Boomer Bytes #13: Providing for the Future

Published Saturday, April 12, 2014 at 8:14 am

Editor’s Note: Below is Steve Canipe’s fourth column in his series called Boomer Bytes. The column, as the title suggests, will focus on a variety of topics that may be of interest to baby boomers, those born between 1946 and 1964. But Canipe also hopes to start a conversation with younger generations, too. Check out an introduction and Canipe’s (first self-titled) column here.

  • See second column – Are We Really Old? – here.
  • See third column – Cars and More Cars – here.
  • See fourth column – Getting Educated – here.
  • See fifth column – Home Alone? – here.
  • See sixth column – Death – here.
  • See seventh column – They’re Playing Our Song – here.
  • See eighth column – Driving: Knowing When To Quit – here.
  • See ninth column – Hobbies: What’s Your Favorite – here.
  • See 10th column – ‘The Last of Life, for which the First was Made’ – here.
  • See 11th column – Volunteeering – here.
  • See 12th column – Duck and Cover – here.

Providing for the Future

By Steve Canipe

April 12, 2014. As I sat in church recently, the minister delivered a short message to the congregation.  The story goes as follows…there was an elderly gentleman (91) who had just buried his wife of more than 70 years. The minister visited the gentleman to see if all was going well.  When the minister got to the house, he found the older man out in the fields planting apple trees.  After saying hello, the older man said to the minister “I bet you wonder what I am doing planting trees that I will never live to see bear fruit.” The minister admitted the thought had entered his mind.  The old fellow said that he was planting for tomorrow.  He told the minister that when he and his wife had first moved to the farm, there were apple trees there, which someone else had planted.  He was making sure that there would be trees there for the next owner.

Canipe

Canipe

This story started me thinking about what our legacy will be when we depart this life.  Are we going to be content to live out our lives focused mostly on ourselves or will it be said of us that we provided for the future? What the 91 year old man said about planting something that he would obviously not be around to enjoy is profound and illustrates an interesting point.  But what about us planning for something that is less physical than a tree? As you read the rest of this column, keep in mind planning not only for your family, although the focus will be very personal,.

Most of us have probably given some thought to our immediate family and about providing for children and maybe grandchildren.  A question that comes to mind is “Do we have a responsibility to our generalized descendants as opposed to just our specific line?”

Many boomers (41% according to the AARP) have been hesitant to provide a will or trust for their heirs. Perhaps even more disturbing from a planning standpoint is the subliminal message it is sending. Do we intend to live forever? 

According to a survey by the Associated Press and the Life Goes Strong.com website, 64% of we boomers do not even have a living will.  The living will has to do with making some decisions about our care should we become incapacitated and be lying in the hospital. There are perhaps many reasons for needing to do this.  The hesitancy to do it may be due to several factors as well. We are healthier and are not expecting to be injured or become ill anytime soon – we might be in denial.  Perhaps it is fear that is saying to us that if we don’t think about death and end-of-life issues they will not happen.

Perhaps this same attitude is what is driving our lack of future planning for our descendants or not doing what the 91 year old was doing – planning for a future that will not be experienced.  Or maybe the attitude is different; in the Los Angeles Times there was an article purporting to give an insight into attitudes of boomers.

The attitude being described in this article seems to be different from planting apple trees for the future…but maybe it is not totally different.  Many boomers, according to the LA Times article, do not intend to leave anything for their children.  One man made the comment “My goal is when they carry me away in that box that my bank account is going to say zero. I’m going to spoil myself now.”

Some words come to mind in considering that statement – selfish, self-centered, greedy, egotistic, arrogant, but are these really a true reflection of the feelings? Many boomers have already been generous with their children and have given them the equivalent of a post-life inheritance.

Many parents have provided help with college funding, home buying, car purchases, and education accounts for grandchildren.  Does this count for providing for the future? Maybe.

Some would argue that yes it definitely does. According to the LA Times article mentioned earlier, only 49% of millionaire boomers believe it is important to provide for their children once their death has occurred. Among the wealthy boomers, there seems to be a fear that having this “golden egg” of inheritance might lead to a sense of entitlement or encourage laziness and sloth.

In talking with my friends, who are not particularly wealthy (although most are comfortable), there is an attitude that if I have my own money, I will not be a burden on my children.  I don’t want them to have to take care of me in my old age.  I don’t want to have my children responsible for me.  When I did this for my Mom, I did not consider it a burden but rather a payback for all those early years when she took care of me.

Most boomers have worked hard and have saved some money. Because of changes in our pension plan types or them being dropped altogether, we are relatively worse off than our Depression era parents.  During our working lives, pension plans went from mostly defined benefit plans (DBP) to defined contribution plans (DCP).  In the first (DBP), you worked for a company say for 30 years and had a 2% benefit contribution.  Say your average salary was $50 thousand.  The retirement income was $50,000 x 2% x 30 years=$30,000 per year in retirement.  If the investment was actually paying less than this amount, the company was obliged to pay the difference and your retirement income stayed steady. It was the traditional plan when most of us started to work.

In the DCP, an employer usually requires employee contribution and may or may not match it either fully or partially.  My current employer has this type plan.  I put in 6% of my pre-tax salary and the company matches half of it or gives an additional 3%.  All this money goes into my 401 (k); depending on how I elect to make my investments, I can lose or make more money than was originally invested.  The key factor is that at this point in working life, my ultimate pension benefit amount has nothing that is guaranteed. This can be really scary, especially since I and most other boomers are nearing their retirement horizon.

If all this financial talk seems to be getting complicated, it is because it is complicated and I would encourage you to find time to talk with a certified financial planner.  There are number of them in Boone.  Find someone with whom you are comfortable. He or she will discuss your plans, goals, working life, needs, etc. and help you make the decisions that hopefully will allow you to be comfortable in retirement. But remember nothing in this type plan is totally guaranteed!!  For those of you pretty savvy, you will point out that an annuity might work – and indeed it might – back to my advice—talk with a certified financial planner.

All this discussion circles back to our leaving a legacy for our children and how we may not even know what we have to leave them.  If there is another financial melt-down, collectively investments may once again lose massive amounts of money that had been invested.  Now without the DBP, there is no safety net and it is all in our hands. Scary!!

To try to put this issue into a prospective, Boston College did a survey detailing how much boomers lost in the recent recession.  If you are sitting down – good; if not take a seat please; we collectively lost $1 trillion….this is $1,000,000,000,000.  Maybe seeing our accounts go south is a reason for us to think more about ourselves than our children or others coming behind us?  Or maybe it is selfishness.

If this article has done nothing than provide a little nagging voice saying, “I probably need to talk with someone,” then it will have served a good purpose.  Let me hear from you about your experiences with your investments and planning for the future. How are you planning for a future you may not see?  Are you planting a real or proverbial apple tree?  Are you doing it only for your family or for the broader population? Send your thoughts, either via email at [email protected] or post them at the end of the column. I’ll look forward to hearing from you.

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