Personal Finance
56% of Americans say their parents never discussed money with them.
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As families gather for Thanksgiving this year, money is one topic that likely won’t be discussed.
Yet experts say it’s a perfect time to start the conversation, particularly with aging parents.
More than half of Americans — 56% — say their parents never discussed money with them, according to a recent Fidelity survey of 1,900 adults ages 18 and up.
One reason is that many people have a complicated relationship with money and wealth.
Most Americans — 89% — said they do not consider themselves to be wealthy, Fidelity found. For many, the definition of being wealthy is just not having to live paycheck to paycheck.
For the wealth they do have, most Americans say they accumulated it on their own, with 80% identifying as self-made and only 5% saying they inherited it, Fidelity found.
The fact that many people have relied on themselves, especially older Americans, may help explain why many don’t feel the need for more formal financial planning, according to David Peterson, head of advanced wealth solutions at Fidelity.
One-third of baby boomers don’t feel having a financial plan is necessary, Fidelity’s survey found, which is the most of any generation.
“They have sort of go your own way mindset, and that’s probably why they keep a lot of this just to themselves,” Peterson said.
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Yet experts say that not having a plan in place can leave individuals and their families vulnerable when unexpected events happen.
If you know what your parents want, have it written down and know where things are, it makes things much smoother in the event a parent passes, gets sick or starts showing signs of dementia, said MaryAnne Gucciardi, a certified financial planner and financial advisor at Wealthmind Financial Planning in Cambridge, Massachusetts.
“You want to catch things early and proactively and preemptively, so that you know what they want and you can advocate for them,” Gucciardi said.
The holidays are an excellent time to start conversations about family finances, Gucciardi said. But those discussions can also take place whenever there’s a group gathering where siblings and children can also be involved, she said.
How to get the family money conversation started
Research has found money is consistently one of the topics Americans would rather not talk about.
A recent U.S. Bank survey found more people would rather reveal who they were voting for in the presidential election than talk about their finances. Other research from Wells Fargo find discussing personal finances almost as difficult as talking about sex.
To get the conversation started with aging parents, experts say it helps to start small.
“Don’t go into it thinking that you’re going to solve it all this particular holiday,” Peterson said.
To kick off the conversation, you may want to talk about your own estate plan and ask for their advice on anything you’ve missed, he said. That way, you can get a sense of how far along they are in the process, Peterson explained.
It can also help to bring up examples of friends or family who died with estate plans that were either organized or in disarray, and how that affected their loved ones who were left behind.
“What I like to do is start with small topics and build up to the bigger topics,” Peterson said.
Peterson explained that wealth can be transferred through asset titling or beneficiary designations. But for assets that do not pass that way, you need a will, he said.
Without that planning, you leave it up to the state probate process. When someone dies without a will, also known as dying intestate, a state’s intestate succession laws determine what happens to their assets.
“The question is, do you want to be the one making the decisions?” Peterson said. “Usually, when you ask it that way, you get an answer that suggests that they want to be the ones in charge.”
In addition to a will, it helps to have other documents in place, such as a health care directive, power of attorney and HIPAA authorization in the event a parent’s health declines, Gucciardi said.
If those documents were not established recently, you may want to revisit them to make sure they’re up to date, she said.
Often, people have accumulated assets over their lifetimes and lose track of them, such as savings bonds or insurance policies, Peterson said. It helps to create a central location where all of that will be stored, either physically or digitally. Bank safe deposit boxes should be avoided, since they can be difficult for loved ones to access, he said.
With more assets stored online, it’s also important to ask about access to online financial, subscription and social media accounts, Gucciardi said. Using a password manager can help ensure those assets are secure, she said.
As families engage in these conversations, it may be best to start small with one area, such as health care preferences, and then build from there, she said.
To help start the conversation, books can be a great way to break the ice, Gucciardi said. Among the titles she recommends to clients include, “Who Gets Grandma’s Yellow Pie Plate?” “Crucial Conversations” and “Being Mortal.”
During those discussions, try to listen more than talk and ask open-ended questions, Gucciardi said.
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Actively managed exchange-traded funds are a growing trend in the investment space.
To that point, investors have pulled money from active mutual funds and sought out actively managed ETFs in recent years. Investors yanked about $2.2 trillion from active mutual funds from 2019 through October 2024, according to Morningstar data. At the same time, they added about $603 billion to active ETFs.
Active ETFs had positive annual inflows from 2019 through 2023 and are on pace for positive inflows in 2024, according to Morningstar. Meanwhile, active mutual funds lost money in all but one year (2021); they shed $344 billion in the first 10 months of 2024.
“We see [active ETFs] as the growth engine of active management,” said Bryan Armour, director of passive strategies research for North America at Morningstar. While acknowledg
“It’s still in the early innings,” he said. “But it’s been a bright spot in an otherwise cloudy market.”
