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Giving to the kids until it hurts

By Jennie L. Phipps · Bankrate.com
Sunday, July 25, 2010
Posted: 10 am ET

My husband and I have never been good at telling our kids no. Even now, as we near retirement and  they are adults with paychecks and families of their own, when they ask for help or we see them struggle, we pull out our wallets.

A recent survey shows that 57 percent of boomers have provided financial assistance to their children or grandchildren.

A recent survey from MetLife Research shows that we aren't alone -- not by a long shot. The survey found that among older boomers, those born before 1952, 57 percent say they have provided financial assistance to their children or grandchildren in the last five years, averaging $59,000 over that period.

For most of us, that's a lot of money. In a different Met survey -- of minority group boomer grandparents -- 28 percent say helping their children has had a negative affect on their own finances.

So, perhaps, we are being too generous. Especially, if we are counting on an inheritance to replenish our retirement coffers. According to Met, among older boomers, 67 percent have no living parents and of that 67 percent, only 19 percent received an inheritance when their parents died. Of the 32 percent who still have at least one parent living, 27 percent still think they'll be remembered in their parents' wills, but that may be wishful thinking. A 1998 study by the New York Federal Reserve found that by the time someone was 80 or older, his or her median net worth was $118,000, even among America's wealthiest families. Most of the oldest Americans are living on things that can't be transferred to the next generation like pensions, annuities and Social Security.

There's a lot of ballyhoo right now about the expiration of the inheritance tax, which is allowing some wealthy families to escape paying any estate tax at all. Unless Congress acts, the estate tax reverts in 2011 to a $1 million exemption per spouse after which estates will be taxed at 41 percent to 55 percent.

In this day and age, $1 million isn't a lot of money even for some families that aren't wealthy. A home in an expensive area, a few valuable possessions and some savings can add up to that amount. If you look at it that way, those of us who are giving it all away while we're still living are doing the right thing. But if we're going to live a long time, giving until it hurts could be a big mistake.

Thinking about this issue figures into our family's retirement planning and obviously, it should be part of other people's as well. So far, my husband and I think sharing in the here and now makes everybody happier, even if it means we don't have anything to leave when the inevitable happens. But not everybody will see it that way and maybe we won't either as we age and the money gets tighter.

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