CHAPTER NINE
Summary and New Directions for Research
In this chapter I highlight major recent research findings about intergenerational gift giving and bequests and propose a research agenda with fertile questions and issues to be addressed by researchers and policy makers in the coming decades. The evidence intermingled throughout this book helps open new windows to understanding the ways we think about our gift-giving behaviors in late life and their effect on our personal legacy. But, in many cases, the data in this study raise more questions than they answer. Set out below is a set of issues that will call for a conversation among family members, public officials, and interest groups, to address the myriad family-relations matters associated with retirement security in aging America. Toward that end, I list some thought-provoking questions to stimulate discussion.
This study took me on a personal journey of discovery that consisted of different approaches to the intended and unintended consequences of gift giving and wealth transfers in middle-class American families. A constellation of factors in the United States—demographic, political, legal, economic, ideological, and health—will affect inheritance decisions and behavior, and family practice in the future. As Chapter 2 discussed, political and legal aspects of gift giving can increase or decrease a family’s access to different types of retirement income and wealth (private or public). In traditional societies, the transfer of property from one generation to the next was governed by common law and social practice. Widows and adult children shared property according to prescribed norms. Today the transfer of property, like so much else in modern life, is not governed by established norms and practices but is left to the individual, within the bounds of relevant laws. Increasingly, decisions must be made about dividing property among half-siblings and between different families with a common parent. For this reason, leaving a legacy in the twenty-first century will, in large part, evolve around family values learned in childhood and on the beliefs and attitudes toward financial exchanges one develops as one matures.
Despite these findings, efforts to understand the effects of public policies designed to influence individual-level accumulation of wealth often fail to assess the economic policies of aging in the larger context of the goals of other social welfare programs. As yet, governmental proposals, such as the Pension Protection Act, which aims to protect employees’ pensions, and its implications for health care of older adults and their heirs, have not been fully grasped by advocates and lawmakers. Baby Boomers are not a monolithic group, and the age heterogeneity among this birth cohort has ramifications for future support of health entitlements such as Medicare and catastrophic coverage. While these changes in the law will shift more of the burden to workers, employers will also bear a potential cost. Consequently, the increasing regulation of pensions could lessen a corporation’s willingness to sponsor traditional pensions and could diminish future employer support of any retirement benefit proposals.
Lessons can be learned, as shown in Chapter 3, from the current institutional regimes of pension programs in industrialized nations such as Sweden, France, and Italy, which are undergoing dramatic demographic change in caring for their elderly citizens. These nations mirror aging trends in the United States and portend serious problems and challenges for the future of economic security for generations to come if action is not taken to strengthen the state’s obligations to families across the life course. Although the state is often viewed as the safety net for older people in the developed world, increasingly many Americans are turning to family for support, as they enter their retirement years without any private wealth or substantial assets or income.
What emerges from the research is recognition that the family dynamics associated with “gift giving” in late life are complex. The complexities inherent in the decision-making process are deeply textured, and it is difficult to unlock the personal meaning and perspectives of familial money exchange. What is not to be disputed is that the personal motivations underlying intergenerational transfers are anchored in people’s histories. The extent to which early childhood experiences can color an individual’s view of gift giving in later life is stunning. The voices of older adults and their adult children display their deepest feelings and emotions regarding their childhood experiences with family money.
In my research, most families stated that they see leaving and receiving inheritances as an act of love from one generation to the next. People believe that the right way to handle their estate, however modest it may be, is to tell their children the reasons for passing down their assets, and what role they expect them to play in maintaining the family’s values. When planning a will, most parents expect to divide their estate equally among their children, in part because they do not want to show favoritism or cause any resentment among family members.
