Do You Feel Rich? - the finance of Americans

Kiplinger's Personal Finance Magazine, Jan, 2000 by Melynda Dovel Wilcox

In the endless quest for bigger and better, luxury features on appliances, cars and other goods eventually trickle down the product chain, says Robert Frank, an economics professor at Cornell University and author of Luxury Fever. Base models become pricier, and the standard for what's acceptable merchandise also rises. So long, $50 Weber kettle; hello, $4,500 Frontgate stainless-steel outdoor grill.

Prepare for a long life

BUT EXTRAVAGANT Americans can't afford to spend all their money. Prosperity has its risks, not least of which is a false sense of security that could lead us to spend too much, save too little, retire too early and blithely ignore the prospect of living too long.

In Kiplinger's online poll, four of ten respondents said they now expect to retire earlier than they had planned to ten years ago. The same number anticipate that their standard of living in retirement will improve. But readers may not appreciate the full extent to which a higher physical standard of living may require them to reevaluate their financial goals.

The number of Americans age 100 and older has doubled over the past decade, to 70,000, and is expected to double every ten years as the century proceeds. (Will your retirement nest egg carry you to age 100?) And the proportion of older Americans who have problems managing day-to-day tasks has declined dramatically.

"Even if we don't have a big stock-market decline, people run a greater risk of outliving their assets," says Chris Carroll, an economics professor at John Hopkins University. That's true not just because of medical breakthroughs, but because it appears that higher socioeconomic status and higher levels of education seem to stimulate people to live longer.

"The prospects for people living longer and better are remarkable," says Dr. Robert Butler, president of the International Longevity Center, in New York City. And the economic consequences are enormous.

Plan your estate

EVEN IF BOOMERS don't inherit the full $10.4 trillion from their parents--an amount that breaks down to $133,000 each--a conservative estimate is that they will get an average of about $90,000 per family, or about $30,000 when divided among several siblings, says Steven Devlin, a former director of the Better Center of Financial Gerontology at the University of Pennsylvania.

As a result, estate-tax planning and other wealth-preservation strategies, once the concerns mainly of the rich, have gone the way of golf and tennis to become decidedly bourgeois. "Estate planning isn't just about the wealthy reducing their taxes any more," says Elizabeth Mathieu, president and CEO of Neuberger Berman, an investment management company.

Today's estate plan is a blueprint for making your assets last over your lifetime, as well as for making sure that whatever is left passes along according to your wishes. That means a strategy that reduces taxes, produces earnings and still gives you access to your money when you need it. Traditional estate-planning vehicles, such as trusts and written wills, are being retooled and revved up. "The problem with trusts is that if they're really going to be used effectively, they have to be irrevocable, and the baby-boomers don't like anything they can't change," says Gregory Harbaugh, an estate-planning lawyer with Houston Harbaugh in Pittsburgh.