Wells Fargo/Gallup: Half of U.S. Investors Tapped for Money, Time, or Both by Close Relatives

U.S. investors squeezed for $10,000 a year by family

SAN FRANCISCO--(BUSINESS WIRE)-- According to the Wells Fargo/Gallup Investor and Retirement Optimism Index survey, roughly half of U.S. investors, 53%, report they have provided financial assistance, personal assistance or both to adult children or extended family members — not including school tuition. These demands curb investor’s ability to save for retirement at times.

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Mary Sumners, regional president of Wells Fargo Advisors’ Northern Region, said, “It seems to me that today’s landscape is far different than that of a generation ago. I think that with many retirees living decades into retirement and adult children accumulating hundreds of thousands of dollars in debt, investors in the middle are feeling the pinch for support in every direction. The poll suggests that adults who seek family financial support are no longer the exception but the rule.”

Specifically, 45% of investors say they have provided financial assistance to one or more of the relatives listed in the graph below, 21% have provided personal assistance, and 13% have provided both. For this survey, personal assistance was defined as providing personal care, making medical decisions, hiring professional caregivers, handling financial matters, shopping, cooking, driving to appointments, or similar tasks.

The poll was conducted Aug. 5–11, with a representative sample of 2,091 U.S. adults who have $10,000 or more invested in stocks, bonds or mutual funds.

The poll did not measure every type of family expense investors might have – but of the types measured, the most common, current or past, is non-college related living expenses for an adult child. Thirty percent of investors say they have incurred such costs. A distant second (13%) is living expenses for a parent or parent-in-law. This is followed by significant medical expenses for an adult child (9%), caregiver expenses for a parent or in-law (7%) and medical expenses for a parent or in-law (6%).

Additionally, 29% of investors report they paid college or other school tuition for an adult child, but this was not factored into the financial support statistics reported above.

Helping family averages $10,000 per year

Expenses investors incurred add up to a considerable sum. When asked how much they spent in total in the past year financially supporting adult family members — not including college expenses for an adult child — investors estimate spending $10,000 on average.

Most investors report that family-related expenses have taken a negative, although minor, toll on their finances. Only 7% say the impact has been very negative; 19% say it has been somewhat negative, 39% say a little negative and 36% say not negative at all. Last year, however, the 2018 Q3 Wells Fargo/Gallup survey showed that nearly half of investors do not feel well prepared to handle an unexpected expense of $5,000, suggesting a possible disconnect for the majority of investors who may be undervaluing just how negative their support to adult family members has been.

Retired (44%) and non-retired (39%) investors are about equally likely to report providing significant financial help to extended family. Non-retired investors, however, are 11 percentage-points more likely than retired investors to say that providing this monetary help has harmed their finances (31% vs. 20%).

“It is extraordinarily generous for investors to step in and help adult family members with this level of support, but there is risk if they are not doing so from a position of strength,” Sumners said. “Working with an advisor to build and maintain a comprehensive plan may help investors avoid sabotaging their own goals as they help close relatives.”

The gift of time also has downstream impacts

The time investors contribute to helping family members is significant. Investors who report providing personal assistance to adult family members say they spend 13 hours per week on average on such activities.

Helping family has the potential to enhance family bonds and life satisfaction. In particular, more than a quarter (28%) of investors who provide assistance to a family member say that doing so has had a positive impact on their emotional health. But the poll suggests that the downside outweighs the upside for many investors. Investors who spend time helping family are most likely to say it has had a negative effect on the time they have for themselves (56%) as well as on their emotional health (52%), their ability to take time away from home (47%) and their time for friends (40%).

Thirty-eight percent of investors who provide personal assistance to family also report that the time they have spent has negatively affected their ability to focus on their job or career, and 37% say it has negatively affected the time they have for their immediate family.

When examining factors related to time and money, nearly one in four say the time commitment has negatively affected their ability to save for retirement (23%) or their finances more generally (22%).

“It is hard for people to imagine that the time and money they spend today could have an impact 20 or 30 years from now, but it is only then when you may see the true costs,” Sumners said. “It’s not that people won’t make the same decisions to support their family members, but seeing an illustration of the possible impact may influence their decision to supplement their own savings or earning potential right away.”

Women feel the squeeze of family time-commitments more than men

The poll shows that women investors are more likely than men to spend time helping a parent or in-law (14% of women versus 8% of men). Women who provide this care are also much more likely than their male counterparts to be the sole caregiver (40% versus 13%).

This may partly explain why among all investors who provide care to any family member, women are much more likely than men to say the care negatively affects the time they have away from home (56% of women versus 30% of men) as well as time for friends (46% versus 27%). Women are also more likely than men to say that family caregiving has a negative effect on their emotional health (57% versus 40%).

