Are your adult children a financial drain?-By Ilana Polyak

It's reasonable to want to help adult children financially, but doing so can foster dependence and endanger your retirement, say financial advisors.

It's natural for parents to want to help and support their children. But should that help continue well into adulthood? By helping too much, parents run the risk of imperiling their own financial future and creating dependence.

"The reality is that you are not doing the adult kids any favors at all by always bailing them out," said certified financial planner ReShelle Barrett, a senior vice president with Bill Few Associates.


The Great Recession rewrote some of the rules of financial independence for many young adults. With jobs scarce, student debt soaring and foreclosures hitting, it wasn't uncommon for grown children to take refuge in their childhood homes.
"If they're typically financially responsible but have fallen on hard times, you are going to want to be there to help them, and that's fine," said Joe Franklin, a CFP and founder of Franklin Wealth Management.


Those were unusual circumstances, and even hardworking children found themselves in financial straits. It's a general "open wallet" policy that financial advisors say is dangerous for parents and children alike.
"People don't want to cause their kids any pain or any stress," said Joel Larsen, a CFP and principal of Navion Financial Advisors. "One day you're not going to be around anymore. Do you want your kids learn to deal with the world when they're 60?"
It's fine to make a lavish gift to adult children now and again, especially for children who are otherwise diligent and make no demands. But always coming to the rescue can jeopardize both your child's drive and your retirement security.
"In the final descent to retirement, there's not a huge buffer for you," said Ken Geraghty, a CFP with Eagle Strategies. A child in his or her 30s or 40s has lots of options for income generation; a retiree does not.
Take one of Joel Larsen's clients, a 70-something widow who always swooped in to rescue her three children. "One needed help starting a business; another needed a down payment on a house or a new car," Larsen said.
The woman had a comfortable retirement that wasn't too extravagant, but her constant gifts soon depleted her investment account and, later, her emergency savings. When she came clean to Larsen, he called her children and asked for the money back. "They all said, 'Sorry, I can't,'" he recounted.
Before long, the client had a medical issue and needed care. With her assets gone, the only care she could get was in a Medicaid nursing home. Had she not made those handouts, she could have afforded a better facility or received care at home, Larsen said.
Now when clients say they want to help their adult children, he offers to run the numbers for them and tell them how it will impact their retirement plans. "That way, they can say, "My financial planner says I can't afford it,'" he said.
There are several categories of gifts that advisors caution against. The first is help with a down payment. Parents who provide a down payment outright may be facilitating home buying before their children have the maturity that comes with saving for it.
Helping with a bigger down payment has other problems. "If children are buying a house and counting on help from Mom and Dad, then it's probably a house they can't afford," Barrett at Bill Few Associates said.

Parents are also too quick to help their children start a business. Plenty of small businesses fail, and parents need to protect themselves.
"You need to have something legally in writing that protects you as an investor in that business," Barrett said. "If the business defaults and can't pay its creditors, those creditors can come after your personal assets."
Some advisors, such as Franklin of Franklin Wealth Management, believe that when parents make substantial cash outlays to help their kids, they should expect to be paid back. He advises his clients to draw up a contract and charge interest. "As a parent, you have to feel proud when they pay your money back, knowing they are on the path to financial independence," he said.
By Internal Revenue Service rules, you must charge a minimum interest rate. In March the Applicable Federal Rate was 0.40 percent for loans up to three years, 1.47 percent for loans of three to nine years and 2.19 percent for loans longer than that. "If they don't pay you back, it's now a gift," Franklin said.
Gifts that are more than $14,000 (or $28,000 per couple) are taxable, though "most people are not even aware about the gift tax," said Geraghty. If tax is not paid, then larger gifts will need to be accounted for and taxed at that time.

Some parents go one step further and deduct gifts from their children's inheritance. "I had a client who said that when she passes, her son is not going to get anything, that it was going to the other children because he had already gotten so much from her in the form of handouts," said Franklin.

Of course, financial dependence is a two-way street and the result of a lifetime of financial lessons never learned. The best defense against dependent children, advisors say, is increasing financial responsibility as children grow. And letting them fail when they're young is a lesson that will stay with them long after their parents are no longer there to bail them out.

Culled from CNBC.com

For boomers, it's the retirement that never was-By Ilana Polyak

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Call it the retirement that never was. The oldest baby boomers are turning 69 years old this year, yet many are still working and have no plans to go anywhere.

