Download the Schwab app from iTunes®Get the AppClose

  • Find a branch
To expand the menu panel use the down arrow key. Use Tab to navigate through submenu items.

Focused on the Future

Since the financial crisis, a growing number of households have opened their homes to additional family members. For some families, this has meant having young adults move back home; for others, accommodating elderly parents. Some families—members of the so-called “sandwich generation”—are supporting both children and parents.

The statistics give a sense of the scale of the situation: A record 57 million Americans—about 18 percent of the population—lived in multi-generational households in 2012, according to the Pew Research Center.1 That is double the number of people who lived in such households in 1980. And those numbers don’t even capture the other ways in which individual families have helped support their relatives.

David Mattox, a Schwab Financial Consultant based in Atlanta, has seen first-hand how different families have confronted the issue. In recent months, he has worked with a couple trying to adjust their savings plans so they could provide health care and set up a living space in their home for an elderly parent. Another couple wanted to help pay for their nephew’s college education. Several clients have asked about how they can help siblings who have lost jobs.

To families that are feeling squeezed by the financial burden of providing for extra family members—even as they’re trying to save for a longer-term goal such as retirement—David offers this guidance: Make a plan and stick to it.

It’s a simple piece of advice, but one worth repeating, especially when it feels like an unanticipated family expense might require a detour from one’s goals.

The value of planning

Research has shown that investors who plan ahead tend to experience significantly better outcomes than those who leave things to chance or invest based on short-term whims. One study found that those who stuck with their savings plans accumulated three times as much wealth as non-planners.2

One of the values of financial planning is that it can help minimize the effect of emotions when it comes to making spending and saving decisions. But the picture can change drastically when family is involved. It’s only natural to want to help a family member in need, and in some situations, putting a longer-term financial goal on hold may be the only option.

It’s important to remember, though, that veering from a financial goal will have repercussions. Delaying or halting contributions to a retirement savings account or a 529 college savings plan will make it more difficult to achieve related goals—which could affect other family members in the future. In talks with clients, David often finds them weighing a desire to help a relative today against their concerns for the future.

“I hear it all the time. Clients tell me: ‘I want to do what I can to help my family members, but I don’t want to be a burden to my children or my family,’” he says.

Weighing the costs

In such cases, David helps his clients by running the numbers and showing them what’s possible. This often involves taking a step back and looking at the big picture. Is it time to revisit the clients’ goals? Are they saving for retirement? A private education? A second home? How much are they saving? How much are they spending? Where does helping family fit in?

For some clients, helping a relative and staying on course to a longer-term goal is simply a matter of setting a budget and prioritizing.

“Unfortunately, many people don’t have a written monthly budget and can provide only broad estimates of how much cash flow they’ll need—both to fund their retirement and care for a parent, for example,” David says. “If you can account for where every dollar goes, you can be more efficient with your money. Is it a hassle to do that once a month? Maybe. But it’s worth it.”

In some cases, the math isn’t in the client’s favor.

“These can be tough conversations, but financial goals should be flexible,” David says. “A client’s situation and family needs will always be in flux and their plan needs to adjust along with those needs. There are always steps that people can take to get back on track and work toward their goals.”

For example, while David urges his clients to avoid withdrawing money from their 401(k)s or other retirement accounts before retirement to free up cash flow, he says they could consider adjusting their contributions to those accounts and then, if they’re over 50, make additional catch-up contributions when it’s more convenient. They could also earmark bonuses, raises and tax refunds for retirement.

Others might have to consider postponing retirement so they can continue earning a salary while also preserving their savings. Staying on a company health plan might reduce the need for private coverage—which can be pricey—before they are eligible for Medicare. Working longer also may allow investors to delay taking Social Security, which would translate to higher monthly payments.

Trust and communication are essential when it comes to discussing these topics, David says.

“Having a trusting partnership with a client helps us make sure their plans get updated so the client doesn’t zig when they need to zag,” he says.

Staying engaged

However a family deals with the unanticipated financial consequences of helping support a relative, David has found that such situations offer a valuable opportunity to talk about transparency, smart budgeting and planning across multiple generations.

One of David’s clients is in the enviable position of preparing for a planned rise in her disposable income. She has been supporting an adult son, who will soon be moving out on his own. To make sure that he’s well prepared for life as an autonomous adult, the client is planning to introduce her son to David so they can talk about creating a budget and savings plan.

David values such relationships and says he often asks his clients to bring in their children and grandchildren so they can develop good financial habits.

“I’m now working with the third generation of one family,” he says. “For a Financial Consultant that’s a huge compliment.”

1Richard Fry and Jeffrey S. Passel, “In Post-Recession Era, Young Adults Drive Continuing Rise in Multi-Generational Living,” Pew Research Center, 7/17/2014.

2Annamaria Lusardi and Olivia S. Mitchell, “Financial Literacy and Planning: Implications for Retirement Wellbeing,” NBER Working Paper Series, 5/2011, page 29.

Part of the Plan
Portfolio Repair: A Case for Rebalancing
Portfolio Repair: A Case for Rebalancing

Important Disclosures

There are eligibility requirements to work with a dedicated Financial Consultant.

Investing involves risks, including loss of principal.

The information provided here is for general purposes only and should not be considered an individualized recommendation or personalized investment advice. The types of securities and strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction and investment strategy for his or her own particular situation.

The opinions expressed by clients are not meant to suggest future performance or the suitability of any account type, product or service for any particular client, and may not be representative of the experience of other clients.

(0515-2719)

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.