Posts Tagged ‘baby boomers’

Boomers Planning on Taking It With Them

Tuesday, September 27th, 2011

A new study  has found that many baby boomers plan to spend their money on themselves and forego giving their offspring any inheritance.  “My goal is when they carry me away in that box that my bank account is going to say zero,” said Carol Willison, a 60-year-old Seattle woman.  “I’m going to spoil myself now.”  Upsetting the conventional idea of parents carefully tending their financial estates to be passed down once their wills are read, many baby boomers plan to spend the money on themselves while they still can.

In a survey of millionaire boomers by investment firm U.S. Trust, only 49 percent said it was important to leave money to their children.  The low rate surprised a company that for decades has advised well-heeled people about how to leave money to their heirs.  “We were like ‘wow,'” said Keith Banks, U.S. Trust president.

The decision to leave an inheritance is increasingly faced by many of the nation’s 77 million baby boomers, and it’s becoming all the more complicated because of the difficult economy.  Boomers face the decision of wanting to enjoy their long-awaited golden years and the pressure of various financial concerns, such as fear of outliving their savings and the need to help parents, children or siblings who have money struggles of their own.

“I do not see my baby boomer clients giving up a vacation or wine or dinners out so that they can leave more money to their children, because they feel like they’ve already done it for their kids,” said Susan Colpitts, Executive Vice President of a Norfolk, VA wealth management firm.  “They say, ‘If there’s something at the end I’d love (the kids) to have it, but what’s important for me now is to get what I’ve earned, which is to travel and have a nice bottle of wine,'” Colpitts said.

“How can you say no when a child asks ask for a down payment for a house or money to remodel their house to have a bedroom for a second child?” asks Ken Dychtwald, chief executive of the research firm Age Wave.  “A lot of boomers are finding that family members are taking cash advances on those inheritances right now.” 

Writing on the Encore blog about retirement planning,  Missy Sullivan says that “The survey found that three-quarters of respondents believe their wealth came from their own focus and hard work, while half said they paid a steep personal price — limiting time off, neglecting their families, mishandling relationships.  Maybe that’s why, as they approach retirement, they’re planning to spend more on themselves, traveling (64 percent) and having fun (36 percent).  Boomers surveyed also had doubts about their kids’ readiness to handle the family riches.  Only 31 percent of parents agree strongly that their children can handle an inheritance.  Only 36 percent believe the kids can work together to make decisions about the family wealth after they’re gone.  Fifteen percent have disclosed zilch to the kids, detail-wise, about their wealth.  When asked why, the reasons included fear the kids would become lazy (24 percent), would make poor decisions (20 percent) or would squander the money (20 percent).” 

The size of parental estates can be significant  — a median of $64,000, according to a report from the Center for Retirement Research at Boston College and MetLife insurance.  That’s a handsome amount, but hardly the life-changing Lotto win that will send boomers on a big shopping spree.  “We ran all the numbers, and it’s really unlikely that boomers will inherit an unimaginably large amount of money,” said Anthony Webb, a research economist with the retirement center.

The fact remains that many Boomers inherited less from their parents, thanks in part to the recent financial meltdown.  Boomers who have already inherited an estimated $2.4 trillion avoided much of the market declines.  If investors didn’t have to take their cash out of the market, the investment hit most estates took during the recession has nearly all been recovered.  Nevertheless, the Center for Retirement Research estimated that the $6 trillion originally coming due to boomers had been cut to $5.2 trillion, creating an $800 billion loss.  Additionally, that 13 percent estimated loss in investment wealth, the major factor dragging down boomer inheritances, is the drop in housing prices.  “Real estate took a huge cut, whereas investments have largely recovered for many people,” says Warren McIntyre, a certified financial planner with Troy’s VisionQuest Financial Planning.

According to Marilyn Capelli Dimitroff of Capelli Financial Services, “Once the parents are gone, the kids can’t sell the house.  I’ve had conversations with clients where they just don’t know what to do.  The houses are on the market and on the market, and sometimes the kids live out of state and the houses just deteriorate.  I actually had one family try to give away the home, and they couldn’t do it.”

Meet the Very First Baby Boomer

Wednesday, June 8th, 2011

Social Security Commissioner Michael Astrue calls it “America’s silver tsunami.”