In 1990 just 12.1 percent of workers were 65 and older; by 2010 more than 16 percent were, according to the Census Bureau. That number is likely to grow as more boomers move into the over-65 demographic.
Modern retirement calls for different rules, so it's no wonder that boomers are redefining retirement.

"To think that you can finance a 40-year retirement is mathematically impossible," said Catherine Collinson, president of the Transamerica Center for Retirement Studies. A Transmerica survey shows that almost two-thirds of baby boomer workers plan to stay on the job beyond age 65-or don't plan to retire at all. "Baby boomers do not envision not working," Collinson said.
People who are at least 65 can expect to live another 19 years, and those who make it to 75 should plan to live well into their 80s, reported the Centers for Disease Control. At the same time, the average account balance for workers in their 50s and 60s is less than $150,000, according to the Employee Benefits Research Institute.
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"Unless you socked away a lot of money, retirement for many is just not going to be what we grew up believing retirement was," said certified financial planner Mark Singer, president of Safe Harbor Retirement Planning, author of "The 6 Secrets to a Happy Retirement" and himself a boomer, at age 60.
As a result of working longer, boomers are transforming not just retirement, but the workplace itself.
Working longer is the most obvious solution to the retirement savings problem. Among all of the options available to pre-retirees, it's the one that has the biggest impact on a nest egg, said Judith Ward, a senior financial planning with T. Rowe Price. Working three years longer and contributing 15 percent of income can grow a 401(k) by 22 percent; working five years more can increase savings by 39 percent. Combining more years of work with a bigger retirement-plan contribution (say, 25 percent) has an even more powerful impact.
Of course, not all boomers will be content to continue pounding out 40-hour weeks, said Kerry Hannon, a jobs expert with AARP and author of "Love Your Job: The New Rules for Career Happiness."
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Some will opt for phased retirement schemes, where they're able to cut back on their hours but still stay employed. Depending on the number of hours, they may be able to hold on to crucial health insurance and retirement-plan perks. Most important, however, is that even part-time work can keep boomers from tapping their nest eggs too soon.
However, employers may not be so quick to jump on the phased-retirement bandwagon. "The trend is happening so quickly that employment practices have simply not kept pace with the changing times," Collinson at Transamerica said.
There are some legal obstacles in switching from full-time to part-time work-specifically, how to account for insurance and pensions for part-time workers-noted Mark Schmit, executive director of the Society for Human Resource Management Foundation. What's more, these arrangements could be seen as unfair to younger workers. "They might be thinking, 'These older folks are getting a perk that the rest of the organization is not getting,'" he said.

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The oldest boomers turn 69 this year, yet many are not ready to quit the workforce-transforming not  …

 

Some industries, however, are more open to it, said Schmit, especially if they have a looming brain drain, as is the case in health care and mining. Phased retirement might give businesses time to accelerate their recruiting efforts while still benefiting from the talents of boomers.
Of course, staying in the workplace longer is not without glitches.
According to Dan Schawbel, founder of WorkplaceTrends.com, a research and advisory firm focusing on millennials in the workplace, every generation has a negative view of the generation that's coming up but a positive view of their elders'. "The younger generation is seen as more connected and they're cheaper to hire, so they're seen as a threat [by boomers]," he said.
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In SHRM's survey of human resource managers, more than a quarter reported some level of intergeneration conflict in their organizations.
Dress code is one area particularly fraught, with millennials advocating for casual dress and boomers insisting on business attire. "Millennials want you to appreciate what's coming out of your head, not the costume they're wearing," said Anne Donovan, a managing director and millennials expert at accounting giant PricewaterhouseCoopers.
Focusing on dress code might seem trivial, said Donovan, but it speaks to workplace culture. Businesses that cling to formal dress will continue to lose young talent to companies that do not, she said. Few would argue that the hoodie-wearing engineers in Silicon Valley aren't getting the job done.
Communication style, too, causes conflicts. "The technology divide is getting wider," said Schawbel at WorkplaceTrends.com. "[Younger people] don't use email; they're texting and using Snapchat, and voice mail's dead."
These issues come to a head in particular when millennials supervise workers 20 years or more their senior. "We're seeing more and more of that, and that's just life," said AARP's Hannon. Boomers lamenting this reality, she added, are just "going to have to get with the program."
To quell these conflicts, some companies have instituted reverse mentoring programs-pairing up boomers with younger workers who can help guide them in today's technology and communications.
At Pricewaterhouse Coopers, where 80 percent of workers belong to the millennial generation, boomers in the company's Atlanta office can get help with their technology questions through their millennial mentors. "What we've done is taken the stigma away for the boomers, and millennials want to have that interaction with leadership," Donovan said.
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Philips, the Dutch lighting company and a client of WorkplaceTrends.com, uses cross-generational teams of millennials who manage employees nearing retirement. "The millennials are learning from the baby boomers, but the baby boomers are also learning from the millennials," Schawbel said. 

