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In planning one’s financial future, there is no such thing as a sure thing

By , - Last modified: April 12, 2013 at 11:07 AM

I don’t need to tell you about the diminishing number of “sure things” out there. If you haven’t already figured this one out on your own, here are just a few un-sure things: Social Security benefits, Medicare and any number of unfunded state pensions or entitlement programs.

In light of ballooning health care costs and extended life expectancies, you can now add to this list “an inheritance.”

As a financial planner, one of the challenges of the job is providing financial guidance through the thicket of life into the clearing of retirement while carefully positioning myself as an unbiased observer without neglecting the emotional stake that each individual has in his/her own financial picture. I have had a handful of conversations regarding retirement with clients or prospective clients who believe they should count on a large inheritance as a part of their retirement plan.


Aging populations

Men and women who live to age 65, according to the Social Security Administration’s life expectancy tables, can expect to live well into their 80s. Twenty-five years or more spent in retirement can fast diminish a retiree’s wealth, especially given the fact that many elderly folks had not expected to live nearly that long.

According to the National Center for Health Statistics, individuals born in 1950 could have expected to live to age 68. When they turned 60 years old in 2010, they would have found themselves expecting to live until age 79. Over a period of 60 years, the individual’s life span increased by 11 years, and life expectancies are continuing the upward trend. The Census Bureau projects that one in every nine baby boomers will live into their late 90s and one in 26 will reach 100.


Social Insecurity

With the evidence mounting that Social Security benefits represent a less-than-fully-funded liability, the remote possibility that the elderly may have to rely on their savings to a greater and greater degree is becoming ever more plausible.

When Social Security was signed into law in 1935, life expectancy was 63, while the retirement age was 65. That’s right, the retirement age occurred after an individual’s expected date of death. Even by 1950, with life expectancies around age 76 and the typical retiree claiming Social Security benefits around age 68, the program only had to support eight years of retirement income. Compare that to the typical retiree today claiming Social Security benefits around age 62 and living to around age 80.

The Congressional Budget Office projects that the number of people age 65 and older will increase from 53 million to 92 million in the next 25 years. For those of you keeping score, that is a 90 percent increase. Moreover, the number of people paying taxes to support that aging demographic will increase by only 12 percent.

As many American businesses have figured out over the past 20 years, defined-benefit (aka pension) plans are expensive and difficult to maintain for these same reasons. According to the Employee Benefit Research Institute, 24.2 million individuals were enrolled in traditional pensions in 1984 compared to a mere 11 million individuals enrolled today.


Investment risk

One proposed solution to Social Security’s impending crisis involves shifting responsibility for funding retirement from the government to the individual through an investment hybrid similar to traditional 401(k) plans. The employer-sponsored pension plan also is giving way to the traditional 401(k).

The average American soon could be trusted with the entirety of his/her own retirement planning and investment management without a government- or employer-provided stream of income on which to rely.

According to “BIS Quarterly Review,” volatility in the stock and bond markets has risen around the globe since around 1970. The reasons for this are varied and include the decreased cost of financial transactions and the ease with which technology facilitates those transactions for the average individual.

Statistics abound about the folly of the average investor and his/her inability to make prudent investment decisions. These two facts present a clearly problematic environment in which individuals are expected to shoulder more of the investment risk in order to fund their retirement years, yet studies consistently show that average investors are not adequately prepared to do this, even if they think they are.


Goodbye, inheritance!

The reality, for Americans young enough to save sufficiently for a very long life span, is that it is fast becoming the responsibility of individuals to manage their own finances and to fund their own retirements. More children are finding that their parents have exhausted their own retirement resources, and as their parents live longer, their progeny may have to dig into their own pockets to support them. What was that about an inheritance again?

Anthony M. Conte is a managing partner of Conte Wealth Advisors with offices in Camp Hill and Fort Myers, Fla. He has a master’s degree in financial services as well as the certified financial planner certification. Email him at


Registered Representative Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Conte Wealth Advisors, LLC are not affiliated.

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