| 31 May 2009
I still remember sitting in my grandmother’s living room on a typical summer day, right before lunch, with the old radio tuned in to Paul Harvey. Over time I fell in love with Paul Harvey because he was able to synthesize a complicated story down to the real meaning in life. Sometimes those stories were happy and sometimes they were troubling; as Paul Harvey would likely say after the last year in this economy, “…and now, the rest of the story.”
The rest of the story to be played out over the next several decades is a story of taking care of generations to come. This economy has hopefully taught all of us that the secret to good fortune is living within one’s means. Those with lots of debt are now paying the price for not delaying gratification. Yet it is also becoming more evident that delayed gratification might not work going forward in the same way it has worked for past generations.
I have never been one to suggest clients owe their children or grandchildren anything. In fact, I usually argue that my generation and the following generation should not rely on their parents as much as they do but instead work a little harder at saving for the long-term. Yet it is becoming more apparent that the affluence many enjoy today might not be possible for their children and grandchildren. The main reason is that our government spending is starting to get all of us in trouble and the only response will be increased tax bills down the road. Increased tax loads will mean less money for an affluent lifestyle, and for saving as well.
What I am advocating is not a free ride for the next generation but recognition that help might be needed. As we work with clients in developing their estate plans, we are starting to see more people consider pushing gifts out even further than normal. In the past, distributing assets by the time a child was 40 was considered long enough to wait. But now I am hearing more discussion about distributing assets from an estate at children’s age 65, so that they have money for retirement. This might be the only way some in the next generation will have enough to retire.
I wonder if an entire generation will look back at this economic downturn as a point where we once again refocused on helping our own family. The debt we piled up did not make us happier, and I suggest the debt the government piles up will not as well. Beyond debt, it is becoming more expensive than ever to raise a family, particularly with health care and education; help might be needed going forward. And raising a family from generation to generation is what life is all about. “And now you know the rest of the story.”