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The Silver Tsunami Silver Lining, Pt 1: Minimizing the Wave

By October 2, 2013One Comment

Recently, I shared a lovely dinner with a few friends and clients over a discussion about the “Silver Tsunami,” a phrase I’m sure you’ve heard bandied about over the last year of so. Still, just what is this “Silver Tsunami”?  The “Silver” is related to the number of Baby Boomers, those of us born in 1946 through 1964, reaching retirement age daily. There’s a whopping 10,000 of us looking at 65 every day and that number isn’t decreasing for at least 10 years.

The Silver Tsunami is the combined effect of factors caused by retiring Baby Boomers, the largest concentration of individuals reaching retirement age in U.S. history. The effects involve what happens when millions of people suddenly stop earning what they used to, are staring at potentially a longer lifespan than anyone anticipated, and because of the Great Recession or other factors may have or become non-spousal or partner dependents.

Silver Tsunami squeeze
But there is a silver lining to the Silver Tsunami and, given the current state of affairs of our government, this information is even more critical for Boomers and their children and parents.

Most of us have dependents – minor children, grandchildren, very close nieces, nephews, or even very close minor children of dear friends. If we don’t, we probably have adult dependents. If we don’t have either, we just need to give it about 10 years or so. The point is the dependent wave is the precursor to the tsunami but this wave requires relatively simple preparation to ensure that it doesn’t morph into a tsunami.

Chris and Charles’ story helps make the point:

Chris and Charles decide to take a vacation without the children, Taylor and Michelle. Chris’s sister, Sarah, usually watches the kids but is working on a major project for her boss during their vacation, so Charles’s brother, James is watching them. The kids love James and he loves them, too, often lavishing them with Cheetohs, fruit punch, and snickers…for breakfast.

Chris and Charles are driving along and POW! Pileup! Both sustain injuries that will require 6 months or more of surgeries and then therapy. So who’s going to care for the kids? Who will pay the mortgage? No one knows because Chris and Charles are both incapacitated and they failed to plan adequately.

What could they have done to ensure the kids were cared for and the mortgage was paid while they were both unable to work? They could have had solid property powers of attorney, which would allow the right person – probably Sarah – to step into their shoes and help ensure their financial stability. In this case as in many, a property power of attorney isn’t about helping someone out until death; it’s about protecting what they’ve got until they can get back on their very much alive feet.

What about the money, though? Neither one will be working for at least 3 months. Any financial advisor worth his or her salt will tell you that’s why you must save at least 6 months of emergency living expenses while you’re also socking away your retirement. But let’s just say the money is there. What we don’t want is someone running away with the money, which is why choosing a trustworthy power of attorney agent is critical.

What if there were no siblings but only Chris’ parents left to care for the kids? Then the waves may come crashing down on the children and definitely on the parents’ retirement goals.

A recent study indicates that approximately 2/3 of Baby Boomers are unsure about their retirement resources. If Chris and Charles were only survived by the girls and Chris’ parents – Rob and Jen, then Rob and Jen were, of course, going to care for Taylor and Michelle. However, that loving obligation could surely cause waves to crash against the retirement shores.

Since estate planners love killing folks off to get our points across, for purposes of our story, let’s just say that Rob didn’t last long after Chris and Charles, so only Jen – age 52, Taylor age 6, and Michelle age 8 survive.

Rob left Jen comfortable, but Chris and Charles, as mentioned earlier, had not planned adequately.  They did what most young couples do, bought reciprocal life insurance policies with a death benefit of $50,000.00 each, naming Taylor and Michelle as contingent beneficiaries.  At the time of their deaths, the projected cost of a college education for one child at Taylor’s age was $180,000.00 and the cost to raise one child to 18 years of age, $215,000.00.

Accordingly Grandma Jen would need an additional $500,000.00 to see the girls through college. That’s a tsunami headache. What can she do?

The Silver Tsunami Silver Lining, Pt 1 | The Silver Tsunami Silver Lining, Pt 2

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