Boomers know they can’t take it with them

Baby boomers can expect to inherit a total of $1 trillion after their parents pass away, but bequeathing money to their own adult kids doesn’t seem to be a high priority — they’d rather hand it over while they’re alive.

According to a new RBC/Ipsos Reid survey, 61% of the 1,225 boomers polled said they are planning to give money to their kids before they pass away.

“There’s this whole concept of I want to give, but not necessarily after I’m gone,” says Mike Reed, head of retirement and affluent client strategy at RBC. “They want to be able to see their kids enjoy it.”

Reed says this ties into the concept of legacy — or how people want to be remembered after they pass away. The study shows that 70% of respondents who said they’ve thought about their legacy list enjoying time with family as the way they want to be remembered.

That could mean spending a potential inheritance on big family vacations or other family-oriented things. “I’ve talked to clients who tell me that they could save and save and have money to pass on, but they want to take these annual family trips,” says Reed. “The trips will cost a lot … but they want family to be a number one priority.”

Robert Abboud, president of Orleans, Ont.-based Wealth Strategies, isn’t surprised by RBC’s findings. He says about 90% of his clients over the age of 50 have saved money for their kids’ education, while others have helped their children buy their first house.

What he doesn’t see, however, is clients building an inheritance. “Less than 10% say they want to leave money to their kids after their lifetime,” he says. “It’s not a priority.”

Abboud adds that when clients are done paying for education and a few major purchases for their kids, their inclination is to start spending their hard-earned cash on themselves, not their family. “Boomers are a little more focused on themselves,” he explains. “The previous generation was much more concerned with their kids, maybe because they lived through a depression, but we’re not seeing that as a concern for boomers.”

“Boomers are a generation that maybe does indulge themselves more,” adds Reed. “Are they spending their kids’ inheritance? I’m not sure that’s the way to think of it, but do they have high lifestyle expectations? The answer is yes.”

Still, the RBC poll reveals that only 10% of respondents said that they won’t give any money to their children at any point. Reed says a motivator for withholding cash is that parents want their kids to become responsible on their own.

While the kids of boomers might not be looking at a big cash windfall a few decades from now, many 50-somethings will receive an inheritance. But even that prize might not be so lucrative. “Forecasts are a little high,” says Abboud, referring to RBC’s $1 trillion figure. “People are living longer and longer, and long-term care expenses are going up.”

Because of the unpredictability of inheritance these days, neither Abboud nor Reed suggests factoring the extra money into a client’s financial plan. “The money shouldn’t be a big part of a boomer’s retirement plan,” explains Reed. “You can’t tell when it’s going to come, or how it’s going to come.”

But what will boomers do when the cash does eventually show up? “Some of it will go towards retirement,” says Abboud, “but a lot will go towards themselves.”

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com