective

Children and Retirement: A Financial Advisor’s Perspective. The Retirement Research Consortium 16th Annual Meeting. Agenda. Sensible Financial’s practice – a small, selected sample Financial advisor observations Children’s Influence Before Retirement Children’s Influence After Retirement.

alfreda-golden
Download Presentation

Children and Retirement: A Financial Advisor’s Perspective

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Children and Retirement:A Financial Advisor’s Perspective The Retirement Research Consortium 16th Annual Meeting

  2. Agenda • Sensible Financial’s practice – a small, selected sample • Financial advisor observations • Children’s Influence Before Retirement • Children’s Influence After Retirement www.sensiblefinancial.com

  3. Sensible Financial client base • Largely pre-retirees • More affluent than average • Better planners than average • Better savers than average • Even so, most have a “financial planning problem” www.sensiblefinancial.com

  4. The Life Cycle: Overview Human Capital Accumulation Work / Earning Retirement 20 40 60 80 100

  5. The Life Cycle: Earning and Spending Human Capital Accumulation Work / Earning Retirement Earnings Consumption 20 40 60 80 100

  6. The Life Cycle: Assets Over Time Human Capital Accumulation Work / Earning Retirement Assets Earnings Consumption 20 40 60 80 100

  7. Reducing / managing retirement risk starts early in life • Our most valuable advice to clients: live within your means • We can identify clients with significant retirement risk early in life • Some clients live very frugally, and will have no trouble retiring comfortably • Some clients spend at the limits of their income – their retirement is fundamentally at risk www.sensiblefinancial.com

  8. Priorities and preferences vary – investing in children important to many couples • Few distinct answers • “Family” almost always makes the list (usually connotes either children or siblings or both) • Friends • Health • Meaningful work • Experiences • Priorities and Values • What is important to you in life? www.sensiblefinancial.com

  9. The Life Cycle: Introducing Children Human Capital Accumulation Work / Earning Retirement Child Rearing 20 40 60 80 100

  10. Consumption impact Human Capital Accumulation Work / Earning Retirement Earnings Child Rearing Consumption 20 40 60 80 100

  11. Parents may change their commitment to work Human Capital Accumulation Work / Earning Retirement Earnings Child Rearing Consumption 20 40 60 80 100

  12. Children change saving pattern, too Human Capital Accumulation Work / Earning Retirement Earnings Assets Assets Child Rearing Consumption 20 40 60 80 100

  13. College Human Capital Accumulation Work / Earning Retirement Earnings College Child Rearing Consumption 20 40 60 80 100

  14. After College Human Capital Accumulation Work / Earning Retirement Earnings College Child Rearing Post-College Consumption 20 40 60 80 100

  15. At and after children’s marriage, support may continue in predictable ways… Human Capital Accumulation Work / Earning Retirement Earnings Weddings Down Payments Child Rearing Consumption 20 40 60 80 100

  16. … and unpredictable ways Human Capital Accumulation Work / Earning Retirement Earnings Bad Marriage Serious Illness Child Rearing Substance abuse Consumption 20 40 60 80 100

  17. Some children will never be independent adults Human Capital Accumulation Work / Earning Retirement Earnings Child Rearing Lifetime Support Consumption 20 40 60 80 100

  18. A family’s choices about children has pervasive financial impact • Children are important life projects for many couples • Relationships with and dreams for children extend far beyond “child rearing” www.sensiblefinancial.com

  19. Children can influence parents’ retirements significantly • Spending (planned or unplanned) on children requires resources that otherwise parents would • Spend on and for themselves before retirement • Save for and spend in retirement •  fundamental impact on living standard • Parents may reduce work commitment  less financial resources to spend and save • Parents may spend substantial resources on grown children (and on grandchildren) www.sensiblefinancial.com

  20. Appendix

  21. Gary Becker1930-2014 • Families are important • They embody and reflect powerful human motivations • These have significant economic implications • Economics can help us understand behavior in families www.sensiblefinancial.com

  22. Advisor backgroud • Economist (labor, not finance) • Management consultant • Internal consultant – mutual funds • Financial advisor • Financial plan  investment strategy  investment management • Financial plan  ongoing financial advisory support (with investment management) www.sensiblefinancial.com

  23. Couples may contribute toward their grandchildren’s expenses, too • Education (many couples) • Private school • College • Special education • Some families appear to think of their resources as fully shared across generations • Others draw clear lines • Most fall between these extremes www.sensiblefinancial.com

  24. Dealing with disability in old age • Children may help with • Financial management • Care • Care management • Less able couples without children are disadvantaged, as they must • Hire extra help or • Rely on professionals or the state www.sensiblefinancial.com

More Related