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As most advisors are well aware, the majority of the wealth in the U.S. is controlled by baby boomers. However, two rising trends in this dominant demographic are creating complications, not only for boomers and their advisors, but also for the children of boomers who constitute an increasingly vital current and future client group.
Those two trends are gray divorce and non-marital cohabitation among U.S. seniors.
The rapid increase in gray divorce is well-documented. The most recent U.S. census data indicates that, while divorce is becoming less common for younger age groups (falling by 21% for ages 25–39 from 1990 to 2015), among older Americans, especially those aged 50+, the divorce rate doubled from 1990 to 2015. While the lower divorce rate among younger couples might be attributed to the decision many make to live together without being married, the greatest increase in non-marital cohabitation from 2007 to 2016 was among those age 50 and up. Cohabitation among persons aged 18–34 increased by 24% during this period; for those 50+, it increased by 75%.
From a financial planning perspective, there are several troubling implications from these statistics. For example, many of us have clients in their older years who are divorcing after decades of marriage and the accumulation of significant assets. Helping them navigate the painful process of dissolving a union and splitting up the estate is tricky enough. But suppose that one or both of the divorcing partners is also cohabiting with a new companion? This not only poses complications for the divorcing couple, but now the children are also concerned about how much of their presumed inheritance is going to Mom or Dad’s new live-in partner.
As financial advisors, we need to be prepared to help all the parties involved make good decisions. We also need to be ready to put in place the necessary structures and plans to put those decisions into practice.
One of the most important things we can do in our advising role is to facilitate open, honest communication among all parties. A good place to start with that is to take a step back from the financial implications and remind everyone of the fundamental importance of relationships. We need to help our clients remember that they are in control of their financial decisions, and they can make decisions that solidify, rather than fracture, those all-important relationships. By helping them focus on gratitude for what they already have, rather than fear of what they might stand to lose, we give our clients a much better chance of creating outcomes that work for everybody.
The other vital consideration is contributing to an understanding of the various attitudes toward money and finances that exist among the interested parties. When gathered in a room, some of the family members will be dedicated savers, while others derive a real, neurological pleasure-jolt from spending. Helping both types to understand the other will go a long way toward creating a climate for constructive conversation and cooperation.
Finally, keep in mind the various considerations of those who are experiencing changes in their marital status or living conditions. For older women who remarry, loss of spousal Social Security benefits can be a real concern. Unmarried couples may also pay less in federal income taxes than those who file joint returns. A new spouse may complicate plans for transferring wealth to children or grandchildren; this can also be an impetus for living together without marrying. And there are many other important decisions with far-reaching financial implications that older couples must make when contemplating a new marriage or remaining together while unmarried.
As advisors, we have to remind ourselves to get beyond the balance sheets and the account statements; to be effective counselors, advisors, and planners, we must engage the emotions, understanding, and desires of our clients. Human beings have a fundamental need for connection, and the more we can keep that need in the forefront of our involvement with clients of all ages and circumstances, the better we’ll be able to provide what they really need.
For a deeper dive, download my whitepaper on gray divorce, living together, and elder care: Handling the Transitions.
Kimberly Foss, CFP®, CPWA®, CFT-I™ candidate, is president and founder of Empyrion Wealth Management, an RIA with offices in Roseville, CA, and New York City. Her book, Wealthy By Design, is a New York Times bestseller. She has been a commentator for NBC, ABC, Fox News and The Wall Street Journal. You can reach her at [email protected]
Read more articles by Kimberly Foss
Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.
