I’m completely intrigued by the study of generations and each generation’s characteristics. What I find fascinating is that each generation is distinctly different and clearly characterised by the events of the world in which they were raised. In fact, each generation is so markedly different that it’s not surprising that we struggle to communicate across the gaps that lie between us. If you consider just your family unit, it’s most likely that you and your spouse are from the Baby Boomer or Generation X generations. Your children are probably Millenials and your parents are probably from the Silent Generation. All four of these generations have completely diverse attitudes towards life, money, work, fun, religion and consumerism. But, naturally, it’s the diverse attitudes towards money that most fascinate me.
The Silent Generation is that generation of people who were born somewhere between 1926 and 1945 (or thereabouts). The world events that most defined their generation were the Great Depression of 1927 and World War 2 (1939 – 1945). How did these events define them as a generation? The majority of the Silent Generation were raised during a depression and/or a world war, which means that food and money was scarce. Their generation is notoriously cautious, self-sufficient and hates any form of waste – probably because they grew up with so little. Many were employed for life at the same company, and were comfortable being promoted through the ranks until their inevitable retirement at age 65. They are also probably the last generation to rely heavily on a defined benefit pension scheme. They were raised to simply get on with the job, not complain, accept their annual increase and company benefits, and suffer in silence. Which is, ofcourse, why they’re referred to as the Silent Generation.
This brings me to one of the key anomalies of the Silent Generation – they don’t talk! If your parents are (or were) from the Silent Generation, the chances are that you never discussed what your parents earned. Your parents’ income was a complete mystery, and any discussions around salary or earnings was considered impolite. You parents probably never discussed their Will with you or what plans they had put in place in the event of either of their deaths. Their financial affairs, estate planning and matters of employment were completely private and not up for any form of open discussion.
It’s true to say that the Silent Generation were well-disciplined when it comes to retirement funding with many feeling comfortable that their retirement assets would last until age 85. Research shows however that whilst they were disciplined in funding for their retirement, many are going to live longer than they anticipated and will probably outlive their retirement assets. Many have underestimated their longevity as a direct result of the enormous enhancements in medicine and disease management. With modern medicines and disease management regimes keeping them alive for longer, it has become evident that the Silent Generation has also understated their post-retirement healthcare expenditure by a substantial amount. The reality is that many members of the Silent Generation are living longer than anticipated, their healthcare costs are higher than expected and their retirement assets are running out. Whilst many retirees are choosing to re-enter the workforce after retirement in a bid to earn additional income, this option is not available to all. Enter the Sandwich Generation.
The Sandwich Generation is that group of people who are financially responsible (in part or in full) for both their children as well as their parents (generally members of the Silent Generation). The Sandwich Generation feels trapped between providing adequately for their children and helping their parents cope with their retirement funding shortfalls. Exacerbating this problem is the fact that the Silent Generation doesn’t readily talk about their financial situation, often leaving their adult children completely in the dark when it comes to their financial affairs. In fact, many of our clients have attested to not knowing anything about their parents’ financial affairs until their retirement funding is completely finished. At a point where you are getting ready to send your teenage children to university, the surprise burden of suddenly having to help fund for your retired parents can be debilitating and life-altering for all three generations.
As lifestyle financial planners, we’re often referred to as a ‘new breed’ of planners. One of the key reasons for this is because we practice what is known as multi-generational financial planning. What good is a carefully considered, well-documented financial plan when it can be blown completely out of the water by an announcement from your retired parents that they have no money left? The unequivocal solution is to ensure that your financial plan takes into account the financial position of your retired (or soon-to-be retired) parents. The reality is that any retirement funding shortfalls that they have will ultimately become your responsibility, and the sooner you are aware of any shortfalls, the better. This ofcourse means that you have a responsbility to sit down with your parents and unpack their financial position together. Getting the Silent Generation to talk about their finances isn’t always easy, but it can and must be done. To make things easier, consider sitting down together with a lifestyle financial planner which will help to take the emotions of the discussions. Perhaps a good starting point is to assure your parents that openly discussing their financial position will help ensure that they never become a financial burden to you. In addition, it might be appropriate to assure your parents that you have no inheritance expectations – that you’d simply want to ensure their financial security for the rest of their lives.
The key, really, is open and honest discussions about what they have, what shortfalls exist and how these can be addressed. We like to think of it as developing a Family Financial Plan as opposed to a Personal Financial Plan. Financial planning for three or more generations may sound like an enormous undertaking. In reality, it’s merely a case of making sure that each generation within the family fully understands and appreciates each other’s financial positions. Your Silent Generation parents have no doubt worked hard and saved religiously for their retirement. Any shortfalls that exist in their retirement funding are most likely unintentional and unanticipated. We can only encourage you to reach out and open the channels of communication between the generations, and to allow the Silent Generation to leave, not a inheritance, but an unforgettable legacy.
Let’s keep talking.