According to a pair of recent studies, more and more people approaching retirement age are ill-prepared for it. Many are not even aware of the true costs that lay ahead of them. As a consequence, the tradition of leaving a financial legacy for you children is rapidly becoming a quaint custom of the past.
Fewer parents plan to leave a legacy
Allianz, a provider of life insurance, reported that most baby boomers — those born, roughly, between 1946 to 1964 — had better not hope for a fat inheritance as their retirement approaches. Times being what they are, only 14 percent of boomers’ parents feel they can afford to leave their children an inheritance.
Hendrik Hartog, author of “Someday All This Will Be Yours,” wrote:
“Culturally, the idea of a legacy has disappeared for all but the very wealthy.”
Children give parents support
Instead, many elderly parents are using every cent they accumulate to live the remainder of their own lives. Often, it even becomes up to their children to give them a hand.
Kay Kramer of KLB Financial said:
“There’s no question that 10 years ago people were expecting greater inheritances than they are now. With very few exceptions, people don’t want to count on anything. And we’ve got some people who are actively helping parents out because they don’t have enough.”
Lifespan and med costs increase
As the average lifespan lengthens and the cost of medical care increases, the price of retirement is likewise escalating. In addition, the value of homes and other assets have taken huge hits in the economic downturn. According to the Star Tribune, the average American’s net worth today is only $77,000. That is about the same as it was 20 years ago.
Underestimating cost of retirement
A second study from Allianz recently concluded that about a third of transition baby boomers — those between the ages of 55 and 65 — were not even sure of how much they will need to accrue for retirement.
Allianz Life President and CEO Walter White wrote:
“It’s alarming that so many boomers on the cusp of retirement are still unclear about the basic factors which determine their ability to fund their lifestyle once they stop working.”
Most have also not adequately factored inflation and taxes into their projected retirement needs, says Allianz. According to its report, only 10 percent of those surveyed identified inflation as a concern in preparing for retirement. Likewise, only 16 percent mentioned taxes in estimating future needs.
Allianz concluded that starting early is crucial in preparing for retirement. Nearly half of those surveyed — 43 percent — said they will not concern themselves with accruing retirement savings until they are five years away from closing the door on their careers. Another a 16 percent said they will wait until one year or less away from retirement to begin.