November 8, 2014 — We retirees have a strong desire to leave something for the kids once we go on to baby boomer heaven. A recent study by the Population Research Center at the University of Texas found that 86% of people aged 59-96 expect to leave an inheritance to their kids and grandkids. In reporting that study the New York Times article, “The Children Will Be Fine: Spend Their Inheritance“, called this perhaps “the height of foolishness”. Let’s take a look why.
About half of baby boomers are concerned they won’t be able to maintain their standard of living in retirement. Yet the 86% figure from the University of Texas study shows that even people stressed by their retirement finances still hope to pass something on to the next generation. The irony of this is shown in the same study, published in the journal “Gerontologist”, which found that only 45% of children aged 40-60 expect to be left money from their parents. The conclusion of the author, Kyungmin Kim, shows a disconnect – parents deeply want to leave something for the next generation, but the children don’t usually expect one. The Times article raised the point – if asked, many younger people’s advice to their parents would be – spend it mom and dad!
We have done a lot already
Most baby boomer parents have already made large sacrifices for their children. We have often paid college tuition, helped our children get started in life, and supported them to adulthood. Of course if we are well off and can make it through retirement without financial distress, it is only natural to want to make things easier for our children with an inheritance. But the article raises a good point – if we are worried about our own financial future in retirement, think about ourselves first. Our inability to do this explains the reluctance of many people to enjoy the fruits of their labor, or consider a reverse mortgage. Homes represent the biggest part of many retiree’s portfolios, and for many people a reverse mortgage might be the financial salvation to a very dispiriting quality of life in retirement. Yet most people are unwilling to consider this tool, probably because this irresistible urge to bequeath our assets interferes with our own happiness.
One further point from the UT Study interesting. Adult children who have been financially supported while their parents were alive had a higher expectation of getting one. Sounds like entitlement to us.
What are your thoughts about leaving something to your heirs? Do you have formal plans in place? Do you have special considerations that have been made? Or do you intend to spend everything you’ve got, as it’s time to take care of me! Please share your thoughts in the Comments section below.