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PAGE 6A
, • FORSYTH COUNTY NEWS Sunday, December 14,2003
Don’t depend on inheritance to fund retirement
Baby boomers depending
on an inheritance to help fund
their retirement may be put
ting their retirement at risk,
warn many financial planners
and other retirement experts.
The reality is baby
boomers need to concentrate
hard on saving for their own
retirement because large
inheritances are not likely to
materialize for most boomers,
say many retirement experts.
They cite a variety of reasons
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tJohn M. Weaver
Volume Senior Vice President, Investment Officer
'■ 949o ° 2, ZX Wachovia
(678) 455-0016 SECURITIES
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for their conclusions.
First, what inheritances do
pass on will be highly
unequal, and will be spread
out over decades. The Cornell
economists estimated that the
average estate passed on
would be worth $90,000
hardly enough money to pay
for 20 years of retirement. But
that’s just an average. Some
heirs will receive considerably
more, many will receive con
siderably less. Experts esti-
mate that 37 percent of the
nation’s wealth is controlled
by 5 percent of the house
holds. A study released in
2000 by the Federal Reserve
Bank of Cleveland calculated
from a 1998 federal Survey of
Consumer Finances that 92
percent of those people receiv
ing inheritances received vir
tually nothing, while a mere
1.6 percent received more than
SIOO,OOO. Yet a study for
AARP found that over half of
the “leading edge” of baby
boomer expects to receive an
inheritance that will fund their
retirement.
Another factor likely to
limit the amount of potential
inheritances is that today’s
older generations are living
much longer than previous
generation. You may be well
into retirement before receiv
ing a bequest. Furthermore,
older generations are spending
more of their accumulated
wealth, not only for basic
expenses but of a more active
retirement that might include
such activities as travel or
entertainment. Longer lives *
also increase the likelihood for
long-term care, whose expens
es can quickly eat into an
estate.
Experts also argue that
today’s retirees, especially
wealthier ones, are less inclined
than previous generations to
leave substantial wealth to their
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December 14 I
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heirs. Billionaires such as
Warren Buffet have made it
clear they will give most of their
money to charity, often in the
belief that their children should
“earn” their wealth, not inherit
it.
What will be your specific
situation? Financial advisors
recommend that children talk
over potential inheritances
with their parents. This can be
a delicate subject: older peo
ple often don’t like to talk
about their finances, and chil
dren may not want to appear
greedy. Bringing in an outside
financial advisor to provide an
objective third-party perspec
tive can be helpful.
Examine strategies that can
minimize the financial loss on
an estate. For example, some
baby boomers are buying
long-term insurance for their
parents so that expensive at
home or nursing home care
doesn’t drain their estate.
Furthermore, despite the pos
sible repeal or reduction in
estate taxes, tax planning will
still play a role in estate plan
ning.
But the real key, say finan
cial planners, is not to rely on
an inheritance to fund your
retirement. It may not be there
when you most need it.
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