If you have been peaking at your investment results from April, it seems that despite a war (or not), crazy gas prices, and debt that now exceeds our gross domestic product, it was a pretty good month to be invested. The S&P 500 is up 27% in the past twelve months.

Meanwhile lots of Boomers and Gen Xers will be greeting family members for Mother’s Day where the “youngers” are suffering. Gas, groceries, insurance and kid costs are all rising and many are struggling to keep pace. Many want to purchase a house in a world where the starter home is now a $400,000+ buy. Everyone is told to save for college but the cost of college has in this century risen 41% faster than the inflation rate. Then there’s the question of whether AI will make college obsolete- or at least a low return investment. Remember the last decade when the world wanted more and more accountants? Well, today that business is shrinking. KPMG Layoffs: Big Four firm to cut 10% of US audit partners amid slower attrition and cost pressure – Business News | The Financial Express

So, there you may be standing on a financial mountain with 30-40 year old kids looking up at your stack. Many of us have more than we need. We got Medicare. Mortgage is paid. There’s money in retirement. We like to think it’s because we were both prudent and smart. Respectfully, an index fund would have quintupled your wealth in the past 25 years.

But, is it time to make some gifts; advances on a future inheritance? Fair question and one I see a lot. Without playing financial advisors, let’s look at some reasons for a slow approach to wealth transmission.

  1. Divorce. Yes, the hot market in the divorce business these days is the Xers and Boomers. You may read that and respond: “Not me.” Don’t judge so fast. The high speed lanes of the divorce track usually start at or about child bearing years. It picks up again as the kids start finishing high school. Lawyers can’t quite figure out this new divorce lane. Many folks find that retirement is too much together time. But then we see people calling it quits at age 80+. There’s no predictor here except that if lightning strikes, your kitty will go down by half.

How does retirement look for you now that you are 75, single and half your gelt is headed to another household? 1 in 3 divorces now involves people over 50, seriously threatening retirement security | Watch

  • Social Security. We have all seen the reports about looming benefit cuts. We certainly do have a cash flow problem and during the Reagan years, the issue was addressed on a bi-partisan basis. Today, we are in a war but won’t pay to fund “homeland security.” The administration is talking about doubling defense expenditures. We have $39,000,000,000,000 we owe and a shrinking pool of youngsters to pay in so the Treasury can pay out. One thing is clear. Current benefits seem unsustainable, Those who are financially well-off are less reliant on Social Security but that $2-4,000 a month is a base we have all come to rely on.
  • Where are the kids going to put this money? This market is juiced. Tesla sells for 350x earnings. Advanced Microdevices is at 140x earnings. The administration just knocked off tariffs on scotch as a farewell gift to King Charles but then announced 35% tariffs on European cars. Everyone loves AI but we are just beginning to grasp what it can do. Near me, someone is building a high end steak house. Might be nice if my NVIDA goes up 20% but suppose my “partners” a Coopers & Lybrand decide I can be replaced?

I have been investing for half a century and I am confused. Handing your kids lumps of cash or securities seems nice. But where will they put it? Hopefully not a steak house or in airline stocks.

Three thoughts do come to mind. With gifts of $100-200 a month you can insulate your kids from the gas price inflation. If your kids are struggling with consumer or student debt you can loan them $20,000 to pay it off or substitute you as the payee with an 8% rate instead of the 28% they are paying. If a home purchase is a dream, gift the down payment. But I would do so with a caveat. “Kid, here’s the 20-40% you need. It comes with a gift letter because the mortgage lender wants to see that. But, I am expecting that within 3 months you will open a Roth account or a 529 and start to pay in a monthly amount as if you were paying the money I advanced back to me. And I will be asking to see proof you are doing that because if you don’t show me you can resume saving, I may start changing my estate plan in ways you may not like.”

Things you don’t want to do include;  finance lifestyle expenses like cars, vacations or new business investments that require a strong economy. The family members you are helping have a lot of life to live. They have seen boats all rising with a couple of serious blips in 2008 and 2020, In each crisis the government flooded the problem with borrowed money and the pain seemingly went away. It’s there still but on the ledger of life in the US debt column. Someone is going to have to pay that, but so far we think we can cut taxes and increase spending. Gifting is good but you want you to do it responsibly and see it managed by your kids in the same way.

Postscript: This appeared in my newsfeed on May 4.

My parents live in a rich, comfortable bubble but refuse to help me buy a house