Life insurers experiment to attract millennials

Tom Anderson | @bytomanderson

Thursday, 16 Jul 2015 | 8:00 AM ET 

CNBC.com

Life insurers have a problem with millennials.
After all, who wants to contemplate mortality, or even retirement, when they're just beginning their adult lives? Fewer than 20 percent of those between 18 and 34 years of age say they're very likely to buy life insurance, according to insurance research and consulting firm LIMRA.

Yet three major life insurers have recently started or purchased businesses designed specifically to reach that age group. MassMutual opened a Generation Y-friendly hangout space near Boston in October called the Society of Grownups that offers financial education through supper clubs and wine tastings. Northwestern Mutual bought millennial-focused financial planning company LearnVest for $250 million in March. And Pacific Life funded Swell Investing, which launched in March and helps tech-savvy investors buy stock in companies that support their favorite causes.

Why? Growth potential, for one. In 1985, life insurers represented about 40 percent of the financial services industry by market capitalization; that figure had fallen to 25 percent by last year, according to management consulting firm McKinsey & Co. McKinsey consultants encouraged life insurers to look for unconventional sources of growth and Generation Y was an attractive target: There are more millennials now than baby boomers.



Another reason for life insurers to experiment with new businesses is that traditional approaches to marketing financial products may not work well on a generation that came of age during the Great Recession. Nearly seven out of 10 millennials said that financial services firms have not regained their trust since the 2008 financial crisis, compared with 59 percent of people aged 35 to 54, and 54 percent of people aged 55 and older, according to the 2015 Makovsky Wall Street Reputation Study. The communications firm surveyed more than 1,000 adults in March. "Millennials are much more sensitive to negative news about the industry," said Scott Tangney, executive vice president of Makovsky. "And they are looking for better service through digital channels."

All of these experiments by life insurers are about establishing a relationship with millennials. They may not bear fruit right away, but the hope is that it will build trust and may lead to sales down the road, said Jamie Bisker, a senior analyst with financial research firm Aite Group,

Society of Grownups

Josh Reynolds | The Washington Post | Getty Images

 

Elissa Garza, 25, of Boston, and Gabi Parsons, 24, of San Francisco (from left) sampled glasses of wine during a recent class that paired finance education with a wine tasting at the Society of Grownups, a financial education operation that uses a coffee shop and dinner club atmosphere to help attract millennials.

 

Life insurance executives recognize both the opportunity and the challenges. "Millennials are a big focus of ours," said Michael Fanning, MassMutual's executive vice president of the U.S. Insurance Group. MassMutual worked with design firm IDEO for two years to develop the concept for Society of Grownups and plans to expand it beyond its Brookline, Massachusetts, location to other cities, he said.

Society of Grownups is small and sleek like a cool neighborhood boutique. It sells 20-minute check-ups with a certified financial planner for $20 and 90-minute sessions for $100 as well as financial education chats with six participants for $10 or $30 classes classes with a dozen students or less. But the company's most popular events are its $40 dinners at which small groups of people feast on artisanal food and wine and discuss the importance of credit scores or retirement savings. Its office has a library stocked with issues of the "slow living" bible, Kinfolk Magazine, and The Economist, The Atlantic and The New Yorker as well as books like "The Alchemist" by Paulo Coehlo and "Outliers: The Story of Success" by Malcolm Gladwell. The office's coffee bar sells pour-over Counter Culture coffee, tea and Spindrift sodas.

Since it opened in October, nearly 1,000 people have participated in Society of Grownups classes, chats, supper clubs and events.
No specific products are pushed at Society of Grownups and the classes are strictly educational. You might not realize that it is owned by a multibillion-dollar life insurer unless you looked at the fine print on Society of Grownup's slick brochures or the bottom of its well-designed website to see that it is "a MassMutual learning initiative." None of the group's 37 employees worked for MassMutual before joining the company.


Why focus on financial education? It's a smart move, Aite's Bisker said, because many millennials lack the assets to be big purchasers of life insurance policies and annuities or generate asset management fees. As their finances improve, so will the chances that they might purchase a life insurance product.

