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Family Finance

Finances aren't just personal anymore... they are generational

10/01/2007 - For those coming from the baby boom generation, discussions about money were taught to be private. Outside of providing details to a financial advisor, accountant or tax preparer, boomers generally felt they should not share it with anyone else, including parents and children. Today's changing financial landscape may require a different approach when it comes to money. This is particularly true for those "sandwiched" between financially supporting elderly parents and adult children.

A generational opportunity: Boomers belong to what historically may be the most prosperous generation in history. At the same time, boomers may face the greater financial upheaval due to the demands of older and younger generations for monetary support. A recent survey conducted for Ameriprise Financial shows that close to 90% of baby boomers are providing at least some form of financial help to their adult children. A considerable number also contribute dollars to support their aging parents

This puts boomers squarely in the middle, or "sandwiched" between older and younger generations. While some may have thought the years approaching retirement would be focused on building a nest egg, the reality for many is that both parents and adult children are placing financial demands that can hamper the ability to save for their own needs.

Keeping your priorities straight: According to the recent study, most boomer-aged parents who provide financial support for adult children say that they are able to do so without jeopardizing their own retirement savings. Only six percent claim to use money that would otherwise be targeted for retirement.

That does not diminish the fact that offering such help places an extra burden on boomers if faced with this situation. Only 9% of boomers surveyed believe providing assistance to their parents has had a negative impact on their own retirement savings, while 29% expressed a concern that the financial help they provide to adult children has detracted from their retirement plan.

Are you being stretched too far? The challenge for the "sandwich generation" of boomers who provide financial support for other generations in their family is whether they can meet their retirement goals. According to "The 2007 Retirement Confidence Survey by the Employee Benefit Retirement Institute", one in four boomers has saved less than $10,000 for retirement while another 45% have saved only $50,000.

While no one questions the generosity of parents willing to help even their adult children through difficult financial times, most boomer-aged parents recognize the need to protect their retirement. The Ameriprise study shows that about two-thirds of boomers said if given the choice between saving money for their own retirement or helping adult children with money to purchase a car or payoff credit card debt, they would favor their own retirement needs.

Time to open up: Now might be a good time to talk more openly with your children about financial matters. If you have been lending them a helping hand, make sure they understand why you did it and the expectations you have for them. If you are struggling to meet your own retirement savings goals, share that with them so they understand that they can play a helpful role by putting fewer demands on you for financial help.

Generational discussions can be a healthy exercise, especially if you are feeling at all financially constrained by having to provide financial support for other family members. The greatest risk is letting your own financial goals such as saving for retirement take a backseat to the current demands of parents or children.

A financial advisor can help jumpstart conversation about money with family members as well as help identify a plan for retirement.

Details of the referenced study are available online at ameriprise.com/presscenter. This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor.

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