Multi-Generational Financial Planning for Asian-American Families

Multi-Generational Financial Planning for Asian-American Families

by Chia-Li Chien, CFP®, PMP® Dec. 28, 2015

What does greater longevity mean for family financial planning?  Research has established that Asian Americans live longer than those in other ethnic groups.  In particular, Lauderdale & Kestenbaum (2002) found that Asian Americans live longer compared to Whites. The Master Beneficiary Record from the Social Security Administration and Medicare Part B enrollee data reveal telling data in this regard. Elderly Asian Americans in Lauderdale & Kestenbaum (2002) were divided into six subgroups: Chinese, Indians, Japanese, Koreans, Filipinos and Vietnamese. The largest subgroup in this study was Chinese.

The same study found that: 1) White males have on average a 1.36 times higher mortality rate compared to Chinese males; 2) White females on average have a 1.48 times higher morality rate than Chinese females. Lauderdale & Kestenbaum (2002) thus establish that Asian Americans live longer, healthier lives.

Why is this longevity a special concern for first-generation Asian Americans?  The implications are both cultural and financial.  According to Quadagno (2014), “adult children of immigrants had a greater sense of filial obligations to their parents and they saw their parents more frequently.” (p. 183) In addition, Quadagno (2014) found that “filial piety was a culture value” (p. 185) and has always been at the center of Asian culture and lifestyle.



Filial piety has been taught to Asian-American youth as a component of respect, and is part of their educational upbringing.  I can offer a personal example.  Growing up, we never were taught to live as adults with our parents.  But we watched them help their own parents through a combination of living with them, providing financial assistance, etc. It is just a way of life, and filial piety is part of mutual, cross-generational respect.  Traditionally, the eldest son is responsible for his parents’ living arrangements.  As a result, there may be friction between a daughter-in-law and that son’s other siblings. To reduce this difficulty, many Asians will take care of their grandchildren as a gesture of mutual benefit.

Clearly, then, filial piety may lead first-generation Asian Americans to assume greater responsibilities for caretaking as their parents age.  Given the increased burden of annual retirement costs among the most elderly, such caretaking might trigger much larger financial responsibility as well.  Fortunately, research shows that Asian Americans also have a higher savings rate—a factor that can potentially ease the financial burdens on family members influenced by filial piety. 

What evidence shows this greater frugality?  A relevant Ariel/Hewitt study was cited in the following articles:

•    401(k) Habits Differ Among Ethnicities. (2009).
•    DISCRIMINATION--RACIAL DISPARITIES IN 401(k) PARTICIPATION AND CONTRIBUTION--FIDUCIARY DUTY--PLAN DESIGN. (2010).

The Ariel/Hewitt study found that, among ethnic groups, Asian Americans have the second-highest participation in retirement plans such as the 401(k). Moreover, compared with Whites, African Americans and Hispanics, Asian Americans contribute the largest percentage of their incomes to such plans.  According to the Ariel/Hewitt study, Asian Americans saved on average 19% more than Whites. In addition, Asian Americans had the highest exposure to equity investments and the least borrowing against their retirement accounts. The Ariel/Hewitt study inferred that Asian Americans are much better positioned for retirement due to their healthy saving and investment behaviors. 

Asian Americans can benefit from these positive saving and investing trends, since the combination of a higher savings rate and greater exposure to equities means, in historical terms, a greater probability that one’s portfolio will remain solvent for a long stretch of time.  And that increased solvency should be beneficial in two ways: helping Asian Americans to cope with the financial challenges of greater longevity in retirement; and helping their adult children, bound by filial piety, manage the financial aspects of multi-generational caretaking.

Given the strength of filial piety culture, Asian American families do need to conduct family financial planning details in a multi-generational fashion.  Though money traditionally is a difficult topic for families to broach, those who provide caretaking—of one kind or another—for family elders need to be aware of the unique financial challenges and opportunities their parents face.  Talking openly about the process will provide greater peace of mind for everyone involved.

 

Schedule an appointment with Chia-Li Chien today!

Chia-Li Chien, CFP®, PMP®; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward. Chia-Li is an Instructor & CFP® Program Director at Ball State University and Adjunct Faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Schedule your appointment today!