Society of Grownups is still learning what classes and events appeal most to millennials, said Nondini Naqui, 35, the company's president and chief executive. Planners frequently change the curriculum to draw more students. Naqui said that she wants the Society of Grownups to change financial planning the way stylish start-up Warby Parker has changed once staid eyewear business.
"That's what I like to think Society of Grownups is doing to the financial services industry. We're disrupting the financial planning industry and making it accessible and exciting," Naqui said. "We've done something different from the rest of the industry, and created a place where no financial products are sold, where each financial plan is holistic, and where much of the learning takes place over dinner and drinks in a class with 10 others."

LearnVest

Northwestern Mutual is happy to run LearnVest as a separate company after its recent acquisition.
The second-largest life insurer is quick to point out that it had already been attracting millennial clients without the online financial planning service. "More than half of our new clients are under age 34," said Emily Holbrook, Northwestern Mutual's director of millennial marketing. "Last year, Northwestern Mutual advisors delivered more than 100,000 financial plans to millennials."
Northwestern Mutual has more than 4.2 million clients served by about 16,000 financial advisors. Meanwhile, LearnVest has about 1.5 million people who use its free tools as well as 25,000 users whose employers pay for LearnVest financial planning services, and 10,000 premium customers who pay for access to certified financial planners.


The LearnVest deal will help Northwestern Mutual learn more about millennial behavior, said Chris Brown, co-founder of retirement market researcher Hearts & Wallets. "Better segmentation approaches can help firms and advisors understand key younger consumer segments," Brown said. His firm's focus group research, conducted in 2014, showed that young women found LearnVest more appealing than other online financial services as a way to help them save. "A lot of people will be tracking the LearnVest acquisition," he said.
Northwestern Mutual plans to integrate LearnVest's technology over the next two years, a Northwestern Mutual spokeswoman said, with the goal of making it easier for clients to get their financial plan details, see real-time updates, manage their spending, access information on mobile devices and simplify the sharing of information with their Northwestern Mutual advisors.

Swell Investing

Millennials want their investments to earn more than financial returns, they want them to have a social impact. Twenty-nine percent of millennials in a recent Bank of America Merrill Lynch survey said they want their financial advisers to provide values-based investing, the third-most requested service after understanding their needs and communicating in a way that resonates with them.
Swell Investing, a subsidiary of Pacific Life Insurance Co., aims to fulfill that desire. "Swell is a research company founded on the belief that you can do well for yourself and do good for those in need," said Dave Fanger, the company's co-founder and managing director. Swell conducts research on the social causes and partners with online broker Motif Investing to execute the trades and manage the portfolios.


Since its March debut, Swell has created four values-based portfolios: "Improving Education," "Ending Poverty," "Upholding Human Rights" and "Fighting Cancer," which is the most popular portfolio now. The company said it plans to add more portfolios soon.
Swell's investment models buy stocks of companies whose foundations gave the most to that cause. Swell then gives 20 percent of the revenue in each portfolio to those same causes. The minimum investment is $250 plus a commission of $9.95 per trade to Motif.
"Swell appeals to a broader audience than our traditional life insurance client base and we look forward to helping people in their efforts to make money and make a difference at the same time," said Khanh Tran, president of Pacific Life.
Whether such efforts will pay off for insurers is still unclear. But there's no question that their future success depends heavily on their ability to attract millennials, who now number more than 75 million, to their financial products.

"[This] is about insurers telling millennials, 'We've got your back,' " said Aite's Bisker. "Nothing about their core message has changed. It's how the message is delivered."
This story has been updated with more details about how Northwestern Mutual plans to use LearnVest's technology.

Tom AndersonPersonal Finance Writer

The concrete determination that created a $20M empire

Lauren Flick

Wednesday, 15 Jul 2015 | 2:59 PM ET 

CNBC.com

Boyce Muse is known as the King of Concrete. His company, Muse Concrete Contractors, is the largest concrete contractor in northern California. Boyce owns two homes, boats, Porsches, BMWs and even his own plane. Traveling the world with his family—from Alaska to Australia and then on to the South of France and finally South America—Boyce is a man who appears to play as hard as he works.
Yet to see where Boyce came from makes his achievements all the more incredible.

Living hand to mouth

Growing up in Redding, California, Boyce was the eldest of five siblings in a family that struggled every day just to get by. Living on welfare, his family, Boyce said, survived mainly because as kids, they just didn't know anything else. "We didn't know how bad off we were ... You just know that you're hungry a lot."
After his mother was killed when he was just 8 years old, Boyce and his siblings were separated and sent to live with various relatives. "I lived with 10 different families all over the country and went to 15 different schools. It was hard to make friends, it was very lonely not knowing how long before I would be uprooted and sent somewhere else. I was another mouth to feed in a family that was already struggling."
 

