The Kids May Be Alright, But Parents May Retire in Poverty
New MassMutual State of the American Family Study Explores Clashing Priorities for American Families
Oct 13, 2011
(Springfield, MA) - For the vast majority of family financial decision makers, children come before they do; paying for the kids’ education ranks far above saving for future medical expenses or retirement. As a result, only three in ten American parents are confident that they are adequately preparing themselves financially for retirement. These are among some of the key findings released today in the second nationwide study in Massachusetts Mutual Life Insurance Company’s (MassMutual) State of the American Family series.
“As a nation, we are becoming incredibly diverse in terms of age, ethnicity, attitudes and experiences; you no longer can put a face on America – because there are so many different faces,” said John Chandler, senior vice president and chief marketing officer, MassMutual. “The State of the American Family research platform helps foster a deep understanding of today’s diverse families, trends that may shape them in the coming decade and factors that affect their dynamics and interactions on matters financial and otherwise.”
Despite parents’ insistence on paying for their children’s education, the study found that half of those who set this as a priority say they won’t have the money needed to fund a future college education, nor do they know how much they need to save.
“When I talk to families about their financial planning needs, we cover plans to pay for children’s college by asking how much of their child’s education they want to cover, what percentage of their income they want to save for it, and whether or not they think their children will receive any financial aid,” explained Kevin Paasch, a MassMutual assistant general agent and sales manager at Commonwealth Financial Partners in Virginia Beach, Va. “Then when we discuss retirement, I ask if they plan to get any financial aid to help with retirement. I get puzzled looks, but the point is made, and we start reprioritizing their financial goals.”
“Planning for your children’s education is a critical need, but prioritizing this above your own financial future may be risky,” warned Paasch.
“It’s clear that today’s American family, regardless of how they are defined, is struggling with reaching their long-term financial goals and managing their finances day-to-day,” said Chandler. “As a father of two teenage sons at a time when the country slowly climbs out of a deep recession, I feel a personal and professional responsibility to help people take that first step toward making smart financial decisions for themselves and their families.”
Other key themes of the research include:
It starts with the foundation.
Even though some Americans have gained confidence in their ability to manage money, many more still struggle with basic financial literacy; 38 percent now say they are strongly confident about managing money, up from 30 percent last year. About half are moderately confident in their ability to manage money, yet only 28 percent actively seek ways to educate themselves on finances.
Secure Retirement May be a Pipe Dream for Many.
Nearly four in ten (39%) Americans have developed a plan for their retirement saving. Among women, it’s only about three in ten (31 percent) – despite the fact that women can expect to spend more than 50 percent more time in retirement than men. Perhaps this is why more than six in ten (63%) of those surveyed plan to work part-time during their retirement.
Taking Care of Mom and Dad.
Americans are not just preparing for their own needs. Close to a quarter is planning to care for their parents financially as they get older. Additionally, most are mindful of the stress that results from being sandwiched between children and parents: 71 percent say it’s important that their children aren’t burdened by taking care of them when they’re older.
Effects from the Recession Still Lingering.
The economic downturn affected families’ finances in unforeseen ways, and many are still feeling the effects of the aftermath. Only 19 percent of those surveyed are satisfied with their current financial situation and close to three in ten (28%) have delayed purchasing big items because of the recession. Yet there may be a silver lining: 60 percent of Americans are careful not to accumulate debt, up from 50 percent last year, and 70 percent want to be actively involved in decisions regarding their finances.
Hope for the Next Generation.
Less than ten percent of those surveyed learned about managing finances from their elders, and a quarter wish that their parents taught them more about money. However, Americans may be trying to change the patterns from the past – close to eight in ten (78%) think it’s important that they educate their own children on finances to ensure a strong economy in the future. This sentiment is especially stronger among women (84%) than men (71%).
“It’s important to stay close to the changing expectations and needs of American families to help them stay or get back on track financially through targeted education and careful planning, so they can achieve financial security,” said Chandler. “Knowledge and planning can help many avoid pitfalls, yet our study shows that fewer than three in ten American parents are actively seeking ways to educate themselves on their finances. We clearly have a lot of work to do.”
To learn more about MassMutual’s State of the American Family Study and to find help with planning for your families” financial future, logon to MassMutual’s Family Finances web page at www.massmutual.com/familyfinances. To find a MassMutual financial services professional to help with the planning process, logon to www.massmutual.com/secure/locateanoffice. For money-saving tips, like us on www.facebook.com/massmutual or follow us at www.Twitter.com/massmutual.
This research was conducted by Forbes Consulting group for MassMutual and involved a 20-minute online questionnaire administered to 1,143 respondents from January 4 - January 20, 2011. The sample included parents, ages 30-64, with household incomes of $100,000 or more, with slightly different requirements for ethnic minorities. All respondents contributed to financial decision making in their household and were financially responsible for at least one child. Data was weighted to age, gender, ethnicity, region and same-sex married/partner couples. The margin of error is plus or minus 3%.
Founded in 1851, MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyholders. The company has a long history of financial strength and strong performance, and although dividends are not guaranteed, MassMutual has paid dividends to eligible participating policyholders every year since the 1860s. With whole life insurance as its foundation, MassMutual provides products to help meet the financial needs of clients, such as life insurance, disability income insurance, long term care insurance, retirement/401(k) plan services, and annuities. In addition, the company’s strong and growing network of financial professionals helps clients make good financial decisions for the long-term.
MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual) and its affiliated companies and sales representatives. MassMutual is headquartered in Springfield, Massachusetts and its major affiliates include: Babson Capital Management LLC; Baring Asset Management Limited; Cornerstone Real Estate Advisers LLC; The First Mercantile Trust Company; MassMutual International LLC; MML Investors Services, LLC, Member FINRA and SIPC; OppenheimerFunds, Inc.; and The MassMutual Trust Company, FSB.