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As we highlighted at the beginning of this white paper series, longer lifespans are dramatically changing what retirement looks like - and therefore, challenging outdated financial frameworks.
For instance, retirees today may not just be supporting themselves, but also their aging parents and even grandparents.
In this sixth installment of our “Is Our Industry Prepared for Retirees’ Longer Lifespan?” series, we introduce a new and urgent concept: Multi-Generation Retirement™.
This new reality examines the mounting pressure on retirement portfolios as multiple generations begin drawing from the same financial pool.
And to keep up, advisors must rethink traditional strategies and prepare for a future where retirement planning spans not just decades - but generations.
Multi-Generation Retirement™
In our discussion of the Retirement Investment Paradox™, we used the analogy of a boat sailing from San Diego to Hawaii. What if, as you were sailing, you discovered your parents' ship, which had embarked on Hawaii before you, and they had exhausted their supplies? They planned for a shorter voyage, never expecting to sail this far. Now, you must share your supplies between the two ships. Your carefully planned resources must stretch to sustain both boats.
Then, as you navigate this new challenge, you spot your grandparents' boat, also depleted of provisions. They, too, had planned for a shorter journey, but favorable winds kept them sailing far longer than anyone expected. Now, your original supplies must support three ships through their extended voyages.
This is the essence of Multi-Generation Retirement™. One generation's retirement resource potentially supports multiple generations simultaneously. Just as our sailor never planned to provision multiple ships, today's retirees may find themselves supporting their own retirement, their longer-living parents, and perhaps even grandparents.
Each additional generation creates exponential strain on the original retirement resources, much like each additional ship depletes the carefully planned supplies more rapidly.
I want to illustrate this new emerging challenge with a personal example. I have a friend who is 67 years old and seriously considering retirement. He is caring for his 102-year-old mother. His situation points to a shift in retirement planning. As he plans his and his wife’s retirement, he must also prepare for his mother's ongoing care and support.
One Generation Supporting Two Generations of Retirees
This scenario differs from the traditional "sandwich generation" concept, where working adults simultaneously support aging parents and growing children. In the sandwich generation, individuals maintain active employment, allowing them to adapt their income to meet multi-generational responsibilities.
This reality changes our understanding of retirement planning. The need for substantial portfolio growth becomes more important than ever as retirees must address persistent inflation and increased longevity across multiple generations.
The combination of extended longevity, inflation, and multi-generational support obligations creates unprecedented planning challenges.
A Three-Generation Example
Consider this: A couple has a child at age 30. When that child turns 70, he wants to retire, but because his parents did not plan to live as long as they did, they are now 100 and broke. He now has two generations to support in retirement.
That child, when he was 30 years old, had a child - a daughter. When she turns 70, she decides to retire. With poor planning, her parents are 100 and broke, and her grandparents are 130 and broke. She now must support three generations of retirees.
And do you know what none of those mentioned above children have that previous generations had?
An inheritance.
This is the concept behind Multi-Generation Retirement™.
This is not science fiction. This is why we must change our thinking about retirement, account for much longer lifespans, and position portfolios to provide for opportunities to increase growth in our retiree portfolios in calculated ways.
Planning for Three Lifetimes, Not Just One
The era of one-generation retirement planning is fading.
As lifespans extend and families deal with overlapping retirements, the need for Multi-Generation Retirement™ strategies has never been more critical.
Financial advisors must go beyond basic income planning to build portfolios that prioritize long-term growth, account for sustained inflation, and mitigate risk across three lifetimes.
Because soon, the greatest threat may no longer be outliving your money - but outliving your money while supporting others who’ve outlived theirs.
Disclosures:
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation. Any investment products or services named herein are for illustrative purposes only, and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance.
Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.