8 Reasons You Should Not Expect an Inheritance
The New York Times, June 21, 2008
You’ve probably heard about the bumper sticker, even if you haven’t
seen it. It’s the one on Cadillacs in Florida and Lexuses in Arizona
that says “I’m spending my children’s inheritance.”
We’ve laughed at that for years. But the truth is, retirees have a
lot of demands on their savings. Out-of-pocket health care costs, for
one, are rising fast. At the same time, many people are not waiting
until they die to help their children and grandchildren financially.
And some are finding creative ways to draw on money that would
otherwise be part of their estate.
For all these reasons and many more (I’ve ticked off eight below),
it would be a bad idea to plan on getting any inheritance from your
older relatives.
Many people have figured this out, though not all. An AARP analysis
of the Federal Reserve Board’s 2004 Survey of Consumer Finances noted
that 21 percent of people born after 1964 thought they would inherit
some money someday. After all, most of them still have living parents
or grandparents.
But with each passing year, the pressures on the nest eggs of those
older people will only grow. The truly rich will be fine, as they
usually are. But a lot of other people, even retirees with net worths
well into the seven figures, could end up spending every dime before
they die.
There is nothing wrong with that, by the way. This is a
judgment-free column on that front. There is no moral obligation to
leave a cent to the next generation. And there are some people who
struggle each day to make ends meet who only wish they could leave an
inheritance.
But for those who thought that they would have something to pass on,
or that money would be coming to them, here are some of the things that
may get in the way.
People who make it to 65 will live a lot longer. As of 2005, according to National Center for Health Statistics data,
males aged 65 could expect to live to 82; for females, it was 85.
That’s 37 years of living expenses for couples, and it isn’t easy or
fun to scale back your standard of living.
Want to get a sense of how long you or your older relatives may
live? Drop the phrase “How long will I live” into a search engine and
play with some of the longevity questionnaires that pop up on the results page.
Social Security and Medicare will probably change.
It’s hard to find anyone who thinks those programs will get much more
generous. Medicare premiums will rise, and the program may cover fewer
procedures or not cover emerging ones. Meanwhile, taxes on Social
Security benefits may rise, and everyone may have to wait longer to
collect.
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