Close Close

Portfolio > Economy & Markets > Fixed Income

Passing on Prosperity

Your article was successfully shared with the contacts you provided.

“Will I have enough money to live comfortably in retirement?” That’s a question your clients are likely asking with increasing frequency, and for good reason. With retirees now living longer and leading more active lives, the future of some pension plans up in the air, and medical costs skyrocketing, retirement income has become a top-of-mind concern for many older investors. According to our Rydex AdvisorBenchmarking survey, about one out of every six clients worries about how he or she will pay bills and buy food during their retirement.

Generational Transfer: Promise and Peril

Small wonder, then, that many investors are pulling back on the amount they are passing on to the next generation. Our research shows a number of reasons for this development, but advisors say that most (58.13%) of those who are gifting less fear that they will outlive their wealth. A smaller percentage (16.27%) wants to enjoy their wealth while they can. Advisors are clearly faced with a conundrum, as 88% of their clients feel obligated to transfer their wealth to other generations but struggle to find a balance between having enough for themselves and providing for future generations.

A strategic approach to planned giving can help resolve this conflict. Lifetime giving programs allow affluent individuals to transfer, estate- and gift-tax free, up to $11,000 per year per beneficiary, reducing the estate tax liability for their heirs. At the same time, certain types of trusts and annuities allow clients to continue enjoying the benefits of their assets during their lifetimes while providing for the next generation or a favorite charitable cause.

Advisors with clients who are concerned about outliving their wealth yet desire to leave a gift for future generations should consider starting a discussion about some of these planning tools:

Charitable Gift Annuity

A contract under which a charitable organization agrees to pay a fixed amount of money to one or two individuals for their lifetime, in return for a gift of cash, securities or other assets.

- Charitable Remainder Trust

– An irrevocable trust that provides for two sets of beneficiaries: an income beneficiary and charities named by the trust. Income beneficiaries receive a set percentage of income from the trust for life, and the charities receive the remaining principle after the income beneficiaries pass away.

- Pooled Income Fund — A trust operated by a charitable organization that enables the donor to claim a current income tax deduction and receive lifetime income while making a future gift to charity. Because these pool contributions from multiple donors, they are ideal for smaller contributions and are often used by colleges and universities.

Studies show that, over long periods, lifetime gifting can provide psychological benefits to donors, as well as substantially reduce their taxable estate. Yet our survey shows that gifting programs are on a slight decline; approximately 20% of clients have reduced their level of involvement with such programs, as opposed to 17% who’ve increased it.

This trend presents an opportunity for advisors, given the rising number of clients age 50 and older. But advisors are not capitalizing on it: Our research shows that just 14% of RIAs focus on estate planning. This is a mistake. Lifetime giving programs open deeper conversations with clients and help meet client needs. Better still, they entail long-term horizons and family involvement that can provide ways to extend a client relationship into the next generation.

The concerns expressed by clients about retirement income and gifting provide an opening for advisors to deepen and extend their client relationships by discussing these fears with older clients and offering valid solutions to meet their wealth management and personal goals.

All registered investment advisors are invited to participate in the latest Rydex AdvisorBenchmarking survey of RIAs. Advisors who participate will receive a customized Practice Analysis report, learn best practices of the most successful advisors, gain access to trend analysis, and will get a complimentary copy of the 2004 Annual Survey.

To participate, visit

Maya Ivanova is a research analyst with Rydex, an affiliate of

Rydex Investments. She can be reached at [email protected].


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.