However, the data reveal a picture that is more complicated and nuanced. It is not uncommon for people to assume and believe that the way they think about gift giving is well intended. But what is unearthed in the narratives of gift-giving behavior suggests that motives are fraught with problems when it comes time to dividing an estate, even a modest one. Family strains are apparent when parents did not engage their children or other relatives in discussions. The preponderance of the data shows that when older family members do not openly share their feelings, specifically regarding expectations of gifts and bequests, it can result in serious long-term consequences for relationships within the family. While the majority of elderly parents feel confident enough in their decisions to inform their children of their wishes, wants, and desires, many of the people whom I interviewed felt uncomfortable holding such conversations. Quite often, either nonaction or denial was the response instead. Although financial honesty is the best policy, for many older people denial can be an effective coping mechanism, at least in the short run. Denial often leads to delays in preparing a will, speaking to adult children, and planning for one’s own death. In the long run, however, avoiding the decision-making process can lead to ill will among family members and unnecessary problems and expenses in distribution of an estate.
Although making sure that all important family members are informed of estate planning helps avoid trouble after one has died, many respondents had not raised this issue with their families; indeed, they had not even thought about it. But, misunderstandings about the distribution of family wealth and belongings occur frequently, often alienating siblings from one another. Such deep-seated negative feelings are seldom anticipated by parents, especially those who avoid planning.
THE DEMOGRAPHY OF GIFT GIVING IN LATE LIFE
The results of this study show that how much older adults expect to pass on to the next generation and their grandchildren varies greatly by social background, family beliefs, and birth cohort. Our study confirms what previous researchers observed in gift-giving behavior across generations. Not surprisingly, socioeconomic status plays a critical role in when gifts are made, if for no other reason than it dictates how much a person can afford to give. Events also influence giving. When all is well, giving is more possible, more generous, and can go as planned, but an elderly parent may end up having medical needs that obviate his or her capacity to give, if steps were not taken before the financial exigency.
The other most significant social structural factors generating different expectations and obligations in gift-giving behavior include parent’s age, offspring’s age and gender, and offspring’s needs. These factors taken together make a significant difference in gift-giving decisions and behavior throughout the adult life course. It became clear from our research that a child’s economic situation trumped all other factors when it came to inter vivos transfers. Those children who needed financial assistance were more often than not provided with resources to the best of the parent’s ability, sometimes with strings attached; but more times than not, the transfers were considered gifts as opposed to loans. Equal treatment of children can be difficult when one has done significantly better than another. The ability to give to a child, especially when he or she is in financial trouble, is also a reflection of a parent’s own success. The fair distribution of assets may not be easily calculated, owing to children’s changing circumstances and their needs for assistance (Gruber, 2003).
Another complicating factor is that the parent is increasingly becoming the one who needs financial assistance. Crossing the line from support provider to needy elderly parent is fraught with difficulties in many instances. Often, embarrassment, pride, or a determination to remain self-reliant keeps the financial line in the sand drawn between a parent and her or his children.
The age-related differences defined in terms of birth cohort revealed in our study were significant. These data suggest a generational shift in inheritance. Traditional attitudes toward gift giving are changing. Significant demographic forces are redefining the expectations and obligations associated with retirement behavior in general and how people perceive their security in late life, with respect to private pensions, savings, housing assets, and Social Security, all of which undeniably affect the relationship between birth cohorts, between the state and the family, and between older parents and adult children, in particular.
SHOULD WOMEN WORRY ABOUT THEIR RETIREMENT?
Gender dimensions also emerged in the research. The transfer of estates from one generation to the next has become more complicated for women in particular. Baby Boomers are now set to retire in record numbers, beginning in 2007 when the first group turns age 60; the issue is becoming more salient as changes in social insurance programs like Social Security and Medicare are debated in Congress. Both adult children and elderly parents are taking stock of how inheritance may affect their retirement security, given rising health care costs and vanishing private pension plans.
As elderly parents, the majority of whom are women, grow older, they tend to focus on their financial security, but women are more likely to be without a safety net. As older women reach deep old age, the mideighties and later, a potential loss of executive functioning can lead to problems in handling money, if steps have not been taken to protect the economic well-being of the very old person.
