“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.