At 46 years old, the statistics would classify me as Generation X. The media defines this generation by people who were born between 1965 and 1979, although I would say practically it is more in the line of people born from 1960 to 1980. For those that fall within these age brackets, I think you better start planning on not receiving much of an inheritance and focusing on building your own wealth. I don’t say this because your parent’s bumper sticker says “I’m spending my children’s inheritance”, but really because of five trends I see happening over the next twenty years that may spend it for you.
- Your parents have reached the age of 65– According to the Center for National Health Statistics (www.cdc.gov/nchs), men who reach the age of 65 have a normal life expectancy of 82 years old. For women it is even better with the average female who turns the age of 65 having a normal life expectancy of 85 years old. With social security in sore need of a major overhaul and Medicare costs continuing to rise, there is a good chance that your parents will need some of those hard earned dollars just to maintain their basic standard of living.
- Divorce– There are many things that hinder the growth of your overall net worth. Divorce in almost all cases results in a slowdown of building wealth if not putting it at a complete halt. With half the marriages in the United States eventually ending up in divorce, the splitting of assets can decrease your chances of receiving an inheritance. It can get even trickier in a remarriage if there are more kids (and eventually grandkids) that may split up the assets down the road.
- Rising Health Care and Nursing Home Costs– Who exactly knows how Obamacare will affect long term nursing home care, but a study by Fidelity (www.fidelity.com) showed that the average person who turned 65 today without any employer provided retiree health insurance would spend around $225,000 in out of pocket medical costs over the remainder of their lifetime. This doesn’t include nursing home costs that could run in the $50,000 to $80,000 a year range today for full time care. A Gen X’er who has seen their parents have to deal with situation over the past 5 to 10 years or is dealing with it now can appreciate just how high nursing home costs may be in the future. You could save some of that inheritance by talking to your parents about getting a long term care insurance policy to at least cover some of the costs.
- Debt– Nearly 67% of the people 55 to 64 have some type of mortgage debt (www.teamjp.net). This debt along with other consumer debt can leave very little real assets behind after final and funeral expenses and paying off the debt that is left behind. In some cases you may actually have to deal with the debt if it is higher than the actual value of the home with the current depressed real estate market.
- One Sibling Needs It More Than You Do– You might be that sibling in the family that Mom and Dad are worried about being able to make your bills, but more often than not there is one of your siblings that needs the money more than you do. While most parents generally want to be fair, the reality is that they will do their best to make sure none of their kids are left out in the cold.
I have always believed you want to build the assumptions in your financial plan without any type of inheritance down the road coming from your family. These 5 reasons should make you revisit how you plan for the future because what you do today may be all you have for your retirement down the road.