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Generational Wealth: Playing the Long Game

Generational Wealth: Playing the Long Game

Originally aired 5/5/2021

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“Leaving a legacy for generations to come” sounds great, but what does it take to get there? On this episode of the Get Ready For The Future Show, we’re talking all about generational wealth!

You’ll learn:
– Important things you need to consider as you plan for the future
– How legislation has changed the way wealth is passed down
– Why you need to protect your assets (and how to do it)
– The most important thing you need to help you work toward your goal

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SHOW NOTES

Me, Myself, and (My Kids)

  • “Leaving a legacy for generations to come” sounds great, but what does it take to get there? We’ve got straight talk you need to know about generational wealth on today’s Get Ready For The Future Show!
    • “Gen” in GenWealth is really centered around generational wealth!
  • Generational wealth is basically assets passed down from one generation to the next. That can be in the form of an inheritance, investments, real estate, a business, or anything else with monetary value.
  • What’s the big deal?
    • If you are starting from scratch with your finances or starting out with a large debt burden, then you should realize the importance of generational wealth.
    • What if your parents had the ability to fund your college education? This single action could have a tremendous effect on your financial future. Instead of playing catch up to pay down your student loan debt, you could be saving for your first home or your future retirement.
    • The more you think about your own financial life, the more you realize how important generational wealth can be (for yourself, your kids, their kids, and so on).
  • We know, this show is about the gift you can give your family through generational wealth, but…
  • It Starts with You
  • Anytime you’re on an airplane and they’re going through their safety demonstration, they always tell you that if oxygen masks were to drop from the ceiling to secure your mask before assisting others.
    • The same can be said about your financial future, your retirement, and leaving a legacy for your children. Secure your future before assisting others.
  • We get it. Your role as a parent is to prioritize your children’s needs. But how are you supposed to take care of your children if you don’t take care of yourself?
    • You can’t pour from an empty cup.
    • If you end up running out of money yourself, you will likely put your children in a more difficult position than if you had taken care of your needs first and given from what you had left.
  • Consider this: You’re not just passing down your money, you’re passing down your habits.
    • Are the decisions you’re making ones that you’d like to pass down to your children?
    • Talk to your children about your habits, too.
  • Things you need to be sure are taken care of before you jump too far into generational wealth planning:
    • Retirement income needs are met.
      • Social Security alone isn’t enough
        • The average Social Security retirement benefit in June 2020 was about $1,514 a month, or about $18,170 a year.
      • If an emergency arises, you can cover it.
      • If your health takes a turn for the worst, you will be taken care of.
  • Are you on track for a successful retirement?

Tender Love and (Long-Term) Care

  • Long-Term Care
    • According to DHHS, half of Americans turning 65 today will develop a condition severe enough to require long-term care – that means it’s highly likely that at least one person of a couple will need this type of help.
    • Qualifying for LTC means you must not be able to perform 2 of the 6 activities of daily living and/or you must need substantial supervision due to severe cognitive impairments (i.e. Alzheimer’s disease, dementia).
      • 6 activities of daily living:
        • Bathing
        • Transferring
        • Continence
        • Dressing
        • Toileting
        • Eating
    • If you do need long-term care, the costs can add up quickly.
      • Costs average:
        • Assisted Living – $48,000 / year
        • Home health aides – more than $52,000 / year
        • Private nursing home care costs – over $100,000 / year.
          • *2019 GenWorth Cost of Care Survey
    • These expenses could tank your retirement and drain anything you’ve saved for the purpose of passing down.
    • The point of LTC insurance is to cover your chronic healthcare expenses without having to spend the money your family is living on.
    • In thinking about how much money you need when you retire, you should go ahead and include the premiums for a long-term care policy.
    • There are 4 ways to pay for long-term care:
      • Self-insure
      • Medicaid
      • Traditional long-term care
      • Life insurance with chronic illness rider
  • Life Insurance
    • This conversation may not be fun, but it’s one of the most important ones you can have: What happens to your family if you don’t come home?
    • Can they function without your income? For a lot of families, the answer to this is no. That’s why life insurance is so important.
      • The loss of an income stream could easily interrupt plans for generational wealth.

(In)Secure

  • In late 2019, the SECURE (Setting Every Community Up for Retirement Enhancement) Act became law.
  • Secure act changed a lot of things with regard to generational wealth.
    • Back in the day:
      • If an investor passed away with a large sum between their pre-tax, taxable accounts, their beneficiary had the option of stretching out the distributions over his/her lifetime but was required to take a minimum distribution each year.
    • Now:
      • Stretching out those distributions is no longer an option.
      • The beneficiary will have no more than 10 years to distribute the entire balance.
        • This runs a high risk of putting the beneficiary in a higher tax bracket and could have significant implications on their plan.
    • Our suggestion
      • If you’re concerned about leaving a legacy, spend your IRA and get life insurance to make sense for your kids’ taxes.
      • A Roth conversion may be an option – heirs still have to take it out in 10 years, but they would get it tax-free.

(Money On) My Mind

  • Get Your Mind Right
    • Generational wealth is more than an inheritance. This is not just a nest egg big enough for your children to live off of.
    • It is also the mindset surrounding money and the financial skills you share with them that can last longer than your dollars will.
      • You can leave your kids with a nest egg, sure, but the tools you provide them with are crucial in ensuring they will be able to sustain and grow that wealth for generations to come.
    • If you truly want to create generational wealth, it is essential that you pass down more than just money to your heirs. You must also teach them all of the same lessons that allowed you to become wealthy in the first place.
      • What are the skills you utilized to create wealth? Hard work? Perseverance? Resourcefulness?
      • You can teach your kids some of these skills by example and some by sitting down with them and having a conversation. Anything less and your wealth may not last more than a single generation.
    • Understand this: No amount of money will keep a fool rich.
    • “Train up a child in the way he should go, and when he is old, he will not depart from it.” (Proverbs 22:6).
      • Training is a daily process – there has to be constant reinforcement, it’s not just set it and forget it.
        • You need to work with your children to create those habits over time, not just teach them once and expect them to know for the future.
        • This will be individual to each kid.
  • So, what’s the plan?
    • If you’re getting started earlier, our MoneyGuide program can help you address retirement concerns, focus on your goals, and create a plan for leaving a legacy.
      • This program is designed specifically for those who are in the middle of their financial journey and need a coach to guide them as they balance family and finance. If that’s you, MoneyGuide is a great place to start.
      • Goals-based program that helps you plan for your life now and your future.
    • If you’re about 5-10 years out from retirement, our Ready to Retire Process is designed specifically for you. Our process covers 7 key areas:
      • Investment strategy
      • Social Security Maximization
      • Creating guaranteed income to meet your basic needs
      • Protect against inflation and providing for lifestyle income
      • Address long-term care needs
      • Reducing taxes during retirement
      • All documented in a written plan (on paper, on purpose)
    • Your situation is unique – your financial advice should be, too.
      • The best time to start is now!
      • Click here to get started.

FINAL THOUGHTS

    • Building generational wealth starts with you.
      • You have to build the habits first.
      • You have to take care of your own needs first.
      • You have to pass down the habits to your kids.
      • But you don’t have to do it alone!
  •  
    • If leaving a legacy is something you want to do, the decisions you make now factor in heavily.
      • The earlier you start to plan, the more options you’ll have later.
  •  
    • Find out if you’re on track to meet your financial goals in retirement.
      • Click here for your free 15 minute retirement checkup!