Culled from CNBC

Japan inflation edges up as BOJ keeps policy unchanged-By Elaine Kurtenbach

Japan central bank keeps stimulus policy unchanged as prices edge higher , jobless rate falls

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View photo

In this Nov. 29, 2014 photo, an industrial zone is seen at night in Kawasaki, south of Tokyo. Japan's industrial production fell in March, 2015, but by less than forecast, casting doubt on expectations that the central bank will opt to expand its already lavish monetary stimulus. The government said Thursday, April 30, 2015 that industrial production fell 1.2 percent in March from a year earlier and 0.3 percent from the month before. (AP Photo/Eugene Hoshiko)

TOKYO (AP) -- Japan's core inflation rate edged up in March and unemployment eased slightly, according to data released Friday, offering glimmers of promise for the world's No. 3 economy as it struggles to get growth back on track after years of stagnation.
Though a decline in factory output and other key measures were less encouraging, the central bank kept its ultra-loose monetary policy unchanged in a policy meeting Thursday. Some investors and analysts expected additional stimulus to be announced.
The central bank governor, Haruhiko Kuroda, acknowledged that his target of 2 percent inflation, excluding the impact of an April 2014 increase in the sales tax to 8 percent from 5 percent, remains elusive. He said actual inflation is flat at 0 percent and it might take three years, instead of the two years he originally aimed for, to reach that goal.
Core inflation, excluding volatile food prices, ticked up to 2.2 percent in March from 2.0 percent in February, the government reported. It said that excluding both food and energy, the consumer price index rose 2.1 percent, compared with 2.0 percent in February.
The unemployment rate slipped to 3.4 percent in March from 3.5 percent the month before, matching the level last seen in December.
However, a survey of purchasing managers by Markit for April showed declines in both production and new orders, with the index dropping below the 50 level which differentiates expansion from contraction to 49.9.
The latest "data signaled worsening operating conditions in the Japanese manufacturing sector," Amy Brownbill, an economist at Markit, said in an analysis of the survey.
"Production contracted for the first time since July 2014, underpinned by a further decline in new orders. Meanwhile, growth in new export orders slowed to the weakest in the current 10-month sequence of expansion."
Data released Thursday showed industrial production fell 1.2 percent in March from a year earlier and 0.3 percent from the month before, a milder decline than the more than 2 percent drop many manufacturers and analysts had expected. But a further fall is forecast for April.
Prime Minister Shinzo Abe, on a U.S. tour, has sought to raise confidence in his government's economic recovery strategy, which hinges on lavish monetary easing, public works spending and longer-term reforms.
The policies have yielded mixed results, with share prices soaring and the value of the yen plunging thanks to massive injections of cash into the economy by the central bank through its purchases of bonds and other assets.
The economy fell into recession following the sales tax increase that broadsided demand. The Bank of Japan expanded its asset purchases in October to help counter the malaise, but growth has remained flat despite a mild recovery in exports.
Japan is still on track for a "moderate recovery," the central bank said in its latest assessment of the economic outlook. But it acknowledged a raft of uncertainties that could either support faster growth or drag it down, including weaker demand for Japan's exports to China and the U.S.
The U.S. economy expanded at a mere 0.2 percent pace in January-March, the slowest rate in a year, and China's economy has also slowed more than anticipated.
Economists point to sluggish corporate investment as a factor slowing U.S. growth. That is a problem shared by Japan as companies opt to invest overseas rather than in a shrinking home market where the population is declining and fast aging.

Wages have also failed to pick up significantly for most workers, whose incomes are not keeping up even with the modest inflation seen so far under Abe. That in turn has undermined consumer demand, sapping growth.

Culled from AP