When Boyce was 11, his father remarried and reunited the family, introducing them to five new siblings—but it certainly didn't reflect the idyllic Brady Bunch image. There were now 10 children living in a two-bedroom house. "I did not ever get to be a kid; there was always a lot of responsibility, and you had to be very self-reliant," Boyce said.

Source: CNBC

Boyce Muse, president of Muse Concrete Contractors

"I did not ever get to be a kid; there was always a lot of responsibility, and you had to be very self-reliant." -Boyce Muse, president of Muse Concrete Contractors

Three years later Boyce ran away from home and worked a myriad of odd jobs to support himself. "I was washing dishes, washing cars, busing tables. It was all about survival—nothing more," he said.

When Boyce eventually reentered school, he met the woman who would change his life: his wife, Joan. Back then she was a 16-year-old high school cheerleader, interested in studying business to become a legal secretary. Boyce recalled, "I remember thinking, 'This is the girl for me,' but I didn't think she was interested. But I was relentless in my pursuit, and she finally gave in."
According to Joan, he certainly made an impression. "He was persistent and a little bit bold. He was fun, exciting and challenging all at the same time. He pushed me out of my comfort zone." She added, "And even then, I could see that once he got his mind set on something, I knew he would do it."

Cementing a future

It was 1974 when Joan introduced Boyce to a friend who was a foreman on a construction site. "I went from earning $1.65 an hour cooking chicken for Colonel Sanders to making $3.50 an hour pouring cement. I thought I won the lottery."


For five years Boyce worked for other people in the concrete business, until he decided he wanted to go out on his own. "I never liked taking orders from other people, and now I saw a way out of my own poverty: through hard work."
So Boyce and Joan decided to invest in their future. By that time, Joan had reached her dream of working as a legal secretary and had $10,000 in a pension plan. "He was very passionate about being able to do it 'better himself,' Joan said. "It was a leap of faith in him and with him. "
With that $10,000, they bought the basics to start a small concrete construction business. Boyce's dreams were simple. "We didn't buy anything but concrete-related tools and equipment, wheelbarrows and shovels. All I wanted was to make enough money to buy a little house and have a little yard—that's all."

Drumming up business was pretty basic: Boyce put flyers up in the neighborhood, knocked on doors and visited construction sites to solicit work. In the beginning, he was working small jobs, like patios, sidewalks and small foundations. The business began to grow, but it didn't really make any money for the first three years. So that's when he decided to take the biggest gamble of his life.

Gambling on a bigger dream

"I saw a slipform machine—a specialized piece of equipment that could do 10 times the amount of work I could do busting my back," he said. "I found a used machine that was $60,000, but I did not have the money to purchase it at the time."
This man, who grew up with nothing and finally had a business and a home, decided to sell his house and gamble on an even bigger dream. He explained, "My mind-set is always not to settle for what we have today but to go for a little bit more. I talked with Joan, and together we decided to sell the house and invest in our future." 


Joan's thoughts on the gamble were a little less enthusiastic: "I was not a gambler and was extremely nervous, but he had so much excitement and confidence, that convinced me we just needed to go for it. "
It was a smart move. Profits went up substantially after they acquired the slipform. After the first year, their gross revenue was approximately $300,000; five years later their gross revenue was $3,000,000. Within 15 years their contracts soared from million-dollar contracts to $10-million-plus jobs.

Now, 33 years after Boyce and Joan took their leap of faith, Muse Concrete Contractors employees more than 120 workers and is currently approaching $20 million annually in gross revenue. (Boyce serves as president while Joan is chief financial officer.)

It is said that with great risks come great rewards, and no one embodies that adage better than Boyce Muse. When asked how his childhood struggles impacted his current success, Boyce responds modestly, "I'm sure I've had as many challenges as the guy down the street, but from every one of those challenges, I took it on and I found a solution and I moved on. I don't like to stay in the problem." 

His counsel for aspiring entrepreneurs and businesses: "See life looking forward through the windshield and not looking in the rearview mirror all the time."
Tune-in Wednesday night at 10 p.m. for the premiere of "Blue Collar Millionaires" on CNBC.

