Tips for Discussing Finances and Retirement with Your Loved Ones

If the thought of talking about money or retirement planning with your family makes you uncomfortable, you’re not alone. Many Americans shy away from discussions about their personal finances for various reasons ranging from the desire to avoid tension or competition in professional and personal relationships, or simply wanting to retain privacy. While it’s certainly understandable you’d want to keep details of your finances and how you are planning retirement discreet, it’s also important to consider bringing your immediate family members into financial discussions which may impact their lives.

What if your family considers finance and retirement planning topics to be off-limits?

If you’ve been raised in an environment where money matters are a taboo subject, it may seem that it’s best to continue doing things the way they’ve always been done. One market-research survey found that 18% of parents who make more than $100,000 per year never planned to disclose their income or net worth with their children. Their reasoning? According to 32% of the respondents, “It’s none of their business.”

While it’s a personal choice as to how much information about your finances and retirement planning you are comfortable sharing with your family, if you pass down a tradition of all financial discussions being off-limits, it can work against the goals you are trying to achieve.

New lines of communication can be started over a casual dinner with something as simple as sharing the best retirement planning or financial advice you’ve ever received. Discussions can, and should, become a two-way street in learning from each other. Whether speaking with young children, teens, or adults, tailoring the topics accordingly will allow their financial acumen to grow as they learn from other family members. The goal of the conversations is to share insight, guidance, and possible expectations of retirement financial planning and managing a family’s wealth. ?????

Financial and Retirement Planning Topics to Discuss

Discussions about money and planning retirement will differ depending on who is involved. A senior parent who is updating their estate plan may have a different conversation with their adult child than a newlywed couple who is looking for financial guidance from older family members. Similarly, a grandparent who wants to speak with younger grandkids about money values and preparing for the future, will be focused on different points than a working parent who wants to share information about retirement financial planning with a new college graduate. ?Regardless of where the conversation may lead, there are some topics that can break the ice and open the door to more in-depth discussions:

• Money and Values. What is important to your family? How has the family made money? As parents and grandparents share the story of how they have earned money and the career paths they have taken, it can allow for younger generations to ask questions and clear up misguided assumptions they may have. Adult children may have grown up in an affluent household and never been privy to why their family’s finances were above average. Or they may not be aware of how a grandparent started a family business with modest resources and grew it over years with strategic financial planning. Perhaps a parent chose not to take over the family business and instead pursued a career that they were passionate about. Maybe they have a viewpoint that sheds light on the importance of budgeting, saving, and how they used retirement planning investments to prepare for their future.
• The Definition of Financial Success. This can be a highly personal answer. For one person it may mean continuing the growth of a family-owned business, and for another it might mean retirement planning that will allow them to travel and pursue hobbies while being able to afford to stay in their current home near their children and grandchildren. Financial resources and what defines success can take on many changing forms throughout different stages of life. Sharing your family’s stories and learning how others established goals and worked to achieve them can be a powerful source of insight and inspiration.
• Money Management. No one is born knowing what is involved in retirement planning or how to save money and manage a budget. A basic financial education is vital to establishing and growing wealth. Retirement financial planning, estate planning, and even knowing what type of insurance you should carry to protect your family and assets are all important elements of money management that young adults should learn about as soon as possible. What better way to enhance lessons already learned in school and business than to hear from family members about the way they have done these things successfully?

Topics More Specific to Your Family’s Financial and Retirement Plans?

Once you and your loved ones are able to begin speaking more freely about money values and experiences that have influenced your family’s financial path, a natural progression can be discussing your family’s specific needs and future financial goals.

• Financial Planning for Education. There are tax-advantaged 529 education savings plans that parents and grandparents may want to learn about and discuss if there is a child in the family who will need to pay for school at some point. Funds in these accounts can be used to pay for qualified education expenses from kindergarten through graduate school and apprenticeship programs. They can also be used as a part of retirement planning as there is the possibility of transferring funds from a 529 plan to a Roth IRA.
• Family-Business Succession Planning. Older family members may have spent a lifetime building up a family business and, as part of their own retirement planning, have been preparing for when they can pass it down to their children or grandchildren, or sell it. Have there been family discussions about the specifics involved? Will all, or some, of the younger generation be involved in the business?? Is there an anticipated timeline for transition? There is always a chance that an adult child has different plans that do not include stepping into a role that a parent may have assumed they would accept. Communication is key so that everyone is on the same page and proper succession planning can take place.
• Philanthropy . Is there a family tradition of donating to causes or organizations with charitable missions? Do older family members want to see certain works continued on in their name? Or do individual family members have charitable causes that they have contributed to, and would like to continue those donations in the family name? It can be helpful to discuss the areas of focus that are important to them, so that the younger generation can understand how to carry on their parents’ and grandparents’ legacy.?
• Caring for Elders. As parents and grandparents age, their care needs will change. Ideally, seniors will have tackled retirement planning earlier in life, but that isn’t always the case. According to the 2022 Survey of Consumer Finances (SCF) by the Federal Reserve , which is the most recent study, only 54.4% of Americans have dedicated retirement savings accounts and the median retirement savings balance of those aged 65-74 is $200,000. Even if seniors have prepared with individual retirement planning, it may not be enough to adequately support their current and future needs. This can be an especially touchy subject, as parents who have not been as successful in planning for retirement as they would have liked may feel frustrated or embarrassed. Still, there are questions that should be discussed so that you can understand what they want and how they envision their lifestyle during their golden years. Do they intend to remain independent and living in their own home as they age? Or do they plan to relocate to a community where assistance is more readily available? ?Do they have an estate plan in place ? Has it been periodically updated? Wills, trusts, powers of attorney and healthcare proxies are all estate planning documents which ensure that health care, legal, and financial issues can be addressed while respecting their wishes. Even if parents do not want to discuss specifics of their retirement planning, younger family members can offer support by helping them with information and/or by connecting them with a financial advisor who can help review their current resources and make appropriate recommendations. ??
• Future Inheritance and Responsibilities. The thought of discussing a transfer of wealth, which may or may not be disbursed evenly between heirs, may seem intimidating, but a conversation between family members may help to ease uncertainty and give the person drafting their will an opportunity to provide more clarity if they choose. A will used in estate planning contains specific instructions about how property and assets will be distributed. It may also name a recommended guardian for minor children, adult children with disabilities, or a senior parent who is being cared for. Considering that a will can have a significant impact on heirs, an open discussion that allows for questions can help prepare heirs for the responsibilities and opportunities they may have in the future.
• Trusted Financial and Retirement Planning Professionals. Some family members may already have a circle of trusted financial experts including a financial advisor, an accountant and an attorney. Adult children or grandchildren may not have experience working with professionals who can help them with retirement planning services or developing a financial plan that is tailored to their specific goals. Or maybe it’s a senior family member who does not have an established relationship with a financial advisor and could benefit from some guidance. Family members can help each other prepare for their future by sharing their experiences and explaining the value of working with a financial team. They may even want to share the resources of the specific professionals who helped with their personal retirement planning and wealth management.

Talking with your family about money and retirement planning doesn’t have to be stressful. It may feel uncomfortable at first, but once a rapport has been established, the benefit of lessons and information shared between family members will likely be worth the effort. If you would like more information about retirement planning, or ideas on how to speak with your family about money, please contact us.