Tag Archives: Retirement

Don’t count on inheritances to save your retirement – MarketWatch

Nearly a quarter of working-age Americans plan to spend it all and leave their kids to fend for themselves. The interior on an Airbus A319 private business jet (Photo credit should read MARK RALSTON/AFP/Getty Images)

Expecting mom and dad to help fund your retirement by leaving you an inheritance? Don’t count on it.

That’s one of the messages behind a new survey by HSBC Holdings PLC, the London-based parent of HSBC Bank USA.

According to the survey, 23% of pre-retirees would ideally like to spend all of their savings and let their children fend for themselves. In contrast, a mere 9% say they want to save “as much money as possible to pass on to the next generation.”

What’s behind the 14-point gap between those who want to spend it all and those who want to give as much as possible to younger generations?
Several things. Many worry that by giving money to their children they will “take away the drive of the next generation to succeed,” says Brian Schwartz, an HSBC wealth adviser. Still others anticipate that due to improvements in longevity, they may spend much of their savings along the way.

For many, though, the “spend it all” mentality doesn’t necessarily equate to a desire to spend it all on themselves. Mr. Schwartz says many people in or approaching retirement are interested in or practicing a “new approach” to estate planning that emphasizes giving away some money to the next generation while they are still alive. For some, the appeal is that they will get to see their children and grandchildren enjoy and benefit from their largesse. For others, it’s a way of testing the impact an inheritance will have on their progeny — in order to make adjustments if necessary. Still others want to give their money away while alive for tax reasons.

“There is already talk in Washington about reducing the estate tax exemption to the levels that were in effect in 2009,” says Mr. Schwartz. Currently, individuals can transfer $5.43 million tax-free at death. A return to 2009’s level would mean the limit would revert to $3.5 million. “People recognize that estate taxes may go up” in the future, making it more palatable to give assets away now, he says.

The survey of 1000 Americans — 21% of them retirees — was part of a global survey of 16,000 people in 15 countries.

While the new approach to inheritance makes a certain amount of sense, it nonetheless comes with risks. In particular, giving away money before death now can leave you at greater risk for not having enough in later life.

The best plan, financial advisers say, is for families to talk — if only to establish realistic expectations.

Not surprisingly, many families are loath to discuss these issues. Adult children, in particular, aren’t eager to ask their parents about inheritances for fear of coming across as greedy.

Still, the survey indicates that working Americans have high hops for inheritances — perhaps too high, according to Mr. Schwartz. According to the survey, almost half expect to receive an inheritance. Among them, nearly 20% are banking on an inheritance to completely or largely fund their retirements, while half say they expect to receive enough to provide them with some support in their later years.

While some may have good reason for their expectations, many others are likely to find that they won’t be getting nearly as much as they had hoped, says Mr. Schwartz.

In an era of low interest rates, volatile financial markets, expanding longevity, and rising costs for health and long-term care, parents may find that they need every penny for themselves. Indeed, thanks to medical gains, a 65-year-old man has a 60% chance of living to age 80 and a 40% chance of reaching 85. For women, the odds are 71% and 53%, respectively. All of this has made the 85-and-over age bracket the fastest-growing segment of the population.

“People are putting their future finances at risk by relying on an inheritance from a retired loved ones, as this may not always be forthcoming,” says Andrew Ireland, head of premier banking at HSBC

Source: Don’t count on inheritances to save your retirement – MarketWatch

The Truth About Women & Money

The Truth About Women & Money


Women have a strong presence in the workforce and have acquired more earning potential now than ever before, but yet many are insecure about the subject of money. On the outside women many may be financially poised by bargain shopping like a pro, watching spending, paying bills on time- but when it comes to investing and a long-term money plans they lag behind. According to the Employee Benefit Research Institute, approximately the same amount of full-time employed men and women participate in retirement plans, but the men’s median account balance is about 33% higher. With women outliving men by an average of 5 years, it’s even more imperative for women to plan ahead for the future.

Historically, women stayed at home and took care of the house and children. For years, they have been excluded from discussions on finance and many aren’t interested. To this day, women are more focused on meeting the needs of their family than on their own long-term needs. The lack of familiarity with financial jargon, engagement and funds to invest are common barriers that definitely come at a high cost.

