Younger Generations and Retirement

The numbers are going in the wrong direction for a lot of people. The Boomers and some Gen Xers are planning effectively for retirement… for the most part. However, many Gen Xers and the younger generations simply don’t have the resources to finance retirement with their projected increased lifespan. Student debt is crushing, wages aren’t even keeping up with inflation, and everything is a monetary crisis now. Saving enough for the future is an afterthought. It’s now time to think outside the traditional boxes.

So, what can the family do to secure a stable retirement for their descendants? Are there better ways than the usual IRAs and 401ks out there? It can’t all be about estate planning to pass on wealth to the next generation. There has to be something that next generation can do for themselves, isn’t there? Because of the added financial difficulties in saving these days, there are some emerging strategies worth considering that I learned at The Estate Planning Source’s Advanced Institute. Best of all, these possible strategies are leveraging what many people already have without having to pay more than they already are, and coming out way ahead in terms or growth and tax position. Here is one example. (This is purely hypothetical… we can run numbers on your actual situation if you want.)

Imagine someone age 50 putting away $15,000 a year into their IRA above and beyond what they may be contributing to a 401k. What would that yield in ten years? At 6% interest, somewhere in the neighborhood of $200,000. And every penny withdrawn is taxable. What if instead there was a way to turn that $15,000 a year for ten years into $700,000 tax-free?

The example involves that same 50-year-old buying his 75-year-old mother’s $250,000 house with a 30-year mortgage at 4% interest. Mom lives in the house rent free (because her son is so nice to her), and now she puts the $250,000 in the house sale she received into a specific type of strategy that would pay out to her son as life insurance. If Mom lives another 10 years, her son gets the $700,000, the mortgage balance is a little less than $200,000, and son netted $500,000 more than the contributions to an IRA tax-free. In addition, the son now owns the house worth $250,000 plus whatever the growth was over ten years.

There are a lot of possibilities when you think outside the box, and we are able to discuss some of these new scenarios with you or you can discuss them with your current advisor. They may or may not be right for you. If you are interested, then please let us know by calling us at The Care Assistance Center, LLC phone number, 919-518-8237, and we can look further into it.