Women in general, and widows in particular, of the Silent Generation spoke in this study about their unconditional love for their children, including disappointments with children who were still dependent on them after leaving home, and expressed concern about balancing what they intended to pass on to their children relative to what they could afford, given their health situation and contemplating their need for long-term care. Men, on the other hand, tended to respond in a more strategic or instrumental manner, with fewer emotions guiding their decisions regarding long-term care plans. Many elderly respondents felt a family obligation to speak to their children in advance, before a medical crisis occurred, about their bequest intentions. They explained what they hoped to leave to their children and why. As one respondent put it, at the end of the day, this is one of the best gifts an elderly parent can give a child or other loved one.
Baby Boomer women rarely mentioned any concerns about their finances. For single Baby Boomers, the focus on financial literacy was important, although discussing the gift-giving decision-making process seemed difficult. Married women often left financial decisions, like whether to invest, to their husbands. Married men usually assumed the traditional role in family regarding retirement planning. But, what the research results also suggest is that assuring the financial security of future generations will become a greater challenge for women as norms related to marriage change and as fewer jobs in the service sector provide benefit packages that include a retirement plan.
Currently, the Social Security retirement program is based on a male-breadwinner model that assumes that a woman’s retirement security will be assured by marriage to a man who has a pension and is able to save for retirement (Herd, 2005). The fact that black and Hispanic men have faced serious barriers to the accumulation of assets and have often spent their working years in jobs with low wages and no retirement plans makes this model less appropriate for minority women (Herd, 2006). The failure of the male-breadwinner model and the fact that women in general, and minority women in particular, accumulate fewer assets on their own than men do means that women are highly vulnerable to poverty in old age. This is especially true in the event of widowhood.
The changes noted above clearly call for the end of the male-breadwinner model of retirement security. Future cohorts of working-age women will manage their own retirement income sources. Because of the labor force disadvantages they face, the situation of low-wage service sector workers and the unemployed and underemployed requires special attention. For this reason, any changes to be made to the present Social Security system will need to take these vulnerabilities into account.
Therefore, proposals aimed at cutting benefits as opposed to generating revenue are problematic if the program aims to protect minority group widows from outliving their savings (Kotlikoff and Burns, 2005). The powerful AARP and many Democrats state that the main reason for avoiding benefit cuts is clear: Social Security represents a major pillar of minority widows’ old-age security, making up a major portion of their retirement income, and any reductions in their monthly benefits could make their lives worse. Most significantly, both liberal and centrist Democrats alike argue that the program helps keep low-income minority women from falling into poverty because it enables retirement income to keep up with inflation and to be protected over their lifetime from financial risks (Aaron and Reischauer, 2001).
In addition to reforming Social Security, efforts to improve access to private pensions and increased personal savings and investment by low-wage women employees are needed (Herd, 2005). Some critics suggest that Social Security alone cannot effectively guarantee the old-age security of low-wage workers. At the top of the list is the privatization proposal of the president’s 2005 Commission to Strengthen Social Security, although the idea was eventually dropped by the Bush administration. The commission recommended creating private investment accounts that would allow people to invest the money themselves. Advocates favor privatization because they believe retirees could get a higher return than when they rely on traditional Social Security. Privatization proponents also support these plans because they feel they would enhance the potential for bequests (Munnell, Sundén, Soto, and Taylor, 2003). Unfortunately, proposals for pension reform are largely irrelevant to workers with no pension coverage, and privatization of Social Security, without other reforms, could only increase the risk for minority workers. Low-income households, especially female-headed families, have limited experience with private investments, such as stock ownership, and with financial institutions in general and therefore lack investment expertise (Choudhury, 2001–2002). Privatization of the Social Security retirement program would have serious disadvantages for women, in general.
The data demonstrate that old-age economic security of women is greatly affected by race and Hispanic ethnicity. General reforms to public and private retirement systems may well increase the choices available to affluent workers, but they are not likely to increase the economic security of low-wage or minority workers. Targeted programs that focus on the most vulnerable could more directly address the unique needs of older black and Hispanic women, but like targeted programs in general, they run the risk of stigmatizing the recipients and of generating political opposition. Whatever the future holds, public policy focused on old-age economic security cannot ignore gender, race, or ethnicity. As a result, the AARP, the largest interest group representing the concerns of persons age 50 or older, will continue to fervently speak against any reforms that could potentially threaten these entitlements (Schulz and Binstock, 2006). The membership’s interest in the protection of Social Security is underscored by a 2005 survey, which found that 40 percent of respondents expect Social Security to be a chief source of income, because employers are increasingly reducing or eliminating private pensions (AARP, 2005).