Lauren FlickProducer, CNBC.com

Avoid these 3 Social Security mistakes

Russ Wiles

Monday, 29 Jun 2015 | 10:19 AM ET

 USA Today

Americans are an impatient bunch, at least when it comes to Social Security.
People who delay taking Social Security benefits will be rewarded with higher monthly payments, yet hardly anyone waits until 70, the age at which benefits are maximized. Many lock in reduced benefits by not waiting even until their full retirement age, which is between 66 and 67 for most people currently in the workforce. Some start at 62, locking in benefits as soon as they can.

Claiming benefits early is one of dozens of potential mistakes when it comes to Social Security. That should come as no surprise because the system is complex.

"The Social Security system has 2,728 core rules and thousands upon thousands of additional codicils" designed to clarify those rules, write the authors of Get What's Yours, a new book on the topic. Here are three potential blunders.

Obsessing over the break-even point.

If you delay taking Social Security, the monthly benefit rises. Yet about 40% of participants begin around age 62, while fewer than 2% wait until 70. Some people need the money now or don't think they will live long. Others wonder if Social Security will remain solvent. Still others fear getting shortchanged. They recognize that they would need to live a long time — often into their mid-80s — before receiving more money from the higher payments that come from delaying. This is a common Social Security break-even calculation, and some people pay too much attention to it.
"It's very beguiling to think if you take benefits at 62 and invest them for eight years ... you end up with a very nice pile of money, and it would take you a long time to earn that money back in the form of higher benefits that you would get if you waited until age 70," Philip Moeller, co-author of Get What's Yours, said in an interview that can be viewed at Morningstar.com.


But dying fairly early, and leaving some dollars on the table, might not be the biggest risk. A greater danger for most people, Moeller said, involves outliving one's assets. "Don't focus on the break-even date," he and co-authors Laurence Kotlikoff and Paul Solman advise in their book. "Worry about the broke date — the date you can't pay all your bills because you took benefits that were too low, too early."

Failing to coordinate with your spouse.

One interesting feature of Social Security is that you might be eligible to receive benefits based on someone else's work history — and they, potentially, can on yours. Joint planning thus becomes important, especially for spouses.
"You can collect spousal benefits instead of collecting on your own record," said Boston law firm Margolis & Bloom in a report. "If your spouse earned considerably more than you, this can be an attractive choice."

Married spouses thus should decide how each person should claim benefits. The exercise can get complicated, but it's worth the effort. When married couples don't carefully plan their strategies for claiming benefits, they could receive reduced payments.
For example, if one partner dies fairly soon after opting to claim early benefits, at a reduced dollar level, it can diminish the spouse's survivor benefits.


According to Grimes, it can be wise for at least one spouse in a two-earner household to defer the receipt of regular retirement benefits. In that case, when the first spouse dies, the survivor would be able to collect a higher Social Security benefit. "Having one earner put off benefits until age 70 ensures that the surviving spouse collects the highest benefits possible," he said.

Not realizing that you can change your mind.

Not every Social Security decision is set in stone. For example, people can do over, or withdraw, a decision to take benefits early, renewing their eligibility to qualify for higher monthly payments down the road.

Recipients who start benefits early have one year to change their minds. The drawback is that you must pay back any money already received. If you also have had Medicare premiums taken out of your Social Security benefits, you must repay those funds too, Moeller said.

A do-over (withdrawal) means you're starting over, as if you never filed for benefits in the first place. For people who need short-term cash in the form of immediate Social Security benefits but then decide to do it over, "this essentially becomes a one-year, interest-free loan," said Margolis & Bloom.
What if you can't repay the benefits that you received after 12 months have elapsed? An option would be to suspend the receipt of further benefits so that you could start earning credits that would make you eligible for higher payments later. You can suspend benefits upon reaching full retirement age.


For example, said Margolis & Bloom, if you started benefits at 62 then suspend them at 66, you could build up delayed retirement credits from 66 to 70 that would qualify you for higher payments. Benefits rise by 8% a year from 66 to 70, so delaying over that stretch would result in a monthly payment that's 32% larger.

The bottom line is, with Social Security, you have some flexibility. They're among dozens of potentially helpful strategies available.

Young Money

How to talk with your partner about money

Landon Dowdy | @LandonDowdyCNBC

Wednesday, 1 Jul 2015 | 9:16 AM ET 

CNBC.com

You've unpacked the gifts and said your "I do's" this wedding season, but before you get settled into your newly married life after the honeymoon, it's a good idea to talk about your finances.
Whether you're about to get married, just married or have been married for years, it's important to sit down and have the money talk with your significant other. Sure it may seem like a no-brainer, but you'd be surprised by how many couples aren't on the same page with their finances. According to a new survey from Fidelity, 43 percent of the people could not say how much their partner earned and 10 percent of that group were off by $25,000 or more.



