Boomers' Children Waiting

March 15, 2006
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GRAND RAPIDS — Wealthy baby boomer parents are not likely to leave their children a hefty, lump-sum inheritance when they die.

"They don't want to see their wealth ruin their children," said Scott Carano, partner at Plante & Moran Financial Advisors. "Everybody knows that person who inherits a bunch of wealth or won the lotto, and nothing good happened to them."

Carano said many of his clients want their children to finish school or continue to pursue their career and not depend on their inheritance.

"It's nice to have this wealth available to you, but it's more important to go and be a good citizen yourself," he said.

Instead of leaving a large inheritance at the time of their death, Carano said his clients structure a plan so that their children receive their inheritance in trust, with the bulk of the trust being held until they turn 40, 45 or even 50 years old, rather than at a younger age.

"I'm seeing those ages get elongated a little bit," he said. "It's taking people out into their later years."

Though it is not a new practice for the very wealthy, Carano said many self-made millionaires are beginning to follow the trend.

"There's been a lot of wealth creation in the last 15 to 20 years, and it's not just been the Rockefellers or Kennedys or people like that," he said. "Now it's coming down to the average millionaire."

Carano said allowing for a prudent stewardship of money and trying to prevent haphazard spending are a few of the factors behind the trend.

Plante & Moran Associate Dori Drayton said she sees baby boomers talking to their children more about finances than previous generations may have.

"I think the baby boomers are more open with their children, and are educating them about finances," she said.

Carano agreed, saying that his clients in their late 60s, 70s and 80s are not as willing to talk about money with their children as much as clients who are in their 50s.

Drayton and Carano said they also are seeing more women becoming involved in personal finances. With more women in professional careers, Drayton said, they are becoming more involved in their own finances as well as the family's finances. Women who are active in these roles tend to be younger than 60, Carano said.

Whether a man, woman or child, Drayton and Carano said one issue to be aware of is saving for retirement and having the right expectations for investments.

"We don't have the luxury, if you will, or the high return of the '90s," he said.

Carano said those who are in their 50s and haven't saved much for retirement need to start doing so. For those who have little saved for retirement, Carano said there are two choices: reduce the lifestyle or prolong the retirement age.

"They're going to have to retain some kind of job to retain the lifestyle," he said of those who have not saved adequately for retirement.

Drayton said she suggests people begin to save for retirement in their 20s. Carano suggests enrolling in a 401(k) or a Roth IRA plan where money is automatically deducted from paychecks, as a way to save money before it has a chance to be spent.

"It's a great way to get into the habit of saving," he said.    

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