Silver lining of time commitments may be more realistic planning for retirement

Six in 10 investors who provide personal assistance to a parent or other adult family member (61%) say the experience has changed how they want to be cared for when they are older. The effect is particularly strong on non-retirees, 70% of whom say it has changed how they want to be cared for down the road. The figure is 49% among retirees, possibly reflecting the shorter window this age group has to adjust their lifestyle plans.

The most common change that investors say they are making as a result of the experience of caregiving is saving more for medical/personal care than they originally planned (59%). About half (49%) say they are more likely to move to an assisted-living community in their later years. Fewer show greater interest in purchasing long-term care insurance (38%) or moving into a multi-generational home in their later years (28%) as a result.

One area investors may still be unrealistic about in retirement is estimating what they will need to pay for healthcare and long-term care, not including what Medicare pays for. When asked to estimate costs, over half, 53% say it will be less than $200,000, well under the more than $300,000 estimated costs that retirees are likely to need for healthcare ($193,822) and long-term care ($138,000) combined.¹ Another 16% say it will be between $200,000 and $299,999, and 31% say it will be $300,000 or more.

Compounding the possibility that investors won’t have saved enough for their healthcare in retirement, relatively few report owning financial products that could help them pay these bills down the road. About a quarter of investors report having a Health Savings Account (24%), 20% say they have long-term care insurance and just 6% have longevity insurance.

Non-retirees (32%) are significantly more likely than retirees (12%) to have a Health Savings Account (HSA), reflecting the relatively recent emergence of HSAs as a healthcare financing option. There is no difference, however, in the two groups’ use of long-term care or longevity insurance.

“Many people understand the need to save for retirement, but it appears they have compartmentalized healthcare costs and are not planning the way they need to. Without planning, these expenses need to be funded outside the budget which can bring stress and the feeling of being out of control,” Sumners said. “More importantly, underfunding healthcare costs later in life could deplete retirement savings and make investors vulnerable. By sufficiently planning for retirement as well as other future needs, investors can potentially take back control and interrupt the cycle of familial support.”

¹Individual healthcare cost: HealthView Services as cited in “Retiring this year? How much you’ll need for health-care costs,” CNBC, 7/18/19. Long-term care cost: Bipartisan Policy Center report as cited in “Retirement planning should include long-term care costs,” USA Today, 11/17/17.

About the Wells Fargo/Gallup Investor and Retirement Optimism Index

The results of this Wells Fargo/Gallup Investor and Retirement Optimism Index survey are based on a Gallup Panel web study completed by 2,091 U.S. investors, aged 18 and older, from August 5-11, 2019. The Gallup Panel is a probability-based longitudinal panel of U.S. adults who Gallup selects using random-digit-dial phone interviews that cover landline and cellphones. Gallup also uses address-based sampling methods to recruit Panel members. The Gallup Panel is not an opt-in panel. The sample for this study was weighted to be demographically representative of the U.S. adult population, using the most recent Current Population Survey figures. For results based on this sample, one can say that the maximum margin of sampling error is ±5 percentage points at the 95% confidence level. Margins of error are higher for subsamples. In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error and bias into the findings of public opinion polls.

For this study, the American investor is defined as an adult in a household with stocks, bonds or mutual funds of $10,000 or more, either in an investment account or in a self-directed IRA or 401(k) retirement account. About two in five U.S. households have at least $10,000 in such investments. The sample consists of 61% non-retirees and 39% retirees. Of total respondents, 41% reported annual incomes of less than $90,000; 59% reported $90,000 or more.

About Wells Fargo Advisors

With $1.7 trillion in client assets as of June 30, 2019, Wells Fargo Advisors provides investment advice and guidance to clients through 13,799 full-service financial advisors and referrals from 5,390 licensed bankers. This vast network of advisors, one of the nation’s largest, serves investors through locations in all 50 states and the District of Columbia. Wells Fargo Advisors is the trade name used by Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, Members SIPC, separate registered broker-dealers and non-bank affiliates of Wells Fargo & Company. All data includes Wells Fargo Clearing Services, LLC and Wells Fargo Advisors Financial Network, LLC, as of June 30, 2019. www.wellsfargoadvisors.com. Investment professionals referenced in the article are registered representatives of Wells Fargo Clearing Services, LLC.

About Wells Fargo

Wells Fargo & Company (NYSE: WFC) is a diversified, community-based financial services company with $1.9 trillion in assets. Wells Fargo’s vision is to satisfy our customers’ financial needs and help them succeed financially. Founded in 1852 and headquartered in San Francisco, Wells Fargo provides banking, investment and mortgage products and services, as well as consumer and commercial finance, through 7,600 locations, more than 13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has offices in 32 countries and territories to support customers who conduct business in the global economy. With approximately 263,000 team members, Wells Fargo serves one in three households in the United States. Wells Fargo & Company was ranked No. 29 on Fortune’s 2019 rankings of America’s largest corporations. News, insights and perspectives from Wells Fargo are also available at Wells Fargo Stories.

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Source: Wells Fargo & Company