Having regular money talks that are transparent is key to financial success as a couple. Communication and honesty are the "most important things," said Victoria Fillet, a certified financial planner and founder of Blueprint Financial Planning in Hoboken, New Jersey.
Here's a strategy on how to have the talk.

Know your credit scores

If you're like most couples, money is one of the main reasons you argue. So as newlyweds, you want to get off to a good start with your finances. Experts suggest both getting your credit reports and talking through them. Now that you're married, your credit score affects the other person. If you want to get a loan for a house or car, your partner's bad credit could affect that. Forty-five percent of millennials acknowledge bringing credit card debt into the relationship, according to a recent study by NerdWallet.

If one partners' credit isn't as good as the other's, it is important "not to burden the other person," Fillet said. Figure out a plan where you pull together a joint account for the household expenses and necessities and separate accounts for the extra money after that. Then that person can use the extra money to pay off his or her debt. This helps put a fair and equitable plan in place for both of you.
Read MoreYour partner might be hiding debt from you

Take a look at your credit score, your credit history, your debts and assets so that you know exactly what you are working with. "The most important things is that nobody be surprised and you both work on it together because your married," said David Mendels, a certified financial planner at Creative Financial Concepts in New York City.

Budget together

Being a couple, it's going to be an adjustment thinking in terms of "my finances" to "our finances." A good way to plan together as a couple is to make a budget. Figure out what you each bring in, then try making a list of your monthly income and expenses. That includes your expenses that are a must, like your rent or mortgage, utilities and insurance. Then maybe grab a glass of wine and figure out what extra spending is most important to each of you, such as your gym membership or her manicures.
Once you've got a budget, it's time figure out your accounts. Do you want a joint account, separate accounts, or a combination of both? Financial planners say this depends solely on the couple.
Read MoreHow much should you actually save for emergencies?

For some couples, being together means one unit now, so they want to have one pot of money to budget and spend from. Figure out the logistics of a merge. If you have drastically different spending habits, like one is a big spender and the other is a penny pincher, then it might be a good idea to have a joint account for shared expenses and separate accounts for personal expenses.
Also, set a threshold to discuss big spending items. For example, if you spend $50, it may not be a big deal, but you spend $1,500 you should talk about it and decide about that purchase together.
"Couples do not necessarily need to make all financial decisions together, but for the bigger ones, they should confer and agree. To do that well, couples need transparency to know what is happening with all the money," said Dan Moisand, certified financial planner at Moisand Fitzgerald Tamayo in Melbourne, Florida.

Plan for the future

You've promised til death do you part and for richer or poorer, but have you really thought what goes into all of it? Now that you have talked about your financial history and your budget, it's time to start planning for your long-term goals. If you've already saved up for a home (good for you), think about what else you both are working toward. It's never too early to start planning for children or retirement.
Read MoreHow to stop losing sleep over money
When it comes to your budget, financial planners suggest you save 20 percent of your take-home pay and put 10 percent toward savings and the other 10 percent toward retirement. If you have debt, aim to live on 70 percent of your take-home pay. Almost every married couple didn't know what they were doing with their finances when they got married, Mendels said, and many wished they'd saved more.
"The sooner you start the easier it is to get control," he said.

Landon DowdyReporter

Money skills your teen needs for college

Kelley Holland | @KKelleyHolland

Wednesday, 1 Jul 2015 | 3:24 PM ET 

CNBC.com

Parents sending a kid off to college this fall have lengthy shopping lists, from those extra-long sheets for dorm beds to notebooks and flash drives. Your teen also needs to land on campus with some money smarts.

Many teens are clueless about managing their finances. In a study of college students' financial behavior by the National Endowment for Financial Education, 73 percent of the students reported engaging in some kind of risky financial behavior in the past six months, from paying bills late to maxing out credit cards. If you haven't started teaching your teen about money, this summer is go time.


"Kids go from not paying any bills to all of a sudden having student loans and rent and eating out and groceries, so it's all on them at once," said Vince Shorb, CEO of the National Financial Educators Council.

