The Boomers and Their Parents The “Generation Gap” Persists
- from "Buying Time --
trading your retirement savings for income and lifestyle
in your prime retirement years"
2nd edition Daryl Diamond, CFP, CLU, CHFC
Do you remember the expression “generation gap”? The term was used to describe the extreme variance in attitudes between what was at that time the boomers in their teens and early twenties and their parents. Guess what? It still exists, although both sides have mellowed considerably over the last 30 years. The passing of time has narrowed the communication gap, which was a significant part of this disconnect between parents and their children. Yet different attitudes on certain issues still prevail to some extent. The boomers are now entering their pre-retirement years, while their parents have been retired for some time. If we look back through the years, these were some of the key differences between the belief sets of the baby boomers in their younger years and those of their parents.
| VARIANCE OF ATTITUDES | |
| Boomers | Parents |
| Change the world | Respect authority/conform |
| Never die/never grow old | Go when they are called |
| Many employers, many jobs | Loyal to one company |
| Enjoy now and pay later | "This one’s good enough" |
| Reluctant to save | Reluctant to spend |
| Afraid of not keeping up | Afraid of loss |
For the parents of boomers, the value proposition is the value of money. For the boomers it is the value of time.
The boomer generation has focused on material possessions, credit, debt, and the continuous belief in the practice of buy now (enjoy now) and pay later. Nearly everything the boomers possess has a systematic repayment schedule attached to it.
Boomers, on average, have had fewer children than did their parents. Their parents, however, managed to do with less, stretching existing resources to the maimum, and were still able to save money. Granted, there may have been lower tax rates than we have today, higher nominal interest rates through the 1980s, and the benefit of soaring housing values, all of which attributed to the wealth accumulated by our parents. But our parents for the most part were and are practical in what they expect from retirement and what they spend money doing in retirement.
Compared to their parents, boomers want to retire earlier, expect to live longer, and want to do more in their golden years. However, all of these goals require assets to replace the income they will leave behind when they stop working. The boomers are notoriously poor savers. Fewer than 35 percent of all tax filers make a Registered Retirement Savings Plan (RRSP) contribution. The median RRSP account holds less than $50,000, ad there is next to no savings in non-registered assets. The main reason for boomers making an RRSP contribution is to get a tax deduction, not to accumulate retirement savings. As they progress into the greying years, the generation that was going to change the world, and to some degree did, is realizing that just like their parents they are moving through to old age and many have not prepared properly for this time in their life.
Boomers are accustomed to borrowing to obtain everything they have and so far this pattern has worked, even though they find themselves swimming in debt. The problem in continuing this pattern is that you cannot borrow to finance your retirement. It is the one thing that you must pay for in advance. One needs to pay now in order to enjoy later. This is a process with which the vast majority of boomers have little experience.
Many boomers are counting on inheritances from parents who did not spend their assets. In fact, there are some boomers who have already “spent” their future inheritance in that they will need the money just to clear debt they are carrying. If this is even partially true, then you, your siblings, and your parent(s) need to do some intelligent intergenerational planning. This is probably a dificult subject for you to handle directly with your parents, which is why you should have an advisor serve as your guide and intermediary.
You may have noticed that the boomers like to put forward to their parents what they truly believe to be valuable suggestions regarding the parents’ income, investments, health care, and living arrangements Why is that? Because they feel that they are far more in tune with what is new, current, and best for their parents. The parents, however, don’t necessarily share the view that they should make immediate and radical changes to the way things have always been and to what they have become used to. The boomers walk away from such conversations somewhat frustrated and with a view that the parents are stubborn. In reality you still have two groups with different value and attitude sets that have grown up in different times. The key difference is that each group does not share the other’s Time Hub priorities.
The communication gap is back, except it is reversed. It is the parents who, for the most part, are tuning out the direction their children are attempting to provide. They will listen politely and nod, but are reluctant to implement the suggestions put to them. Eventually, however, as aging takes its toll, the parents will likely depend on the direction and actions of their children. It is at this point when both groups reach a common understanding, and their Time Hub priorities are aligned. A common understanding is reached.
Saving changes...