Should you tell your grown children how much money you have to live on in retirement? Should you share an estimate of how much of it you plan to leave them when you die?
The answer is a firm “yes,” says Fidelity Investments, which has studied this issue and other topics related to families and money twice in the last three years. “When you take the time to have these conversations, they increase peace of mind and decrease anxiety,” says Fidelity’s Lauren Brouhard, senior vice president, retirement strategies. “They strengthen a parent’s sense of preparedness. They help adult children understand their parents’ wishes and financial status, and if adult children are asked to accept real responsibility for their parents later on, they are more ready to handle it. It’s a disservice not to have these kinds of conversations.”
Not everybody sees this issue in the same way. While 75 percent of parents and their adult children agree that there should be some version of this conversation, there is a lot of disagreement about what should be discussed and when.
Nearly 50 percent of parents and their adult children say they aren’t very comfortable talking to each other about these issues. About 30 percent of parents say they are reluctant to talk about their retirement planning with their adult children because they don’t want them to count too much on their future inheritance.
Get it out in the open
Fidelity says the data show that failure to share information creates major misconceptions among family members, especially about who will provide care for ailing parents. Some 43 percent of adult children expect that they or a sibling will care for a parent if he/she becomes ill. Of course, only 6 percent of parents expect to get that kind of help from their children. The realities could be much different.
There is also a considerable disconnect between what parents expect to leave their adult children and what the children think they’ll inherit. On average, adult children believe that they will get $300,000 less than their parents hope to leave them.
“Money is a taboo subject for many parents and their adult children,” Brouhard says. “But the only way to close the information gap is to open the discussion.”
She recommends that parents who are uncomfortable about having these discussions take charge and decide the content of the conversation in advance — who will attend the family meeting, what needs to be discussed, what should be decided, who will be executor of the estate and who will have power of attorney when the time comes. “This isn’t a democracy,” she says.
The reward for frank disclosure is serenity. Of parents who have had these discussions with their children, 93 percent say it brought them greater peace of mind and 73 percent said they thought that down the road, it would improve their children’s state of mind.