They were the generation who saw the first man walk on the moon, ushered in the British invasion, and let their hair down at Woodstock. Now as the “Me Generation” approaches retirement, should these historical and cultural experiences be taken into account by those who serve this population? For those who seeking a better way to manage and understand the money habits of their parents, read our analysis of how history and culture may impact Baby Boomer attitudes toward economic uncertainty, financial planning, investing and long-term care.
Baby Boomer Economic History and Origins of Distrust
Every generation has its economic battle scars, but for the Boomers the cuts can go pretty deep. Look at all the crises the Baby Boomers have seen in their lifetimes. They made it through periods of astronomically high inflation in the 1970s, the gas shortage, civil unrest at home, the oil embargo abroad, the Cold War and the Vietnam War. Their faith in leadership was tainted by the Watergate scandal. Lastly, they had their worlds turned upside down by the shocking assassinations of the Kennedys and Martin Luther King.
And now here they are, on the verge of retirement, the first generation that had to do so predominantly on their own, without the assistance of employer sponsored retirement pension plans. They’re rolling in like a rolling stone. The numbers show that most Boomers aren’t planning to shut down shop anytime soon, with many delaying the transition or not planning to retire at all. Baby Boomers, the “anti-establishment” generation, seem distrustful and opposed to the idea of formalized financial planning altogether. In fact, a study from CreditCards.com reveals that older Americans are more likely to commit acts of financial infidelity such as keeping secret accounts or hiding a large purchase from a partner. (For related reading, see: Why Boomers' Retirement Is Different From Their Parents.)
Confusing Baby Boomer Attitudes Toward Risk
It remains to be seen if the political turmoil they’ve lived through impacts their attitude toward market volatility. On one hand, could it be that Boomers avoid market uncertainty altogether because of negative past associations? Or could it go the other way, where Baby Boomers are perhaps more accustomed to drastic economic events, making them immune to angst about market swings? They did live through all those scary Twilight Zone episodes!
There is no hard and fast rule that dictates Baby Boomer risk preferences. It varies from one individual to the next. Risk tolerance is most accurately assessed through a formal evaluation of the person’s willingness and ability to stomach risk. Financial planners and advisors should have a risk tolerance checklist and questionnaire they work through with clients before initiating any financial planning.
How to Handle Your Baby Boomer Parents' Strange Relationship with Money
What does this all mean for the children of Baby Boomers, those upon whose shoulders the brunt of caring for this aging population will fall? You’ve probably found your parents are reluctant to trust a financial planner, can’t quite find the motivation to buy long-term care insurance, or aren’t that jazzed about investing for retirement. This is probably because as the last generation of traditionalists they find comfort in the idea of family structure. Their reluctance is driven by the comfortable hope that their children will take be there to care of them.
The degree to which children of Baby Boomers will want or need to get involved with the planning process varies from family to family, but the adult child’s approach to involving the parent should be educational. Remember what they’ve been through; this is the battle-scarred, turmoil-exposed anti-establishment generation. Forcing financial planning on your parents in a white-knuckled way is likely to backfire.
Working with a financial advisor who understands Baby Boomers’ unique needs and attitudes can be a plus as well. Some will specialize entirely in working with this generation. It is important that you and whatever financial intermediary you select work together with your parents in a way that puts them in the driver’s seat. You can do this by presenting options and allowing them to choose rather than trying to steer them one way or the other.
Lastly, be persistent. Handling the finances of a Boomer parent, just like their sordid economic past, is bound to be a rocky road. Enlist the right help in the form of a patient and understanding financial planner, accountant and estate attorney, and you’ll find eventually that the answer, my friends, is blowin’ in the wind.
(For more from this author, see: 3 Common Estate Planning Mistakes Among Boomers.)