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Survey: Half of U.S. investors tapped for help by relatives

Roughly half of U.S. investors, 53%, report they have provided financial assistance, personal assistance or both to adult children or extended family members — not including school tuition, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index survey.

These demands curb investor’s ability to save for retirement at times, Wells Fargo said in a news release announcing the results last month.

“It seems to me that today’s landscape is far different than that of a generation ago,” Mary Sumners, a regional president of Wells Fargo Advisors said in a statement. “I think that with many retirees living decades into retirement and adult children accumulating hundreds of thousands of dollars in debt, investors in the middle are feeling the pinch for support in every direction. The poll suggests that adults who seek family financial support are no longer the exception but the rule.”

Specifically, 45% of investors say they have provided financial assistance to one or more of the relatives, 21% have provided personal assistance and 13% have provided both. For this survey, personal assistance was defined as providing personal care, making medical decisions, hiring professional caregivers, handling financial matters, shopping, cooking, driving to appointments or similar tasks.

The poll was conducted Aug. 5–11, with a representative sample of 2,091 U.S. adults who have $10,000 or more invested in stocks, bonds or mutual funds.

The poll did not measure every type of family expense investors might have – but of the types measured, the most common, current or past, is non-college related living expenses for an adult child.

Thirty percent of investors say they have incurred such costs. A distant second (13%) is living expenses for a parent or parent-in-law. This is followed by significant medical expenses for an adult child (9%), caregiver expenses for a parent or in-law (7%) and medical expenses for a parent or in-law (6%). Additionally, 29% of investors report they paid college or other school tuition for an adult child, but this was not factored into the financial support statistics reported above.

Helping family averages $10,000 per year

Expenses investors incurred add up to a considerable sum. When asked how much they spent in total in the past year financially supporting adult family members — not including college expenses for an adult child — investors estimate spending $10,000 on average.

Most investors report that family-related expenses have taken a negative, although minor, toll on their finances. Only 7% say the impact has been very negative; 19% say it has been somewhat negative, 39% say a little negative and 36% say not negative at all.

See more at pvtimes.com Last year, however, a 2018 third-quarter Wells Fargo/Gallup survey showed that nearly half of investors do not feel well prepared to handle an unexpected expense of $5,000, suggesting a possible disconnect for the majority of investors who may be undervaluing just how negative their support to adult family members has been.

Retired (44%) and non-retired (39%) investors are about equally likely to report providing significant financial help to extended family. Non-retired investors, however, are 11 percentage points more likely than retired investors to say that providing this monetary help has harmed their finances (31% vs. 20%).

“It is extraordinarily generous for investors to step in and help adult family members with this level of support, but there is risk if they are not doing so from a position of strength,” Sumners said in the statement. “Working with an advisor to build and maintain a comprehensive plan may help investors avoid sabotaging their own goals as they help close relatives.”

Providing help

Investors who report providing personal assistance to adult family members say they spend 13 hours per week on average on such activities.

Helping family has the potential to enhance family bonds and life satisfaction, the bank reported.

In particular, more than a quarter (28%) of investors who provide assistance to a family member say that doing so has had a positive impact on their emotional health. But the poll suggests that the downside outweighs the upside for many investors.

Investors who spend time helping family are most likely to say it has had a negative effect on the time they have for themselves (56%) as well as on their emotional health (52%), their ability to take time away from home (47%) and their time for friends (40%).

Thirty-eight percent of investors who provide personal assistance to family also reported that the time they have spent has negatively affected their ability to focus on their job or career, and 37% say it has negatively affected the time they have for their immediate family.

When examining factors related to time and money, nearly one in four say the time commitment has negatively affected their ability to save for retirement (23%) or their finances more generally (22%).

“It is hard for people to imagine that the time and money they spend today could have an impact 20 or 30 years from now, but it is only then when you may see the true costs,” Sumners said. “It’s not that people won’t make the same decisions to support their family members, but seeing an illustration of the possible impact may influence their decision to supplement their own savings or earning potential right away.”

The poll shows that women investors are more likely than men to spend time helping a parent or in-law (14% of women versus 8% of men). Women who provide this care are also much more likely than their male counterparts to be the sole caregiver (40% versus 13%).

This may partly explain why among all investors who provide care to any family member, women are much more likely than men to say the care negatively affects the time they have away from home (56% of women versus 30% of men) as well as time for friends (46% versus 27%). Women are also more likely than men to say that family caregiving has a negative effect on their emotional health (57% versus 40%).

Six in 10 investors who provide personal assistance to a parent or other adult family member (61%) say the experience has changed how they want to be cared for when they are older. The effect is particularly strong on non-retirees, 70% of whom say it has changed how they want to be cared for down the road. The figure is 49% among retirees, possibly reflecting the shorter window this age group has to adjust their lifestyle plans.

Inside the numbers

The most common change that investors say they are making as a result of the experience of caregiving is saving more for medical/personal care than they originally planned (59%). About half (49%) say they are more likely to move to an assisted-living community in their later years. Fewer show greater interest in purchasing long-term care insurance (38%) or moving into a multi-generational home in their later years (28%) as a result.

Compounding the possibility that investors won’t have saved enough for their healthcare in retirement, relatively few report owning financial products that could help them pay these bills down the road. About a quarter of investors report having a Health Savings Account (24%), 20% say they have long-term care insurance and just 6% have longevity insurance.

Non-retirees (32%) are significantly more likely than retirees (12%) to have a Health Savings Account (HSA), reflecting the relatively recent emergence of HSAs as a healthcare financing option. There is no difference, however, in the two groups’ use of long-term care or longevity insurance.

“Many people understand the need to save for retirement, but it appears they have compartmentalized healthcare costs and are not planning the way they need to. Without planning, these expenses need to be funded outside the budget which can bring stress and the feeling of being out of control,” Sumners said. “More importantly, underfunding healthcare costs later in life could deplete retirement savings and make investors vulnerable. By sufficiently planning for retirement as well as other future needs, investors can potentially take back control and interrupt the cycle of familial support.”

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