At a high level, mutual funds and ETFs are similar.
They are legal structures that hold investor assets. But investors have gravitated toward ETFs in recent years due to cost benefits they generally enjoy relative to mutual funds, experts said.
Why fees matter
Fund managers who use active management are actively selecting stocks, bonds or other securities that they expect to outperform a market benchmark.
This active management generally costs more than passive investing.
Passive investing, used in index funds, doesn’t require as much hands-on work from money managers, who basically replicate the returns of a market benchmark like the S&P 500 U.S. stock index. Their fees are generally lower as a result.
Active mutual funds and ETFs had an average asset-weighted expense ratio of 0.59% in 2023, versus 0.11% for index funds, according to Morningstar data.
Data shows that active managers tend to perform worse over the long term than their peer index funds, after accounting for fees.
About 85% of large-cap active mutual funds underperformed the S&P 500 over the past 10 years, for example, according to data from S&P Global.
As a result, passive funds have attracted more annual investor money than active funds for the past nine years, according to Morningstar.
“It’s been a rough couple decades for actively managed mutual funds,” said Jared Woodard, an investment and ETF strategist at Bank of America Securities.
But, for investors who prefer active management — especially in more niche corners of the investment market — active ETFs often have a cost advantage versus active mutual funds, experts said.
That’s mostly by virtue of lower fees and tax efficiency, experts said.
ETFs generally carry lower fund fees than mutual fund counterparts, and generate annual tax bills for investors with much less frequency, Armour said.
In 2023, 4% of ETFs distributed capital gains to investors versus 65% of mutual funds, he said.
Such cost advantages have helped lift ETFs overall. ETF market share relative to mutual fund assets has more than doubled over the past decade.
That said, active ETFs represent just 8% of overall ETF assets and 35% of annual ETF inflows, Armour said.
“They are a tiny portion of active net assets but growing rapidly at a time when active mutual funds have seen pretty significant outflows,” he said. “So, it is a big story.”
Converting mutual funds to ETFs
In fact, many money managers have converted their active mutual funds into ETFs, following a 2019 rule from the Securities and Exchange Commission that allowed for such activity, experts said.
So far, 121 active mutual funds have become active ETFs, according to a Nov. 18 Bank of America Securities research note.
Such conversions “can stem the tide of outflows and attract new capital,” according to the Bank of America note. “Two years before converting, the average fund saw $150 [million] in outflows. After converting, the average fund gained $500 [million] of inflows.”
That said, there are caveats for investors.
For one, investors who want an active ETF are unlikely to have access to one within their workplace retirement plan, Armour said.
ETFs, unlike mutual funds, are unable to close to new investors, Armour said.
This may put investors at a disadvantage in ETFs with certain “super niche, concentrated” investment strategies, because money managers may not be able to execute the strategy as well as the ETF gets more investors, he said.
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Lost years ‘absolutely critical’ for retirement security
Unplanned early retirements can have severe financial implications for retirees, according to Catherine Collinson, CEO and president of Transamerica Institute and Transamerica Center for Retirement Studies.
“Many people may not even realize how severe the consequences can be and how absolutely critical those extra five or 10 years in the workforce can be in terms of achieving retirement security,” Collinson said.
If those new retirees take Social Security benefits before their full retirement age — which is 66 to 67, depending on date of birth — they take permanently reduced benefits. The median age for claiming Social Security benefits is age 64, according to EBRI. Retirees stand to get the biggest Social Security benefits if they wait until age 70.
Retirees who stop working at age 62 miss out financially in other ways.
They may lose five years of income, assuming they intended to retire at their full retirement age of 67, Collinson said.
They may also lose potential employer sponsored retirement benefits and additional credits towards their Social Security work history.
They’re also missing out on growth of their savings and investments, assuming they would have left those untapped if they kept working.
Plus, they have to pay for health insurance before Medicare eligibility age of 65, which can be expensive, Collinson said.
Reset financial goals after an early retirement
Individuals who are forced into early retirement may not have a lot of financial flexibility. But they should sit down and come up with a financial plan, which can help assess their risks of running out of money in the future, Collinson said.
If possible, newly retired individuals should try to give themselves time to pause and reset their financial goals, said Ted Jenkin, a certified financial planner and the CEO and founder of oXYGen Financial, a financial advisory and wealth management firm based in Atlanta.
When they do evaluate their finances, they should consider whether it would be advantageous to move, including where taxes may be lower; carefully review the rules that come with COBRA or other health insurance plans; and take a look at any unused perks that may be available to them, like credit card rewards, said Jenkin, who is also a member of the CNBC FA Council.
Still-employed pre-retirees should also take note and take steps now to try to extend their working years, Collinson said.
By keeping good health habits, making sure their job skills up to date and relevant and continuing to build their professional networks, workers may avoid unforeseen early retirements, she said.
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