Your client’s family could be a wrecking ball swinging towards their retirement chances.

Family issues were the largest obstacles to retirement success discussed in “How Clients Can Prevent Failure In Retirement,” a panel discussion last week at Financial Advisor’s 9th Annual Inside Retirement conference in Las Vegas.

Because problems involving divorce and adult children pose such a risk to retirement, advisors need to think holistically beyond financial issues, said Lorraine Ell, CEO of Better Money Decisions and Better Insurance Decisions.

“In general, we have to be more like coaches and guides,” said Ell. “We need to have responsibility for helping our clients make decisions around money.”

Divorce

One of the biggest problems Ell has encountered in retirement planning is the divorce of couples near or in their retired years.

So-called “grey divorce” is a rising trend among older couples, said Greg Sullivan, principal & CEO of Sullivan, Bruyette Speros & Blayney, for two reasons. One is that there is a greater sense of financial security among couples and people of all genders. The other is that social media is allowing older Americans to meet and fall in love more easily.

“We’re seeing more collaborative divorce, but it can lead to a worsening of outcomes for both parties,” said Sullivan. “When you separate the wealth you’ve accumulated as a couple, when you divide it in half, are you still going to be OK? The answer is usually no, you’re going to have much less—but you’re also going to be happier, so it’s still a good win.”

Sullivan suggests setting a meeting with both spouses, if possible, to establish transparency and discuss the financial processes involved in divorce. Afterwards, separate advisors should be assigned to each spouse.

Michael Zmistowski, principal of Financial Planning Advisors, uses a licensed divorce mediator in his office.

“She’s done a great job with helping clients understand transparency of assets,” said Zmistowski.

Boomerang Children

With more than one-third of adult millennials still living in their parent’s home, caring for an adult child has become a major retirement expense that few are planning for.

The root cause of the boomerang child phenomenon is a parent’s difficulty seeing negative aspects of their childrens’ behaviors—parents tend to think their children are adorable and good, said Ell.

“When you know they are taking too much of their income in supporting the hipster lifestyle of their 25-year-old son in Brooklyn, it’s still difficult,” said Ell. “They see that little baby boy that they raised. They still see a child and they want to take care of them.”

Ell says that a familiar metaphor to air travelers—the oxygen mask—can help parents realize that they need to take care of themselves first.

“One thing we say to folks is think about it like you do when you get on an airplane. If the oxygen mask falls down, put it on yourself first before you help your child,” said Ell. “If you don’t take care of yourself, then you are going to be dependent on that 25 year old in the future, and that might not be such a good scenario.”

More than one-third of families with children between the age of 18 and 34 have children who still live at home, said Sullivan, who also notes that his 29-year-old daughter has returned home as she transitions out of a relationship.

“With my kids, I had a thing called the exit interview, where the central point was that it’s time for you to leave and move on,” said Sullivan. “My whole point is that kids don’t come home. You graduate and you figure it out.”

Feuding Children

Boomerang children aren’t the only problem facing parents planning their retirement: Siblings and other relatives may become jealous or offended about financial aid being offered to one child.

Sullivan describes one client couple with four adult children. The eldest, a successful attorney, took home a seven-figure annual salary, but still continued to ask his parents for financial assistance.

“The other three boys were not really happy with this,” said Sullivan. “You can’t say ‘don’t give them the money’ because the clients won’t listen. I said that they should make it a loan—go backwards with all the money they had given him and turn it into a loan.

“When the parents passed away, there was still a $500,000 loan that had not been paid off. When we were dividing up the estate, the boys were friendly and actually talked. But had we not done that, I think it would have been a terrible situation. We added huge value for that client.”

Zmistowski described a similar situation: A client wanted to pay off large credit card balances for two children in their 40s. The client did not have a lot of excess income and was on a very tight path towards a successful retirement.

“The solution was for them to borrow the money to pay off the boys’ credit cards,” said Zmistowski. “I told them ... every time they make a payment, they should think about how good their boys are.”

Financially Unaware And Entitled Children

Underlying the issues of boomerang children and children needing financial support are entitlement and lack of financial literacy, said Sullivan.

“The wealth effect is the curve,” said Sullivan. “In my parents’ generation, it was a rising tide lifts all boats, and since the 1980s it’s been a rising tide. Our children’s generation sees the wealth and tends to make expectations for them. Today, everyone gets a participation ribbon and everyone is taken care of. This is a behavioral issue as well. ... The wealth has gone up, we can afford it, we have afforded it, and it’s changed the behaviors of our children.”

Ell said the solution often lies within the families themselves. Ell’s children took physically demanding summer jobs for low wages and were required to take public transportation to and from work.

By the time families work with an advisor, children can often be older than 25, 30 or 35 years old, said Ell, “so it’s difficult to change behavior.”

Second Home

Clients often see a second home as an aspirational goal, said Sullivan.

“This is more a math game,” said Sullivan. “The perception of a second home is often times misguided. If you have clients wealthy enough to own a second home with no impact on their lifestyle, awesome, but it’s not complicated math.”

Zmistowski described one wealthy couple moving after retirement from the Washington, D.C., metro area to a retirement house in Florida who wanted to keep their original home to visit with friends. After doing the math for the client, he was able to tell them that it would be cheaper to stay in the penthouse suite in the Washington Ritz Carlton hotel than it would be to keep a second home.

Other families want a vacation home for emotional reasons, said Ell.

They envision being there with their family gathered in the summer, but in reality none of the kids want to go to the beach house. "They’re too busy, they have families of their own and it’s just not going to happen,” said Ell.

Over-spending In Retirement

“This happens especially in clients who don’t have the resources to live the life that they think they should be entitled to,” said Ell. “You have to tell them that their burn rate is too high and that they’ll run out of money. We can’t see ourselves more than five years into the future.”

People also tend to have a positivity bias when thinking about their future and often can’t consider potential worst-case scenarios, said Ell. ““Clients can’t envision a bleak future,” she said.