Luckily, financial literacy experts have myriad suggestions for teaching your teen about money. Even if you have only a couple of months, they believe you can impart a lot of essential information.


Learning about credit is crucial, according to Laura Levine, president and CEO of the Jump$tart Coalition for Personal Financial Literacy. "We want people to understand credit, not just how to use a credit card but how credit works," she said. Too often, teens grow up watching their parents pull out a plastic card to pay for everything, and they may not understand that using credit creates a payment obligation. But in reality, "you can't skip a month" when you owe money without a cost.

Some parents believe that a debit card is a form of training for a credit card, but Levine said that is not so: One taps a bank account and perhaps lets a parent see where a teen is spending money, while a credit card can give much more free rein to seriously mess up their credit rating.

Another element of credit is simply keeping a credit card safe, Levine said. "Young consumers are notorious for not being careful enough with what they do with their credit cards." A case in point: the teen who leaves a credit card sitting out in a dorm room. The roommate may be trustworthy, Levine said, but "what happens with the roommate has friends in the room?"

Shorb recommends that parents do all they can to help teens "build those financial muscles," ideally by gradually increasing their responsibility for money decisions. Without that, he said, they will be susceptible to all sorts of money pitfalls.

"Money is such an emotional subject," Shorb said. "If your buddies are going out to dinner and you are going ot be home alone, there is pressure to go."
Shorb recommends that before a teen moves out, he or she should have responsibility for paying some of their expenses, be it clothing or "rent" to the parents. And before they get to college, they should have a bank account established and ready, and automated bill payment in place if that's applicable. Apart from that, Short said it is important for parents to step back and refrain from rescuing a student who makes poor financial choices.



One obvious risk is that students spend too much money too early. Peer pressure can contribute to that, as does the fact that many student IDs double as prepaid cards onto which colleges load student aid funds at the beginning of a term.
If a student does run out of money, Shorb said, parents can consider it a teaching moment. "Instead of sending money, send a grocery story gift certificate" or some other form of money that can only be used for the purpose parents intend, and make it a loan with interest. "We need to start associating some pain with some bad decisions," he said.

Ted Beck, president and CEO of the National Endowment for Financial Education, said there are three major predictors of a student's success with money in college: parental involvement, as in parents who have communicated money lessons; financial education; and the experience of having a part-time job.

Plenty of money pitfalls lie ahead for a soon-to-be college freshman, he said, from peer pressure to spend to unexpectedly high costs for things such as textbooks. The College Board estimates that on average, each student spends $1,200 a year on books and supplies.


Ideally, parents start financial education well before a teen is heading to college, he said. (Beck's organization actually publishes a booklet containing money management tips for students, which could be used to start a discussion.) But even if early conversations do not take place, the summer before college is a great time for parents to have a serious money talk with their teen.


"This is your first time to sit down, probably, and have an adult discussion with your now adult child. They are going off. This discussion is critical. It's not a lecture. It's not a threat," he said. "This is your chance to treat them like an adult." After all, he added, "You want them to behave like an adult."
Apart from the financial minutiae of campus life, Beck said, it is important to talk to your teen about completing college. Going over budget for a month is one thing, but leaving college after a year with thousands of dollars in debt is quite another. When it comes to student loans, he said, "the kids that we worry about the most are the people who don't finish."

Levine does not yet have a college-age child, but she does have a clear checklist for what she wants her child to know.



"What I would want is for my college-age child to have a basic understanding of things like credit cards and banking and some basic financial stuff. They don't have to learn how to manage a portfolio," she said. "Boil it down to financial tools like credit cards, debit cards, how a bank account works, understand that. And then they have to understand how to manage their money."
If a teen can develop the discipline to get all that under control, landing a spot on the dean's list should be a cakewalk.

Kelley Holland

Stop your grown kids from ruining your retirement

Sharon Epperson | Judy Gee

Thursday, 2 Jul 2015 | 7:30 AM ETCNBC.com

If you are in your 50s or 60s and are still caring for your kids financially, you really need to start caring for yourself—or you may never be able to afford to retire.

A recent study found more than half of parents who are supporting adult children are "extremely concerned" about saving enough for retirement.

They should be.

Baby boomers are often providing financial assistance to grown kids when they are in the later stage of their own careers during their prime earning years. When you're 50 or older, you have the opportunity to turbocharge your retirement savings with additional contributions to IRAs and 401(k)s.

