A few months ago, Brandon, 39, a truck driver in Florida, reviewed his mother's retirement account with her and was surprised to find she had saved only 112,000 USD.
His mother plans to retire at 67, about two years from now. Although she expects to receive Social Security next year, she still has mortgage and car loan payments. "At her current spending rate, my mother will never be able to retire", Brandon said.
He worries his mother will view her children as a source of support in old age. She is currently caring for Brandon's 91-year-old grandmother and has hinted that she might need her son's help later. Meanwhile, Brandon also has a wife and two young children to support.
Cases like Brandon's are increasingly common.
In the US, about 10,000 older adults leave the workforce daily. Most post-retirement income in the US comes from savings and investments accumulated during working years. Americans typically prepare financially for their old age rather than relying on their children.
According to statistics from investment consulting firm Vanguard, only 40% of people aged 61 to 65 have sufficient finances to maintain their standard of living in retirement. A Charles Schwab survey indicates Americans estimate needing an average of 1.6 million USD for retirement, but actual savings are significantly lower. The US Federal Reserve (Fed) reports that the median retirement savings for an American household is only 87,000 USD, creating a massive financial gap as they pass 65.
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Illustration: BI. |
This shortfall places pressure on adult children. They not only have to support their parents' daily living expenses but also cover long-term care costs, directly impacting their own savings plans.
A study by Boston University found that unexpected post-retirement expenses, such as medical costs or car repairs, account for an average of 10% of annual income, yet only 60% of retirees have enough cash to cover them.
Laurence Kotlikoff, a professor of economics at Boston University, states that preparing for old age is a way to avoid becoming a financial burden on one's children. When facing difficulties, older adults often turn to family. However, this option is only viable if the children are financially stable.
Laura, 62, from Illinois, shared that her 82-year-old mother-in-law lost tens of thousands of USD over the past five years by being scammed into sending gift cards on Facebook. Ignoring warnings, she spent lavishly to the point where she could not pay her bills, leading to her home's foreclosure.
"I worked all those years, putting every penny into my retirement fund, and now everything is just slipping away like this", the mother said.
Last year, Laura and her husband moved her mother into a nursing home at a cost of 3,000 USD per month. Her mother-in-law's Social Security and remaining savings were enough to cover this fee, but Laura and her husband had to add 50,000 USD for incidental expenses like moving and overdue debts. The family also gave her a phone without internet access to prevent further scams. This experience prompted Laura to re-evaluate her own retirement plans this summer.
The burden of care does not fall evenly. According to the Pew Research Center, one in 10 US adults cares for a parent over 65. Women and low-income individuals often bear the brunt of this responsibility, losing many opportunities to save. These caregivers typically spend an average of 7,000 USD out of pocket annually to care for their relatives.
Financial experts advise families to discuss elder care plans early. Early preparation opens up options such as delaying Social Security benefits, downsizing homes, selling assets, or finding suitable elder care solutions.
Ngoc Ngan (According to Business Insider)