GENERATIONAL DIFFERENCES: MONEY MEMORIES AND FAMILY IDEOLOGY
This study challenges the mainstream argument and the consensus among most researchers that structural factors alone account for expectations in gift giving and bequests in the United States. Thinking about how to transfer money from one generation to the next is also associated with the meaning that people attach to money, regardless of their age, income, or child’s situation. Historical period and events affect the emotional attitude toward money.
As the family narratives revealed, money carries a different meaning for the Silent Generation. As a result of the Great Depression during the 1930s, they faced the worst economic crisis in contemporary American history. Many elderly people saw their parents retire during the 1920s with a comfortable income but lose everything a decade later as a result of the Great Depression.
The financial devastation experienced by older Americans during the Depression had long-lasting effects on their assessments of risk. That abject loss of economic security resulted in an expression of an inner sense of obligation to be thrifty and to save so as to take care of themselves and to pass on whatever they could to their children.
Today, older Americans expect their Social Security retirement benefits to prevent them from falling into poverty (Mitchell, 2000). Less than 9 percent of the older population lived below the poverty line in 2005. Yet, members of the Silent Generation did not expect to live as long as they have, and concerns about growing costs of health care for disabling chronic conditions like diabetes, heart disease, cancer, and Alzheimer’s disease are troubling many elderly people.
Sadly, as health care costs continue to rise and there are plans to reduce or eliminate payments for some medications, the money elders planned to leave to their children may be needed for their own long-term care instead. While a small fraction of older Americans have purchased a private long-term care insurance policy, the need for the rest of them to do so in the future is on the horizon. Ten years ago, the Health Insurance Portability Act of 1996 provided an incentive, through federal tax advantages, to purchase such plans. As Chapter 7 discussed, however, these policies can be costly. Consequently, many older Americans today are faced with two choices: either spend their savings to pay health care costs or long-term care costs or do without. Doing without often requires depending on family members to provide some measure of care. For those with significant assets and income, private long-term care insurance may be worth serious consideration, given that the cost of nursing home care can run as high as $80,000 per year (MetLife, 2002).
That elderly Americans are weighing the costs of health care against doing without that care should not be simply conceded, though (Gustman and Steinmeier, 2003). Baby Boomers are experiencing good health, and the number of active days of life expectancy has steadily increased. This means that elderly people may have fewer needs for medical care and long-term care and therefore are far less concerned about paying for it.
How will AARP mediate the concerns raised by younger Americans, many of whom believe that the Social Security retirement program will not be there when they are older? Garnering younger workers’ support of entitlement programs like Medicare and Old-Age Insurance and Survivors benefits is a thorny problem, and it may be a particularly daunting task as children assume a larger financial obligation for older adults. Kotlikoff and Burns (2005) refer to the potential tax burden on many generations to follow as fiscal child abuse. They argue that the recent tax reduction enacted by Congress will only exacerbate what future generations of workers will need to contribute. They predict that many members of Generation X, the cohort of people born between 1965 and 1977, of Generation Y, children born between 1978 and 1990, and people born during the 1990s, Generation D or the Digital Generation, having been unable to participate in these decisions related to tax cuts because they were not of voting age, may oppose any remedies that include substantial increases (as high as a doubling) in payroll taxes to cover promised benefits.
The debate will also be fueled by other actors inside government. For example, former Social Security Administration Commissioner Jo Anne Barnhart, during her term of service (2001–2007), warned workers of the risks of not achieving sustainable Social Security solvency in efforts to educate the next generation of workers about what they can expect to receive in their later years. She underlined the point that, unless measures are taken to strengthen the Medicare and Medicaid trust funds, nearly three-fourths of full benefit commitments will be broken in 2042 due to the exceedingly low dependency ratio of 2.2 workers to every individual receiving benefits (Social Security Administration, 2005). Barnhart’s successor, Michael Astrue, has not, as of this writing, weighed in on the debate.