 

References:

  1. 2015 Spring Newsletter. Self-Help for the Elderly. Retrieved from http://www.selfhelpelderly.org/wp-content/uploads/2014/08/2015-Spring.pdf
  2. 401(k) Habits Differ Among Ethnicities.. (2009). Journal of Financial Planning, 22(9), 10.
  3. Discrimination--Racial Disparities In 401(K) Participation And Contribution--Fiduciary Duty--Plan Design. (2010). Benefits Quarterly, 26(4), 67.
  4. Finke, M. (2014). Finke: What Makes a Successful Retirement? Think Advisor. Retrieved From: http://www.thinkadvisor.com/2014/01/27/finke-what-makes-a-successful-retirement
  5. Frequently Asked Questions about Social Day Programs. Institute on Aging (San Francisco) Retrieved from http://www.ioaging.org/services/all-inclusive-health-care/social-day-programs/faqs/
  6. Hua, V. (October 14, 2013). Living with three generations in a house has its benefits - privacy is not one of them. PRI Public Radio International. Retrieved from http://www.pri.org/stories/2013-10-14/living-three-generations-house-has-its-benefits-privacy-not-one-them
  7. Kramer, S. (Sept. 23, 2011). Three Generations Under One Roof. The New York Times, N.Y. / Region, In the Family. Retrieved from http://www.nytimes.com/2011/09/25/nyregion/one-roof-three-generations-portrait-of-a-chinese-american-family.html?_r=1
  8. Kurlowicz, T. Choosing the appropriate strategy for delegating financial decisions. The American College. Retrieved From: http://blackboard.theamericancollege.edu/Course/BbC/01_HS/353/Competency_4/LO_4_3_  2/presentation.html
  9. Lauderdale, D. S., & Kestenbaum, B. (2002). MORTALITY RATES OF ELDERLY ASIAN AMERICAN POPULATIONS BASED ON MEDICARE AND SOCIAL SECURITY DATA. Demography, 39(3), 529-538.
  10. Mutchler, J. E., Burr, J. A., & Prakash, A. (2007). THE DEMOGRAPHY OF DISABILITY AND THE EFFECTS OF IMMIGRANT HISTORY: OLDER ASIANS IN THE UNITED STATES. Demography, 44(2), 251-263.
  11. Quadagno, J.S. (2014). Aging and the Life Course: An Introduction to Social Gerontology. 6th ed. New York: McGraw Hill.
  12. Social Day Programs. Institute on Aging (San Francisco) Retrieved from http://www.ioaging.org/services/all-inclusive-health-care/social-day-programs/
    Stein, M. K. (1998). The Prosperous Retirement: Guide to the New Reality.
  13. Ta, V. M., Holck, P., & Gee, G. C. (2010). Generational Status and Family Cohesion Effects on the Receipt of Mental Health Services Among Asian Americans: Findings From the National Latino and Asian American Study. American Journal Of Public Health, 100(1), 115-121.
  14. Taiwan 2010 Population and Housing Census. (2010a). Resident population aged 65 years and over by age and type of living. Retrieved from http://ebas1.ebas.gov.tw/phc2010/english/52/80.doc
  15. Taiwan 2010 Population and Housing Census. (2010b).  Long-term care resident population aged 65 years and over by age, marital status and type of living. Retrieved from http://ebas1.ebas.gov.tw/phc2010/english/52/160.doc
  16. Taiwan 2010 Population and Housing Census. (2010c).  Age and number of unmarried grandchildren of the households with grandparents and unmarried grandchildren. Retrieved from http://ebas1.ebas.gov.tw/phc2010/english/51/383.xls
  17. U.S. Census Bureau. (2010) International Data Base. Mortality Indicators by Sex - Custom Region – Taiwan. Retrieved from https://www.census.gov/population/international/data/idb/region.php?N=%20Results%20&T=8&A=separate&RT=0&Y=2010&R=-1&C=TW
  18. U.S. Census Bureau. P23-212. 65+ in the United States: 2010. U.S. Government Printing Office, Washington, DC. (2014). Retrieved from https://www.census.gov/content/dam/Census/library/publications/2014/demo/p23-212.pdf
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    Ying, S. (March 2015). Chinese ideal family: four generations under one roof. Confucius Institute Magazine. Number 37. Volume II. Retrieved from http://confuciusmag.com/chinese-ideal-family

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