The maximum contribution to a 401(k) in 2015 is $18,000 plus a $6,000 "catch-up" contribution if you're 50 or older. You can contribute up to $5,500 in 2015 to an IRA or $6,500 if you're 50 or older.
But many boomer parents may not have the money to fully fund their retirement accounts when their kids are living with them.

Say you spend $500 a month on gas, groceries and the phone bill for your 23-year-old son or daughter. Over 12 months, that will amount to $6,000 that could have gone into your 401(k), IRA, or another retirement savings account. If you're 50, putting an extra $6,000 in your 401(k) account this year could grow that balance to nearly $12,500 by the time you're 65, assuming a 5 percent annual return. Use Bankrate's 401(k) calculator to run the numbers yourself.

To get your kid off your couch—and on their own two feet—financial advisors say you should do three things now:
 
Set a time limit. You don't want your children living with you indefinitely. Let them know how long they'll be able to stay at home rent-free, when they're expected to find a job and when they'll need to contribute financially to the household.

Spell out expectations. You're not running a bed and breakfast. Come up with a list of household chores your son or daughter is expected to do, even if they can't afford to pay rent.

Create a financial plan. Maybe you never talked about finances with your child. Maybe you don't have a budget yourself. You both need one. Your child should design a road map to become financially independent and your top goal as a parent should be to secure your own financial future.

Wealthy suffer from 'estate-planning fatigue'

Shelly Schwartz, special to CNBC.com

Monday, 29 Jun 2015 | 8:00 AM ET

 CNBC.com

Despite their wealth and business savvy, more than one-third of high-net-worth families have not taken the most basic steps to protect and provide for their loved ones when they die, according to a recent survey by CNBC.com.

The CNBC Millionaire Survey found 38 percent of those with investable assets of $1 million or more have not used a financial expert to establish an estate plan, while 62 percent have.

Tetra Images | Getty Images

 

Individuals with $5 million or more (68 percent) were more likely to do so, compared to those with $1 million to $5 million in assets (61 percent), according to the survey, conducted by Spectrem Group for CNBC, which polled 750 millionaires.

Republicans (68 percent) were also more likely to use a financial advisor to establish an estate plan than Democrats (61 percent) or independents (58 percent).
The numbers don't surprise Mitch Drossman, national director of wealth-planning strategies for U.S. Trust, who said the constant changes to the federal estate-tax law for nearly a decade (until it was made permanent in 2013) resulted in "estate-planning fatigue."

"We have had an incredible amount of uncertainty with respect to estate taxes, and every change led advisors to reach out to their clients to explain these changes and be sure their documents were up to date and reflective of those changes," he said. "Clients finally said, 'Enough already.'"
The higher federal estate-tax exemption amount, which now stands at $5.43 million per person due to annual inflation adjustments, has also rendered estate planning a lesser priority for many wealthy families, said David Mendels, a certified financial planner and director of planning for Creative Financial Concepts.

Married couples can combine their exemptions to give away $10.86 million tax-free in 2015.
"I think people tend to think of estate planning as being primarily a means to reduce estate taxes, and therefore, if they don't have to pay estate tax, they may feel they don't have to do any planning," said Mendels.

But 15 states, including New York, Connecticut and Massachusetts, as well as the District of Columbia, levy their own estate taxes, which kick in at much lower thresholds. New Jersey's exemption, for example, is $675,000, Rhode Island's is $921,655, and Maryland's is $1 million. "Depending on where you live, estate taxes may still be a factor," said Mendels.
Estate planning, however, is about much more than the size of one's taxable estate, he said.

It's a series of documents that protect your assets, provide for your children and delineate your wishes regarding end-of-life decisions. Absent specific instructions, family members are left to guess at what you would have wanted, causing unnecessary stress and infighting.

"Estate planning is not necessarily synonymous with tax planning," said Drossman at U.S. Trust. "There are still many valid reasons to do non-tax estate planning to address property management, to protect assets and to address exactly where you stand on issues you may confront later in life, like cognitive decline or disability.


"That's going to be a bigger issue with longer life expectancies, better medical care and the aging population," he added.
For families with minor children, a last will and testament is the most critical estate-planning document they can have, said Mendels at Creative Financial Concepts.

"If you have young children, you need a will," he said. "It's not about the money. You need to name a guardian for your children, in case something happens to you and your spouse."
It can also be used to set up trusts for any property your child will inherit and to name a trustee to handle the property until your child reaches the age you specify.

