Our Parents Will Bail Us Out (Maybe)

     On the theory that one example is merely an anecdote, but two examples create a trend, I offer this as a solution to our financial problems.

     I have two friends who, I only found out recently, grew up in New York City. One in Queens; the other in Brooklyn. In both cases, their parents were middle class and lived in relatively modest attached houses. In each case, when their kids grew up and left home, the parents turned part of the home into an apartment. They continued to live in their houses for many more years, collecting rent and paying off the mortgage. The parents of one of my friends died about three years ago. My other friend's elderly mother died last year.

    These friends, along with their siblings, inherited their parents' homes. The houses, now mortgage free, were each worth maybe a little more than $500,000. But my friends didn't sell. Instead, they decided to hold onto the properties and rent out the apartments. Today, my friends live in the suburbs, but they're each clearing a couple of thousand a month from renting their parents' old inner city row house.

     Not bad for some extra income -- especially since one of these friends has an interesting job, but it doesn't pay particularly well; and the other one lost his corporate sales job a few years ago and now is trying to get by as a real-estate agent.

     So how does this help the rest of us? It doesn't, except it illustrates how many of us stand to inherit substantial assets from our parents -- even if our parents aren't rich. It could be real estate; part of a business; an art or antique collection; stocks and bonds; or a retirement account.

     I saw a statistic over the weekend saying that the national debt has now climbed up above $14 trillion. That's about $146,000 for every man women and child in America. Sounds like quite a burden. But then I saw a chart, published in Newsweek and coming from a study for MetLife from The Center for Retirement Research at Boston College, that estimates the total inheritance baby boomers can expect to receive from their parents is $11.6 trillion, or a little over $146,000 per baby boomer.

     It's just about a wash. So what's the big problem? Why does everyone lament our national debt, and gnash their teeth about the economic burden we're passing on to our children? Sure, we have a lot of debt. But we have a lot of assets, too.

     Well, it's not quite as simple as that. First of all, the studies predict that two-thirds of baby boomer families will receive some sort of inheritance. But that means one third of boomers will receive nothing. Even so, according to estimates, about half the people in even the very lowest income group can still expect to inherit some sort of estate from their parents or other relatives.

     Yet, as you might expect, the distribution of inheritance is unequal. Of those baby boomers receiving an inheritance, the top ten percent will receive an average of $330,000. The bottom ten percent will receive an average of only $8000. The studies say about 25 percent of baby boomers will receive a substantial inheritance, something over $100,000.

     Then, of course, there are the uncertainties. Our parents are living longer, which is a good thing. But that means they have a longer retirement to finance, and much more time to spend down their savings. And with medical bills climbing higher and higher, one serious medical problem could wipe out your parents' entire estate. If the medical bills don't, monthly payments to an assisted living facility might.

    So maybe we all won't get bailed out like my two friends. And, you know, you hate to think about the part where a loved one has to die before you get your windfall. Still, it's something to think about as we ponder our financial futures.