1. "Paws off, Junior, this cash is mine."
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Don't expect a big inheritance from your boomer parents — even if they are rich. Less than half of millionaire boomers say that leaving money for their kids is a priority for them, according to a 2011 U.S. Trust study. But 64% of boomers say they plan to use their money to travel and more than one in three say they want to use it to "have fun."
Boomers didn't get this idea from their elders: Older retirees are seven times more likely than boomers to believe they owe their children an inheritance, according to a survey of high net worth individuals published in the Journal of Financial Planning. By contrast, "boomers are more concerned with leaving behind things like values and keepsakes," says Katie Libbe, the vice president of consumer insights for Allianz Life, the company that conducted the survey.
Even boomers who do plan to leave an inheritance may do so with strings attached. "More often than not clients leave inheritances in trusts," says John Olivieri, a partner at law firm White & Case, who works with a lot of boomer clients. Leaving a lump sum means their kids have access to all of the money all at once. With a trust, a third party manages the money and doles it out at intervals that the parent has specified. "Some parents have concerns about how their kids would invest and spend the money," Olivieri says. Indeed, only one-third of affluent parents strongly agree that their children will be able to handle an inheritance, according to the U.S. Trust survey.
2. "Make room kids, we'll be living with you when we're old."
Boomers are expected to live longer than any other generation. At the same time, it's no secret they haven't saved nearly enough for retirement. Overall, the average retirement savings shortfall for married baby boomers is about $30,000, according to the Employee Benefit Research Institute. Nearly half of early boomers, born between 1948 and 1954, and 44% of late boomers, born between 1955 and 1964, may not be able to afford even basic living expenses in retirement, according to EBRI. The result? Kids could be supporting mom and dad well into their eighties and nineties.
One of the biggest drains on boomer retirement savings will be health-care costs. Medicare pays for just over half of the health-care expenses that the typical elderly person will face, estimates EBRI. A couple who is 65 today will need nearly $300,000 to cover those costs. "People who haven't saved enough for health-care costs will deplete their assets," says Michael Markiewicz, a partner at New York-based Fogel Neale Partners. "A lot of them may have to live with their kids or depend on them for money and care."
If parents do move in, their kids should expect to spend an extra $6,000 and $10,000 annually on food, clothing and other basics, says Andy Cohen, CEO of Caring.com, a website devoted to helping caregivers. Add thousands more for big ticket items like wheelchair ramps or home health-care aids. Expensive as that sounds, it's still less than the $60,000 to $100,000 per year it would cost to move a parent into an Assisted Living Community.
3. " and we blame you for that."
Twenty-seven percent of people in their 50s say that having children got in the way of saving for retirement, compared to 15% who blamed buying a home and 19% who said that household bills were the obstacle, says a 2011 study by ING Direct. That's not surprising, given the typical middle income family spends more than $220,000 to raise a child, up 22% since 1960, according to data from the U.S.D.A. When you add paying for college to the mix sometimes another $100,000 or more retirement savings can really take a hit. "A lot of parents prioritized saving for their kids' college over saving for retirement," says Dan Greenshields, the president of ING Direct Investing.
The reason? "Parents often equate paying for college with helping their child become successful in life," says Deborah Fox, the founder of Fox College Funding, LLC. That's something they feel they have a duty to do, whether or not they can afford it, she adds.
4. "We can't face reality."
What boomers think retirement will be like and what it actually is like are two very different things. A case in point: The forever young generation just can't deal with the idea of growing old. Only 13% of pre-retirees (people over 50 who have not yet retired) think their health will be significantly worse in retirement than it is now, while 39% of retirees report that it actually is worse, according to 2011 research by the Robert Wood Johnson Foundation and the Harvard School of Public Health.
Boomers are a little fuzzy on the financial realities as well. While only 22% of pre-retirees think their financial situation will be worse in retirement, roughly one-third of retirees say that it is worse. Along those same lines, only 14% of "pre-retirees predict that life overall will be worse when they retire, but a quarter of retirees report that it actually is worse. "There's a real disconnect because your life pre-retirement is much different than your life post-retirement," says Hal Hershfield, a professor at NYU who recently conducted a study entitled, Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self.
5. "Until death do us part" doesn't apply to us.
Boomers are untying the knot at a record pace. The divorce rate for people over 50 has doubled in the past 20 years, says the National Center for Family and Marriage Research at Bowling Green State University, compared to a slight decrease in divorce overall. More than 300,000 couples over 50 divorced in 2008, and if the rate continues to grow at current levels that number will jump to more than 400,000 in 2030. What's fueling this trend? Empty nesters who find they are a lot less compatible when the kids aren't around is one reason, says Toronto-based psychologist Tami Kulbatski. Another might be, ironically, boomers' love of marriage: A lot of boomers are in their second, third or even fourth marriage, and these marriages are more likely to end in divorce, says Krista Kay Payne, a researcher at the center.
Divorce will likely take a chunk out of boomers already inadequate retirement funds. Lawyers' fees alone can range from a couple of thousand to tens of thousands of dollars, says Jeff Landers, the president of Bedrock Divorce Advisors. What's more, splitting retirement accounts, investments and other assets and trying to sell a home in the current market can all be money losing propositions, says Susan Colpitts, a CPA and executive vice president of wealth management firm Signature.