Thy will be done

Failure to do so means the courts would have to decide who is best suited to care for your children if tragedy should strike. A medical power of attorney is another important weapon in your estate-planning arsenal, authorizing an individual to make health-care decisions on your behalf in the event of physical injury or cognitive impairment.
If you're married, that's typically your spouse, but if he or she dies first, you'll need a backup—ideally, someone who is geographically nearby who can communicate in person with your health-care providers, said estate-planning attorney and CFP Austin Frye, founder and president of Frye Financial Center.

"If, God forbid, you are put in a situation from which you are not going to recover, you want to keep control over what happens to you," said Frye.

Such documents are often created alongside an advanced medical directive for physicians, also called a living will, which clarify your wishes regarding end-of-life medical treatment, including resuscitation and organ donation. (Make sure you have a HIPAA form attached, which grants your power of attorney the right to access your medical records, which are protected under privacy laws.)
A durable financial power of attorney document is also necessary, as it identifies the person you'd like to manage your money if you are unable to make decisions for yourself, said Frye. Such legal documents grant that person legal authority to pay taxes on your behalf, borrow money, pay your bills, invest and handle bank transactions.

With higher income-tax rates in effect, tools and techniques that help minimize the income-tax hit to your estate—and your heirs—are playing a far bigger role in estate planning today, said Mendels at Creative Financial Concepts.

Indeed, the top marginal tax rate for wealthy taxpayers now stands at 39.6 percent. Those with higher incomes also face a higher capital gains rate of 20 percent instead of 15 percent, a 0.9 percent tax on earned income (wages) and a 3.8 percent Medicare surtax on net investment income, plus the phaseout of personal exemptions and deductions.
"As estate taxes have come down, the income-tax consequences are much more important," said Mendels.

For example, trusts remain a valuable tool for protecting assets from creditors, legal claims and offspring with poor money-management skills, but due to recent tax-law changes, they could also leave your heirs with less.

Effective in 2013, trusts that accumulate income are now hit with the 3.8 percent Obamacare tax that applies to net investment income. The beneficiaries are also subject to the highest income-tax rate of 39.6 percent and the top capital gains rate of 20 percent on any income received from the trust in excess of $12,150.

By comparison, the top income-tax rate for individual taxpayers kicks in at $400,000 for single filers and $450,000 for married couples filing jointly.
"Trusts are very versatile, and they can do a lot of things, but these are things that need to be thought through," said Mendels. "Your heirs may end up paying much more income tax by leaving property to them in trust than if you just gave it to them outright."

Drossman at U.S. Trust said income-tax implications, as a component of estate planning, have taken center stage at his firm, too. That, and what he calls "reverse estate planning."
"In some cases we're helping clients unwind or reverse some of the estate planning they had done in the past, because it may no longer be needed, given the significant estate-tax exemption or because it would add to their income-tax cost," he said.

"The probability of something happening may not be high, but if it does and you haven't planned, anything is possible, including litigation, higher taxes and complete chaos." -Austin Frye, founder and president of Frye Financial Center

Some families, for example, are taking assets out of trust and giving them outright to their heirs, since they now fall below the estate-tax exemption line. Others created LLCs or family partnerships years ago to facilitate a discounting of assets, but new rules in some cases prevent assets held in such structures to take full of advantage of the step-up in basis.


Remember: Those who inherit appreciated property, including real estate and stocks, receive a step-up in cost basis for tax purposes based on the current market value on the date of the benefactor's death. Thus, the beneficiary could sell the property immediately without incurring a capital gain, or sell it years from now and only owe gains based on its price appreciation from the day they inherited it.
"If held in a discounted entity, they're not stepped up as high as they would have been had they been held outside that entity," said Drossman. "They may no longer want that in place if they don't benefit from any estate-tax savings, and they get a lower basis."

It's never pleasant to contemplate one's own mortality. But high-net-worth families who fail to plan—and there are many—risk exposing their kids' inheritance to creditors, predators and bitter ex-spouses.

Worse, they leave life's most important decisions—such as who will care for their kids and whether their spouse should pull the plug—in the hands of the courts.
"You have to plan for the worst and hope for the best," said Frye of Frye Financial Center. "The probability of something happening may not be high, but if it does and you haven't planned, anything is possible, including litigation, higher taxes and complete chaos."

—By Shelly Schwartz, special to CNBC.com