Even with a complete financial plan covering retirement, healthcare and trusts and estates, older adults sometimes fear the future.
The good news, though, is that they can gain a little peace of mind by explaining their plans to younger relatives and eventual heirs. So suggests survey results from a recent
Fidelity's study, "The Transition Ready Family," found that planning for retirement, healthcare and passing on wealth can bring peace of mind — to a point. Just over half (51%) of the survey respondents who said they had completed financial plans said they still feel anxiety about the future, despite their precautions.
That was better than the 37% of respondents who said they contemplate their futures with contentment. But it still suggests financial planners have far to go if they are to achieve one of their most oft-stated goals: ensuring older clients can enjoy their retirement years free of nagging money worries.
Steps advisors can take
Financial advisors, as well as Fidelity's survey, suggested several steps advisors can take to help clients feel more confident, beyond providing comprehensive financial plans:
- Offer to schedule periodic meetings between your clients and their families and act as a discussion guide;
- Take the trouble to learn your clients' financial anxieties and goals before starting a plan and make sure your recommendations take those into account; and
- Don't assume the best use of a client's money is to save for retirement. Advisors should balance clients' present wants with their desire for future comfort
According to Fidelity's survey, even having what most people would think of as considerable wealth doesn't necessarily allay anxieties. More than 4 in 10 (41%) of the respondents with $5 million or more reported that they did not have financial peace of mind.
Dan Klug, a financial advisor at Edward Jones in Chesterfield, Missouri, said he — somewhat counterintuitively — often sees that one of clients' biggest sources of stress can be the possession of wealth.
For people who find themselves with more money than their neighbors have or their parents had while they were growing up, the biggest question can be: What do with it all? Many don't want to give it all to their children immediately, for fear of making life too easy for them, but also want to provide enough to ensure against financial hardship in the long run.
Providing a good answer requires advisors to first understand what their clients really want, and what they really worry about, before even starting to build a plan.
"I can think of clients that have taken generations of their family on really nice vacations because, in conversations, it's come up that what's really important is not the financial legacy they're going to leave them," Klug said. "It's the experiences that people have."
The need for frequent, open family discussions
The remedy, according to Fidelity's survey, may be to discuss plans frequently and openly. The results suggested that older Americans who discuss their retirement, healthcare and estate and trust planning in great detail with their families are twice as likely to feel confident as those who merely talk about these subjects in a general manner. Yet, barely more than one-quarter of the respondents (27%) said they've explained the details of their plans to their children, and only 35% keep them up to date on changes.
Open discussions about retirement plans was particularly helpful in building confidence. Seventy-one percent of the Fidelity respondents said they felt confident after holding frequent open dialogues about retirement with their children; among those who had no open conversations, just 35% expressed confidence.
Klug said he often offers to arrange meetings with clients and their families so they can discuss finances with his guidance. A good deal of work goes into planning these family talks, he said.
He generally won't hold the meetings in his office or at a client's house because of the risk it won't be perceived as a neutral setting. Many times he looks for a private room in a restaurant.
Even more important is to learn what his clients' expectations are for him as a moderator.
"I need to know what's off limits," he said. "What questions do you want me to answer? What questions do you want me to look at you and have you answer? Or what questions do you want me to look at you so that you can tell your kid we ain't answering that question?"
How age makes a difference
Fidelity's survey results dovetailed with those
Younger savers were more likely to be confident, but not by much. Thirty percent of millennials, defined as between the ages of 30 and 46, expressed confidence in their current finances. Only 25% had similar feelings about their future.
The survey suggested financial priorities vary greatly by age. Among millennials, 64% said they want money for purchases, and 39% said they were saving for retirement. Those figures fell to 34% and 22% for baby boomers.
Klug said financial advisors err if they think their sole responsibility is to help clients prepare for retirement.
"I think what this research helps show is that our job as financial advisors, especially for those younger generations, is to help them weigh the trade-offs between doing something today or in the intermediate, and what that does to their long-term goals," Klug said. "So it's more of a balancing act for those younger generations."
What prevents savers from openly discussing finances
Fidelity's survey results, meanwhile, suggested several reasons respondents were reluctant to talk about their plans for retirement, healthcare and passing on wealth.
Thirty-six percent said they had already gone over those topics and no further discussion was needed. Twenty-four percent said they needed to do more preparation before talking about their plans, and 19% said it was too early to start talking about these topics. (The average age of the respondents was 63.)
The report also offered some slightly more unsettling findings.
Almost a quarter of the respondents (22%) said they couldn't name all of their household accounts, such as checking, 401(k), college savings, health savings or retirement accounts. And nearly a third (30%) said at least half of their accounts aren't ready to be passed down to heirs.
