Our 2 Cents

Welcome to Professional Financial Solution’s blog, Our 2 Cents! We aim to provide you with brief insights and analysis on financial planning and investment topics on a weekly basis. If any clients or other readers have questions or topics that they would like to see covered here, please feel free to contact us by email or by posting a comment to a recent blog post. By reading the articles on this blog, you acknowledge our warning and disclaimer, provided here. Articles are provided for informational purposes only and shall not be relied upon as personal financial or investment advice.

How the Much-Maligned Millennials May Be Helping Your Bottom Line

Millennials are often portrayed in the press as a bunch of under-employed, tech-obsessed, living-in-their-parents’-basement drags on our economy.  But, demographic data paints a different picture.  Millennials, or Generation Y (defined as those born in 1981 through 1997), now represent the largest living generation in the U.S., outstripping both Generation X and Baby Boomers as of 2016, and they may be positively impacting your bottom line in a number of ways.

Funding Social Security.  Are you collecting Social Security retirement benefits?  Thank a millennial.  Payroll taxes account for over 86% of annual revenue for the Social Security system, and in 2015, the millennials became the largest generation in the U.S. labor force with over 53 million workers.  They are not yet the highest income-earning generation, but that will change over the coming decades, especially given their relatively high education levels and technological savvy.  Thus, if/when Social Security trust funds are depleted and your benefits are completely dependent on income from payroll taxes, you are even more likely to have a millennial to thank for your monthly benefit check.

Boosting Housing Prices.  A recent Wall Street Journal article reported that home prices through January of this year were rising at the fastest rate since 2014, and that one of the drivers of these gains was the increased demand from millennials entering the housing market.  According to the National Association of Realtors, many millennials have saved enough for a down payment to buy more than just a condo or starter home, and therefore they are influencing the market for “move-up properties” as well.  (Maybe living in mom and dad’s basement for a few years was not such a bad idea after all!)  This trend of rising home prices may cause difficulty for aspiring first-time home buyers, but it is likely to benefit older generations, especially retired persons who may be looking to downsize their homes. 

Bolstering the Economy.  There are many ways to measure how the economy is moving and many factors that impact that movement.  But, as any Economics 101 student could tell you, one way to measure economic growth is by changes to gross domestic product (GDP), and two of the main components of GDP are the amount of goods and services consumed and the amount invested nationwide.  Here again, millennials are poised to make a significant contribution in the coming decades.  Just as their demand for housing is starting to increase, their demand for other consumer goods and services will likewise grow over the coming decades as younger millennials enter the workforce and older millennials continue to advance in their careers.  Similarly, having experienced the Great Recession at a formative age, older millennials in particular are focused on saving and investing for retirement.  According to a 2014 Wells Fargo study, 8 in 10 millennials indicate that the recession convinced them of the need to save more now, more than half are saving regularly, and, despite witnessing the stock market declines of the recession), millennials remain open to investing in stocks.

Despite facing a difficult post-recession job market as they entered the workforce and being saddled with the largest student loan burdens of any generation, millennials are finding employment, buying homes, and increasing consumption and investment—all of which has the potential to benefit the financial situation of older generations.  We have witnessed these positive trends in interacting with young adult children of our clients—millennials who are focused on savings, home buying, etc.—and we expect these trends to only grow stronger over the coming decades.

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Time to Talk: The Benefits of Preemptive Conversations with Loved Ones about Aging

Whether with a spouse, parent, grandparent, or other loved one, many people have experienced or at least heard of difficult situations in which an aging loved one continues living in a manner that is no longer safe, healthy or beneficial to them, causing concern and sometimes significant problems for other family members.  Frequently, this takes the form of continuing to drive, live in the same house, or manage one’s own finances and household affairs, despite physical or cognitive issues that may interfere with doing those things well.  (In our office, we have dealt with these issues alongside our clients as well as in our own lives, most recently with Glenn helping his wife navigate the effects of ALS and Mike helping his mom manage life with Alzheimer’s.)  We have discussed previously on this blog other ways to prepare and help your loved ones as you age, such as estate planning and organizing your finances, but one of the biggest favors you could do for those you love is to have preemptive conversations about how you would be open to changing your lifestyle as you age.

Living Arrangements.  Many times the home in which you live during middle age or early retirement years is no longer appropriate as you move into later retirement years.  Upkeep may become unfeasible.  Stairs may become difficult as mobility issues arise.  Close proximity to stores, restaurants, and medical services—as well as to family and friends—may become more important, especially if/when you stop driving.  It is important, therefore, to analyze your options and develop a plan before a health event or other issue inhibits your ability to continue living comfortably in your home.  Consider the following questions:

  • Where do you want to live in your later retirement years? 
  • Are family members available to help and/or do you have the resources to hire help if you desire to remain in a living situation that does not involve continuing care?  Do you have a plan in place for what that help will look like?
  • Under what circumstances might you need or want to change your living situation? 
  • Who is authorized to decide when it’s time to make that change?  Or, what standards will you set to evaluate and signal whether it’s time to make a change?

Driving.  According to research from The Hartford insurance company, while the total number of accidents and driving citations attributable to older drivers is relatively low, they do have a higher rate of fatalities and a higher risk of being involved in a collision for every mile that they drive.  These trends are particularly significant after age 75.  Certain warning signs can indicate declines in driving ability, such as failure to obey traffic signs or signals, driving at inappropriate speeds or stopping at inappropriate times, hitting curbs, and decreased confidence while driving. 

Again, the key is to discuss this issue before any warning signs surface and develop a plan for how to evaluate your driving abilities and who will have authority to press the issue if/when family members have reason for concern.  Possibilities include:  agreeing to complete an AARP driver safety program at regular intervals, agreeing to annual discussions on driving after age 75, limiting long-distance and night driving past a certain age, etc.  While this can be a sensitive issue given its impact on your sense of independence, considering it from the standpoint of protecting yourself and not endangering others on the road may help you to be open to driving alternatives when the time comes.  Regardless of the statistics, how would you feel if you hurt someone in an accident?  Also, remember that as we age, it becomes much more difficult to recover from injuries, so it’s best to try and avoid getting hurt.

If you or other family members research transportation alternatives ahead of time, that will likely make the prospect of moving away from driving a bit less daunting—check, e.g., resources from the National Aging and Disability Transportation Center, your local county, volunteer groups, as well as the availability and cost of various public transportation and taxi services.

Managing Household and Finances.  Similarly, there may come a time when you are less capable of managing your finances and household tasks than in earlier years.  Simplifying your finances and budget, including setting up automatic transfers and online bill pay where possible, can be beneficial, but again, you should plan to discuss this issue with loved ones in advance, identifying who might be willing and able to help with these tasks and at what point they should do so.  (This should include, but is not limited to, making sure that this person has durable power of attorney for financial decisions.)  If you work with a financial adviser and/or other trusted professionals to manage your taxes, insurance, or estate planning, ensure that your loved ones have their contact information or make introductions ahead of time, so that your loved ones know who to contact for help if/when they need it.  Also, be sure to authorize your financial adviser to speak to one of your loved ones about your financial situation if they notice a decline in your cognitive abilities. Without prior written authorization, the adviser’s hands are tied to reach out to another person about your personal financial information.

Regardless of which side of the conversation you are on, make sure that you are sensitive to and communicate about the emotions involved with these decisions.  If you are the one having to change your lifestyle, tell your loved ones how it makes you feel.  If you are the one advocating change, ask your loved one how it makes him or her feel, and listen.  Hopefully, you can brainstorm together ways to ensure that the person changing his or her lifestyle can still feel empowered to lead a full and vital life.

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