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The Danger of Boomer Generosity

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TD Canada Trust recently released a report that was a little surprising, both from a financial and social perspective. It indicated that one-in-five baby boomers (19 per cent) admitted to researchers that they would consider jeopardizing their own financial stability and future in order to help their adult kids financially.

A great many more admitted to already funding their adult children's lives with 43 per cent letting them live at home rent free, 29 per cent subsidizing big ticket purchases like cars and 23 per cent providing monthly money for things like food and rent. While it is understandable that parents would want to help their children, does this willingness of boomer parents to risk their own future security pose broader implications to the Canadian social landscape?

As a Trustee, seeing seniors facing debt crises is, unfortunately, an increasingly familiar situation. Indeed, the Vanier Institute reported that bankruptcy rates amongst seniors increased by a whopping 1747 per cent in 2012 over 2011. The recent TD Canada Trust research, however, seems to provide a new context to this unfortunate trend.

Seniors' financial burdens may not be stemming solely from living longer, or having savings and pensions that are not keeping up with increased costs of living, as have been the primary explanations. The TD Canada Trust report indicates that some seniors-to-be in the boomer generation are knowingly placing their financial stability in harm's way to help their kids. This makes one wonder what may happen to the boomers if they experience financial instability? If those 19 per cent of boomers willfully jeopardize their financial security now, what are the possible implications in the future, for them, for their kids and for the broader social infrastructure?

One needs only to consider the healthcare system to ponder the broader implications of a boomer generation that may face future financial challenges. Some indications are now surfacing that suggests boomers could face the introduction of a co-payment structure in our healthcare system in the future. This thought is gain some traction in government and academia circles, as the rising healthcare costs that will be required to care for boomers in the future are being studied.

Those increased healthcare costs will be occurring at the same time that the working population, paying taxes, will be decreasing in size. A study done by former Saskatchewan NDP cabinet minister Janice MacKinnon (commissioned by the Macdonald-Laurier Institute, an Ottawa think tank) has stated that "if you look at the economic projections, you're not going to be able to sustain the current (healthcare) system without more money." With this opinion in mind, the fiscal policy professor noted that since boomers will use the healthcare system more, "it's fair and it's effective" to have boomers pay more than others to access healthcare.

Leaving the sensitive nature of Ms. MacKinnon's opinions out of this discussion, the bottom line issue is that boomers will require an increasing amount of healthcare in the coming years. Some will need retirement and nursing homes. Others will require home care. All will require daily living expenses and, as we live longer as a society, these may be for a longer period of time.

If these boomers diminish, or outright jeopardize their financial stability now to support their adult kids, where is the money going to come from to meet their retirement needs? Will it be their adult children, who are already adults and participating in the highest debt-to-income ratios in Canadian history?

Many of them simply don't have much financial flexibility to support more expenses. To say that the demands could be substantive on both the boomers and their kids is an understatement. If boomers dilute their financial safety nets now, face future pressures such as co-payment for healthcare and have kids struggling with their own debt loads, where does the buck stop? What is the potential social impact?

Maybe these forces are lining up to return us to a more "traditional" way of life and impact our cultural norms. Maybe boomers won't sell their current homes into a flattening housing market. Maybe the kids move in, or never leave, and 3 generation households become a norm, like days gone by. Maybe eldercare will, by default of cost, be provided in the home, as the boomers and their children will be left with few options. Maybe one car, or no-car, families become typical, as does shopping locally, decreased travel and less consumption.

It can be easy to see the TD Canada Trust report as more economic theory that doesn't connect with average people. One has to wonder, however, if a financial story such as this is actually an indication of broader social and cultural evolutions that we would all be well served by reflecting upon.

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