Retirement today is a very different beast to the one enjoyed a generation or two earlier.
The traditional view of the retiree spending the day completing crossword puzzles or pottering about in the garden has been replaced, in the main, by a more active retirement spent ticking items off a bucket list and gaining real fulfilment.
This more active retirement, combined with living longer lives, inevitably costs a fair bit more money to fund.
Some research completed by SunLife found that more than half of over 50s say they live for today and 61% are enjoying life more since celebrating their 50th birthdays.
The survey also found that one in five over 50s have taken up a new hobby, one in eight have learned a new skill and one in four have visited a new country. Retirement is creating opportunities to learn, experience and travel.
This all comes at a price and it seems that members of the post-war Baby Boomer generation aren’t afraid to spend their wealth to secure a chosen lifestyle.
SunLife found that almost a third of over 50s say money is ‘there to be spent’ and more than half say they want to enjoy their money now, rather the preserving wealth to pass on to the next generation.
This tallies with our experience working with a large number of clients to develop Financial Plans for their retirement; they put themselves first to get the most out of life, with provision for children and grandchildren firmly in second place.
Ian Atkinson, marketing director at SunLife, said:
We have all heard the term SKI – Spending Kids Inheritance – to describe this generation of older people who are happily enjoying the finer things in life while younger generations are supposedly watching on bitterly as they struggle to make ends meet.
But our research shows that younger generations are not bitter. In fact, the vast majority don’t see their parents as selfish simply for spending and enjoying their own hard-earned cash – just one in ten their parents are spending too much of their inheritance.
This suggests it’s not a case of a fortunate generation carelessly blowing their wealth, with an unfortunate generation looking on with jealousy.
There is though some dissonance between children genuinely wanting parents to enjoy their retirement while also being aware that they will need some financial help. SunLife found that one in 20 adults admitted they are relying on an inheritance to either help pay off debts or to provide or supplement their income later in life.
But it is not all one way; while a fifth of children say they are relying on their parent’s cash, the same number of adults say they are depending on their children to help support them financially when they’re older.
The research also found that one in ten complain their parents are having too much fun with their ‘inheritance’.
We’ve got a couple of suggestions which could help parents and their children strike the right balance between living for today and being ‘fair’ to future generations.
Financial Planning is clearly key here; making sure that you have sufficient income and assets to live the life you want in retirement, without too great of a risk of running out of cash before you die.
The work we do with our clients, producing lifetime cash flow forecasts based on a set of reasonable assumptions and carefully considered scenarios, helps to create confidence that desired lifestyles are both affordable and sustainable.
Communication is another important step here. There’s bound to be some resentment if financially struggling adult kids are watching their parents living seemingly extravagant lifestyles; jetting off on expensive foreign holidays and living the life of Riley while they struggle to make the next rent or mortgage payment.
Something we’re able to do with our clients is facilitate open and honest family conversations, designed to set reasonable expectations about any scope for future inheritance, and hopefully help the children become more financially independent in the process.
Kids are largely fine with parents spending their inheritance, as long as the intentions are well understood.
Kids are fine with parents spending their inheritance. Or are they? Share on X
