We’re in the middle of a melting pot. Gen Y are told we’re lazy, never satisfied and too entitled to “go without” to get ahead. There is no denying the job market has changed, in line with our spending habits, while property affordability in metropolitan areas has seen new business ventures set up in cities like Austin and Santa Monica instead of San Francisco. This, along with the boom in start-ups, disruptive innovation and ever rapid technological change, has expanded opportunities for jobs in places that we want to work, live and can afford to be “Gen Y.”
At the same time, as the children of “boomers”, we are facing two very separate futures. One based on cultural differences, our parents’ financial independence and the stability of the economic climate for anyone relying on their 401(K) deposits or a pension — which is the majority.
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The lucky ones will have parents who are well prepared for retirement. With assets, savings, insurance, and an income, they may be able to afford to put themselves in a home when the time comes and potentially to have prepaid for their own funeral.
For the rest of us caught in the generational juggling act, whose parents aren’t quite as financially fit, it’s important to consider parents’ retirement well in advance. This means we don’t put our own retirement plans and savings, and broader financial futures, at risk.
Financially Supporting Parents for Gen Y – A Think List
1) Housing Affordability
It’s no secret that housing affordability crises in some of the bigger cities like New York and San Francisco have priced out many young people.
As many residents of cities around the US struggle to afford a home near the best employment opportunities, others are thinking ahead and viewing home ownership as a once-off outlay rather than the traditional ‘property ladder’. This can mean looking for a house that can fit not only our children, as we approach that life stage, but also — when the time comes — our ageing parents, the idea being that this will help cut costs on the fees of either a retirement community or live-in care later on.
2) Costs of Care
Currently, nearly a quarter of Americans provide financial support to a parent. As the number of retirees continues to rise as a proportion of the overall American economy, the burden of not only financial support but also taxation will grow for those of us who are still working.
The costs of aged care are ludicrously exorbitant and, despite the rapidly aging population, likely to keep rising in the foreseeable future. The financial burden of supporting aging parents is particularly hefty for those with chronic illness or disabilities. Such health issues are difficult to foresee, but saving up now helps prepare for any unexpected, alarming medical and aged care bills later.
3) What About 401(K)?
While millions of Americans rely on their 401(K) investments for retirement, it isn’t mandatory. Millennials who are still working their way up the corporate ladder in part-time or entry-level jobs, or those employed in small businesses or start-ups, are less likely to have employer-sponsored contribution plans.
Others might have an IRA. Since it’s not attached to any given employer, these could work out better for those of us who conform to the Gen Y ‘job-hopping’ stereotype. Unsurprisingly, the boomers and seniors are far more likely than Gen Y to have accrued significant retirement savings.
4) Key Financial Challenges
So why are millennials so far removed from the goal of healthy savings?
For starters, many of us in Gen Y face crushing student debts, all while wage growth has plateaued and the average standard of living is in decline, for the first time since the Great Depression — right as we’ve hit adulthood.
Facing all these overlapping financial challenges, it’s no wonder many millennials are under financial stress; juggling our student debt, the ever-rising cost of living and housing is tricky enough, let alone adding the crucial budgetary considerations of aged care to support our parents, and childcare and related costs to plan ahead for having kids of our own.
5) Planning Ahead
Many Americans wait until a health crisis arises before discussing the issue of their parents’ retirement plans. The key is to have those conversations well in advance to determine whether it’s likely your parents will rely on you financially in coming decades. This way, you can start saving or investing now to make sure you’re prepared for financially supporting your parents when they need you most — without dipping into your own retirement savings.
Factors to consider when planning for their, and your, financial future include assets, healthcare needs, whether they have long-term care insurance (one that doesn’t expire after a certain age cut-off), whether they’re still paying off a mortgage or renting, and whether they have retirement funds set away or will receive a pension.
Work out a personal retirement plan that identifies any lingering debts that could impact on their quality of life, and the degree of support they’ll need. As the time draws closer, create a balance sheet that looks at both the financial and time needs of care giving, with the input of siblings.
While it often seems like Gen Y has all the odds stacked against us, careful planning and saving now can make all the difference in not only our parents’ but our own financial futures.
This post sponsored by Harrie, a Gen Y small business owner. With a toddler and another baby on the way, time is of the essence and “grown up life” is sneaking up on her! She enjoys baking vegan treats and asking awkward questions.