Thread: Baby Boomers to Inherit Up to $11.6-TRILLION

Baby Boomers to Inherit Up to $11.6 Trillion

By Philip Moeller Philip Moeller – 2 hrs 2 mins ago

Baby boomers have even more reasons--11.6 trillion of them--to thank the Greatest Generation. According to a new study, the boomer generation (people born between 1946 and 1964) will inherit that many dollars, largely from their parents.

[See 10 Tips for Retirement Overseas.]

The numbers are broken into three categories, according to a study commissioned by MetLife and conducted by the Center for Retirement Research at Boston College. Already, boomers have received $2.4 trillion in inheritances, and they stand to get another $6 trillion. In addition, wealth transfers from living donors have already totaled $1 trillion and could total another $2.2 trillion. On the downside, the study said the economic downturn eventually could reduce these numbers by up to $800 billion.

To date, about 1 in 6 boomer households has received an inheritance, the study found. Eventually, two-thirds of boomer households will receive inherited funds. Of those who do, the median household would receive $64,000, but there is an enormous range of inheritances. Among the wealthiest 10 percent of households, the average inheritance is projected at $1.5 million. Among the least wealthy 10 percent, it's estimated at only $27,000.

Still, it's at the low end of the wealth scale that inheritances will really make a difference for boomers. "Though high-wealth households receive much larger inheritances in dollar terms," the study said, "these amounts represent a smaller share of their wealth--22 percent for those in the top decile compared to 64 percent for those in the second-to-bottom decile."

[See Retirees Largely Shut Out of Obama Tax Compromise.]

As of 2007, nearly 60 percent of boomers had at least one parent who was still living, the study said, and it will be many decades before boomers are finished receiving their financial bequests. The authors tried to estimate whether boomers might someday be as generous as their elders, but said there isn't enough data yet to paint a clear picture.

This money will help many households, according to the study. "A substantial minority can expect to receive amounts that will improve their financial preparedness for retirement, and their ability to pass wealth to succeeding generations."

But it warned that boomer inheritances were "not a silver bullet" and that individual boomers should not rely on expected inheritances. Many factors can reduce or eliminate these bequests. "Boomer households need to make many of their key financial decisions before they ever receive any inheritance," according to the study.

http://news.yahoo.com/s/usnews/20101214 ... 16trillion

7 Tips for Giving Money to Family Members

By Kimberly Palmer Kimberly Palmer – Tue Dec 14, 1:53 pm ET

Giving money to family members can be uncomfortable at best, and sometimes even relationship-destroying. But it's becoming increasingly common amid a tough economy: A Charles Schwab survey found that 2 in 5 respondents expect to provide financial support to their parents at some point, and 1 in 4 anticipates needing to give money to siblings. Concerns about supporting family members were stronger among younger respondents.

How can you give money, even as gifts during the holidays, without straining relationships with loved ones? Here are seven strategies that can help make cross-generational lending work--or not:

First, decide if you can afford to give help. An Ameriprise Financial survey found that many baby boomers didn't realize how much the help they were providing cut into their own retirement savings. About 30 percent of baby boomers said the money they gave their adult children negatively affected their own retirement savings, but most were unaware of the impact. "People psychologically didn't get that connection ... [that] 'if I weren't bailing out my kid, then I could be adequately funding my own retirement,'" says Craig Brimhall, vice president of retirement wealth strategies for Ameriprise.

If you can't afford it, consider saying no to any requests. Declining a request for help, while painful, is sometimes the best decision a person can make, especially since many loans are never repaid. The top priority is keeping yourself solvent, says Ted Beck, president of the National Endowment for Financial Education.

If a relative asks for money unexpectedly, you should stall, suggest Jeanne Fleming and Leonard Schwarz, authors of Isn't It Their Turn to Pick Up the Check? "What you blurt out may not be the best answer," Schwarz says. Then, be sympathetic but firm. "You want to be unequivocal. Don't say, 'This is a bad time,' or they'll ask you again next week," Fleming adds.

[See 5 Money Lessons Every Woman Should Earn.]

If you receive money, be aware of what might be expected in return. Donald Cox, professor of economics at Boston College, says people who give or lend money to relatives are usually motivated by altruism, but they may expect something in return. For example, if a parent gives money to their child for a down payment for a house or college tuition, they may expect assistance later. "Many adult children who are providing care for needy, elderly parents say they are doing this out of a sense of reciprocity," he says.

Spell out the terms of any gifts or loans. If parents decide to give their children money, Eileen and Jon Gallo, coauthors of The Financially Intelligent Parent, recommend discussing the details in advance, including whether the money comes with strings attached. For example, if money is earmarked for a car, can it be any type of car? If the money is a loan, when should it be repaid, and at what interest rate? (If the rate is below the one set monthly by the IRS, it may need to be treated as a gift, which can have different tax implications.)

[Visit the U.S. News Personal Finance site for more insight and money management tips.]

Look for nonmonetary alternatives. Tina Kimball, a 32-year-old administrative assistant in Dayton, Ohio, loaned her parents her car when an accident left theirs unusable. If the situation worsened, she says, she would invite them to live with her family. Kimball says she wishes she could give them money, but with her own family finances under pressure, she's doing the best she can.

Put all loans and gifts in writing. Relatives lending more than $1,000 should draw up a simple document describing the terms of the loan, including the interest rate and schedule for repayment, recommends Jennifer Streaks, a financial services attorney in Washington, D.C. In addition to preventing misunderstandings, the paperwork can be important for legal reasons, too. This year, amounts over $13,000 are subject to gift taxes.

Set up a formal loan arrangement. Some online banks allow family members to loan each other money through an official relationship that includes the ability to automate monthly payments and report any late payments to credit bureaus. Nancy Flint, a semiretired dentist in Oaklyn, N.J., loaned her son, Stephen Martin, $405,000 so he could buy a home in Jersey City, N.J. She says she did so to help him as well as diversify her investments. She receives $2,500 a month in payments on the loan, which carries a 6 percent interest rate. Martin, a technology consultant, also benefited: He estimates that he avoided about $15,000 in fees, such as private mortgage insurance and loan origination charges, which he would have faced had he gone through a bank.

Kimberly Palmer is the author of the new book Generation Earn: The Young Professional's Guide to Spending, Investing, and Giving Back.

http://news.yahoo.com/s/usnews/20101214 ... ilymembers

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