Learn more: Retirement and Women, Financial Considerations for Her

Unfortunately, for many clients, it takes a major life event to make a change. Life is filled with many unknowns, therefore it’s so important not only for your sake, but also your family’s, to make the commitment to securing your financial future. Easier said than done? Not necessarily, there’s a wealth of resources available on the Internet such as The National Endowment for Financial Education’s site, Smartaboutmoney.org to get you started. Another, The Women’s Institute for a Secure Retirement (WISER) is dedicated to the education and advocacy that will improve long-term financial quality of life for women. If the Internet seems like an overwhelming place to start, talk to a family member or friend who can answer your questions and ask them for a referral for a financial advisor they recommend. Also, check with your employer to see if they offer workplace financial education and planning tools or if you enjoy reading, pick up the book Women’s Worth: Finding Your Financial Confidence by Eleanor Blayney to get you started.

The financial world can be confusing and it can take some time to understand and make it work for you. But if you dig deep, identify your goals and create a financial plan around them, you may be surprised to find how exciting and rewarding it can be when you start reaching goals that you never thought were possible.

Take charge, take care of yourself, achieve your goals and get what you want out of life. You deserve it!

Have a Great Mother’s Day Weekend!

A New Way to Use a Prenup

A New Way to Use a Prenup
The agreements are increasingly being used in second marriages between people of equal wealth
March 12, 2015 12:02 p.m. ET

Photo: Getty Images

Photo: Getty Images

Prenuptial agreements have long been used to protect the assets of a far wealthier partner in a marriage.

Now they are also being used by couples who enter marriage as financial peers to help establish financial parameters, according to experts and advisers. In many cases, both parties already have successful careers and significant assets, as well as important commitments to children from prior marriages, they say.

These kinds of prenups typically address issues such as how the couple will pay for a new shared home; which investments they will mingle or keep separate; and who will inherit each partner’s assets—not how much of a family’s fortune might be shielded from the newcomer.

“That was the typical thing: The affluent playboy marrying the meter maid. That’s how we think about prenups,” says Eleanor Blayney, who serves as a consumer advocate at the Certified Financial Planner Board of Standards, a trade group based in Washington.

The agreements “have grown up,” she says. “They’ve expanded in terms of why we use them. It’s not just, ‘Well, if this marriage doesn’t work, I take my toys and go home.’”

When Sarah Quist remarried two years ago, her new family ended up with dual incomes and retirement plans—and a total of eight children. Ms. Quist, who is 51 years old and a financial adviser based in Portland, Ore., and her new husband, a homicide detective, signed a prenup that she wrote up.

Their agreement is focused on making sure that any retirement savings she may have when she dies will go to her four sons, and that her husband’s pension benefits will go to his four daughters, she says.

“It’s not about wealth,” Ms. Quist says. “I have worked for 30 years, and he worked for 30 years. We are protecting that.”

Prenups aren’t public documents, so there is no way to track how frequently they are used. But advisers say they are being used by more couples in a wider array of circumstances than in the past.

“We do prenups for a lot more people than we have ever before,” says Rick Bloom, an adviser at Bloom Asset Management in Farmington Hills, Mich.

The shift reflects, in large part, the growing economic power of women, advisers say.

“There is now a substantial minority who outearn their husbands,” says Heidi Hartmann, president of the Institute for Women’s Policy Research, a Washington-based think tank. “If you have high earnings and that retirement account, and even some assets built up in your own business, you sure are going to protect it.”

As with traditional prenups, the new agreements can raise thorny issues—though they are likely to have less to do with the risk of bruised feelings at the start of a marriage, and more to do with how to value different kinds of assets in a fair way.

An entrepreneur’s startup firm, for example, might be worth more than her spouse’s investments. But in the event of a divorce, it could be more difficult to extract income from the business, says Susan Sofronas, a managing director at Geller Family Office Services in New York.

Even everyday retirement accounts can pose problems, according to advisers. The income from a 401(k) retirement account is taxed but the income from a Roth individual retirement account isn’t, so the spouse with the 401(k) could be at a disadvantage in a divorce even if both accounts have roughly the same balances.

Mr. Bloom, who is also a lawyer, says prenups can be designed to compensate spouses for assets that are worth about the same on paper but generate different cash flows.

Typically, the prenup document is drafted by a lawyer, though financial advisers often get involved. Some advisers suggest prenups as soon as they learn that a client is planning to get married, says Ms. Blayney.

Mary Ann Tarr, 71, turned to her longtime financial adviser, Herb White, who is based in Greenwood Village, Colo., when she decided to get remarried after her husband died.

“She was concerned” that getting remarried would affect her IRAs, Mr. White says.

Ms. Tarr, who is retired, says she and her future husband will share some housing expenses, but her goal is to leave her investments to her son, just as she and her first husband had decided they would.

“My husband-to-be doesn’t want anything,” she says. “He has his own.”

Article Courtesy of: THE WALL STREET JOURNAL