The name Kathleen Casey-Kirschling likely doesn’t ring any bells with the majority of Americans.  She holds the singular honor of being the nation’s very first baby boomer, born one minute after midnight on January 1, 1946 in Philadelphia celebrating her 65th birthday on New Year’s Day.  A retired teacher, Casey-Kirschling is the first of approximately 78 million baby boomers who will begin collecting Social Security and Medicare benefits over the next 20 years.  The Pew Research Center reports that approximately 10,000 baby boomers turn 65 every day.  Baby boomers, who were born between 1946 and 1965, are celebrating their 65th birthdays between 2011 and 2030.  Despite a recent Pew survey that found baby boomers feel more downbeat than other generations about their future, Casey-Kirschling is taking a positive approach.  “I’m OK with knowing that I don’t know what tomorrow will bring,” she said.  “I’m going to live for today.  And I’m thankful that I could live for today, and I am healthy.”  Casey-Kirschling retired at 60 and began taking her Social Security benefits at age 62.

In an interview with AARP at the time of her retirement, she said “I don’t work compulsively anymore.  My priorities are now family and friends, and if something’s not fun, I don’t want any part of it.”  Today, the New Jersey resident works part-time, travels with her husband, and spends time with her children and grandchildren.  Because Casey-Kirschling opted to start collecting Social Security at age 62, she receives only about 75 percent of the total amount for which she was eligible –approximately $240 less per month.  If Casey-Kirschling had waited until her 66th birthday, she would have received full benefits; at age 70 she would have received 135 percent of full benefits.

When asked how she deals with her celebrity, Casey-Kirschling said “In the beginning, it was overwhelming.  But I said I’m just going to be who I am and do what I can, especially for Social Security.  They asked me to do public service (ads) for the generation and help baby boomers apply (for benefits) online and get direct deposit.  Whatever I could do, I would try to have a positive impact.  So many things are negative in the nation today.  Like all human beings, we are not a perfect generation.  We certainly created so much, built so much and have an incredible work ethic to this day.”

Like many of her fellow boomers Kathy leads a full and busy life,” said Jim Courtney, Social Security Deputy Commissioner for Communications.  “By choosing direct deposit, Kathy’s benefit is safely and conveniently deposited into her bank account.  No matter where in the country – or the world – Kathy is, her money is as close as the nearest ATM or just a mouse click away through online banking.”

David Walker, formerly the comptroller general of the Government Accountability Office, Congress’ legislative arm, warned that before too long, the Social Security system will have more recipients than it can afford to pay out “We face a tsunami of spending due primarily to the retirement of the baby boom generation and rising healthcare costs,” Walker said.  “So what’s happened is we’ve gone from 16 workers paying into Social Security for every person drawing benefits in 1950 to 3.3 to one today, and we’re going down to two to one by the time the boomers retire in big numbers and that’s about where it will stay over the long run.”

“I think I’m just lucky to be at the top of the boom.  I’m just one of many millions and am blessed to have been in this generation and really blessed and to take my Social Security now,” Casey-Kirschling said.

Foreign Investors Like Luxury

Thursday, May 1st, 2008

You know what they say about polls.  Still, a recent one is an interesting temperature reading for the new economy.   Overseas investors in United States real estate prefer retail versus office or industrial space right now, according to a recent issue of Commercial Property News. This is just one conclusion in a survey that examined the influence of the current housing slump on the economy and consumer spending.  Nearly 200 members of the Association of Foreign Investors in Real Estate (AFIRE) revised their favored property rankings from the previous year.  Retail soared to first from fifth place, while hotels fell from second to fourth place  Office space plunged from first place to last. “While foreign investors are aware of the high occupancy and rental-rate increases in the office market, they fear that the credit crunch will cause tenants to lay people off and contract their space needs,” reported Karin Shewer, a principal for New York City-based Real Estate Capital Partners, which advises European investors about American real estate markets.  Shewer says multifamily’s lack of popularity is the result of a growing uneasiness with the United States condominium market.“Another issue with multifamily is that cap rates are very low right now and returns are limited,” Shewer said.  The strong preference for hotels relates to aging baby boomers.  According to Shewer, “A lot of baby boomers will inherit from parents who were conservative savers, and as they move toward retirement, they will have more time to travel, and they will occupy hotels.”  So why retail at the top?  Dan Fasulo, managing director for Real Capital Analytics, Inc., notes that “Retail is a diverse property type with many sub-niches.  What these investors might be referencing is high-end urban luxury retail.  We have seen a boom like never before in high-fashion apparel, jewelry and other upscale specialty stores that have been expanding globally as the worldwide economic expansion has driven up disposable incomes of affluent people around the world.”  The AFIRE survey also found that foreign investors still prefer American real estate to that in other countries.  To illustrate, AFIRE’s members collectively own $700 billion worth of real estate worldwide; $230 billion of that is invested in the United States.Lastly, AFIRE members were asked to rank their favorite cities for investment.  New York City and Washington, D.C., took first and second place.  London, Paris and Shanghai completed the list.