| WASHINGTON, April 4
WASHINGTON, April 4 The generation that invented
"helicopter parenting" is moving into its grandparenting years
with a wad of cash and strong ideas about how their precious
posterity should live, so get ready for Granny and Grandpa Baby
Boomer to shake things up.
Already, today's first-time grandparents are the youngest
ever, with an average age of 47, according to an AARP survey.
Boomers have the highest median household income of any age
group, according to the U.S. Census; by some accounts they
control as much as 70 percent of American net worth and stand to
inherit another $8 trillion or more.
What could be more American boomer-esque than spending that
money on the grandchildren, indulging them and exerting
influence along the way? Roughly 36 percent of the grandparents
surveyed by AARP said "spoiling (grand)children by buying them
too much" was a part of a grandparent's financial role.
And it's fun. Ask George Marotta, who is not a baby boomer.
The 85-year-old Palo Alto patriarch has turned helping his 10
grandchildren into a hobby that has paid off for multiple
generations. He and his wife started in the mid-1980s, and over
the years have plowed cash into bank accounts, 529 plans and
Roth IRAs for all of the grandchildren.
Their total investment of just under $700,000 into 529
college savings plans has already put five grandchildren through
college; four more are now in college and one is still in high
school. And there's $708,335 left to fund medical school for
one, divinity school for another, and graduate school and
continuing education for all.
"We had more than we needed for ourselves, and so we thought
we would help the grandchildren," Marotta said, noting that he
and his wife became financial planners in Palo Alto in the
mid-1980s, just around the time the dot-com boom was taking off.
Widowed 10 years ago, Marotta has since remarried and is now a
research fellow at Stanford University's Hoover Institute.
"I recently sent an email to my 10 grandchildren, saying
'Don't worry about your career; do something you really would
like to do. Experiment if you want," said Marotta. "We've got
David John Marotta, one of George's three sons, said: "He
has been my mentor."
So how do you do that? Even if you don't have Silicon
Valley/Marotta wealth, you can make a difference in the lives of
your grandchildren, and do it without hurting your relationship
with your kids. Here are a few ideas, from the real experts --
folks like Marotta who are financial advisers as well as
-- Ask for permission. It may sound funny to ask your child
if it's okay before you start throwing money at your grandchild,
but it is a key step. "Some parents don't want their children to
get a lot of toys and things; it's important that you honor
their view," says Janet Briaud, a fee-only financial planner
(and grandmother) in College Station, Texas.
-- Give experiences, and memories. One new trend that baby
boomer grandparents are likely to latch on to are the
multi-generation family vacations. "That's become kind of a
popular thing to do," observes Robert Carlson, a northern
Virginia financial adviser and editor of "Bob Carlson's
Retirement Watch" newsletter.
Carol Pankross, a fee-only financial adviser in Palatine,
Illinois, takes her kids and three grandchildren to Lake Lawn
Resort in Delavan, Wisconsin, every year for Easter weekend. She
went there as a child, as did her mother. "It's a tradition
we've always maintained, and we enjoy it," she said. But key to
her approach is the weekend nature of the trip. A command
appearance for a longer trip might consume more vacation time
than her children could afford to give up and could make them
feel less indulged than controlled.
-- Roth it up. Roth individual retirement accounts are great
savings vehicles for teens and young adults. Grandparents with
the cash can match earnings of their grandchildren up to $5,000
a year for each one, and have them invest it in a Roth IRA. The
income that earns should be tax free for life to the account
holders, as long as they hold it for retirement. And they can
use some of the money for a house down payment or for college.
Marotta took that one step further. He converted roughly
$200,000 of a tax-deferred IRA into 10 Roth IRAs that he owns,
with his grandchildren named as beneficiaries. He expects them
to eventually inherit those accounts, after many years of them
growing income-tax free.
-- Do 529 plans, or don't. The first advice of most
financial advisers to the "how to help a grandchild" question is
to seed college savings plans with money. This money will grow
tax free if used for college, and you can name new beneficiaries
to the account if one grandchild doesn't use up the money and
another one needs it. But not everyone likes this best.
The planners at Briaud Financial Advisors, which includes
not just Janet, but the parents of her grandchildren, daughter
Natalie Pine and son in law Roger Pine, tend not to recommend
them. Well-heeled clients with more than $100,000 to give may
prefer to set up a generation-skipping trust that generally
conveys more flexibility and allows the parents of the
grandchildren to spend earnings every year as they see fit.
-- Keep it simple. Folks who want to help with college but
don't have trust levels of cash can also just keep the money and
pay tuition for their grandchildren once they are enrolled in
school, says Roger Pine. That avoids a lot of 529 fees and
limits and complications, and allows grandparents to keep the
cash if the kid ends up going to the school of motorcycle riding
and partying instead of an accredited college.
It also allows grandparents to take care of themselves
first. Pankross says she sees clients who want to give their
grandchildren everything, even though they themselves may not
have enough for their own retirement.
-- Spoil them, just a little. Briaud's grandson gets to
watch Barney at her house; that's a luxury he doesn't have in
his no-TV home. But, following her own advice, she did ask his
parents for permission first.