The Lean New Reality Tarnishes Golden Years

The bad news: Many baby boomers are likely to get less money from Mom and Dad than they thought. The worse news: They may have to help their parents financially instead.

For years now, boomers have expected getting tremendous windfalls as their parents pass on. Many boomers, in fact, have been lagging in their savings and betting on big bequests, especially since many of them suffered big losses in 2008.

But for a growing number of boomers, things aren't going according to plan. The postwar generation is living longer and many are spending their savings along the way.

How much longer? Thanks to medical gains, a 65-year-old man has a 60% chance of living to age 80 and a 40% chance of reaching 85. For women, the odds are 71% and 53%, respectively. All of this has made the 85-and-over age bracket the fastest-growing segment of the population.

The result is that, as a group, boomers likely won't be getting as much of an inheritance as they hoped. Even worse, far from receiving a bequest, a growing number are tapping into their own savings to help their cash-strapped parents make ends meet.

For families, the result is often a lot of scrambling, dashed dreams, conflict and anger as parents and children try to come to grips with the lean new reality-and divide up a smaller pie.

Not surprisingly, many families are loath to discuss these issues. In addition to serving as a reminder of the older generation's mortality, a conversation about inheritance or Mom and Dad running out of money can provoke anxiety in parents. Many are uncomfortable disclosing the details of their finances in the first place, even more so when they're worried about disappointing their children.

Adult children, in turn, aren't eager to ask their parents about money for fear of coming across as greedy. Some feel guilty for thinking about their own financial needs at a time when parents could be facing steep medical or long-term-care expenses.

Nonetheless, financial advisers say, it is important for families to talk-if only to establish realistic expectations.

If parents anticipate running short of money-and if they and adult children are able to start a dialogue-there are several measures families can take. Among them: Have parents recalibrate their budgets, downsize to a smaller residence, buy an annuity or longevity insurance to lock in a lifelong income, or take out a reverse mortgage.

In situations where children have adequate financial resources, they can pay a parent's health-insurance premiums, purchase a long-term-care insurance policy for him or her, give a set amount of money each month or purchase the parent's home to generate cash for living expenses.

Before implementing any strategy however, talk with your financial and tax advisers.

If you are interested in learning more about long term care, disability, life, home and umbrella insurance, call Connie Prince at Allied Brokers. Connie is our in-house expert with 26 years of industry experience and strong relationships with major carriers such as Mercury, Travelers, CIG, Hartford AARP, Glenworth, Prudential and Banner.

Visit our website at http://www.alliedbrokers.com/ for information about all the types of insurance we offer. Or call 1-888-505-7988 for a free rate quote.

A version of this article appeared in the June 11, 2012 edition of The Wall Street Journal, with the headline: Counting on an Inheritance? Count Again...