Today, one-third of government funding favors elderly people, yet the issue has largely been neglected by Congress since the debate began thirty years ago (Bin-stock, 1995). This is in part because Social Security is “the third rail of American politics,” a term applied to it by Tip O’Neill, then Speaker of the House, in the early 1980s. Federal lawmakers of all political stripes hesitate to propose reform options for sustaining the system, such as privatization, because they fear that if they do touch the system they will get burned politically. That fear has stymied any progress toward reform.
So, what is a realistic next step? Robert Binstock (2006), a distinguished scholar of political gerontology, finds that the contemporary debate over sharp inter-generational conflict, pitting the young against the old, has lacked focus and cries out for radical solutions. He urges that advocates “reframe the issues [related to generational equity] in terms of strengthening Social Security and Medicare, rather than tearing them down. Banding together its resources, this coalition should launch a sustained media campaign that portrays the aging of the population as a challenge confronting today’s elders, boomers, their families, and society —not merely problems in financing Social Security and Medicare” (p. 3).
AN AGENDA FOR FUTURE RESEARCH
The numerous questions raised here provide ample opportunity for others to investigate in more depth the issue of how generational transfers affect not only personal financial legacies but also the larger society’s. Family ideologies as they relate to gift giving and inheritance practices will continue to be a topic that deserves much greater attention as the Baby Boom Generation confront their parents’ financial affairs in late life. As experts suggest, the difficulties surrounding an elder’s death can be exacerbated if family business matters are not taken care of beforehand (Umberson, 2006). Therefore, future studies of gift-giving practices would do well to include new groups of adult children and elderly parents. Combined with larger sample sizes, this research design would ensure that the qualitative data (narratives) would truly reflect the population and diversity of contemporary families. It would also help to develop a better understanding of the role of culture and gift giving in late life within certain social subgroups (e.g., women, ethnic minorities, immigrants). With a larger study sample, tests could be conducted of specific hypotheses regarding differential expectations and obligations for newer cohorts of minority American men and women.
Intergenerational transfers will no doubt affect generations to come. How family relations evolve as old-age dependency increases is a subject that deserves serious reflection. Specifically, how wealth transfers shape sibling relations, whether they positively or negatively affect the relationships of those left behind, and how, is a fertile ground for an enduring research program. It is important to investigate how heirs, particularly siblings, interact with each other after a parent’s death and throughout the settling of a parent’s estate. Little is known of the quality of kin relations before and immediately following a parent’s death and its impact on funeral and wealth management, including insurance and investments.
The generational-equity debate examined by Williamson and colleagues (1999) suggests that studies should examine the dynamics of the myriad actors involved in a serious debate, reaching beyond the usual suspects who have profoundly influenced development of federal social policy of old-age pensions over the last century. These senior movements, including the White House Conferences on Aging and AARP, must evolve to incorporate other interest groups who act on behalf of constituents, including Third Millennium, National Council of La Raza, National Organization for Women, to name just a few. Understanding how these advocacy organizations will represent the growing social welfare needs of aging women, minorities, children, and recent immigrants deserves attention.
Policy studies could concentrate on the array of medical care and social service issues that influence our response to the social policy demands. There is a lack of much-needed information, for instance, on whether age-based health care rationing is a realistic solution to insure Medicare solvency. Other research is needed to estimate the individual and employer costs of health insurance for older workers on the cusp of retirement. Few studies assess the effects of COBRA legislation on individuals’ plans for retirement. Gruber and Madrian (1995) observe that Medicare gaps may increase the risk of poor health in late life in spite of COBRA. In the light of this disparity, it would be useful to investigate states’ strategies to reduce administrative barriers to promote access to programs for low-income Medicare beneficiaries.
In addition, we need to expand our knowledge of the complexities underlying the many choices at the end of life. Some of the hardest decisions—how to pay for palliative care, how to balance dying and dignity, and how to provide care that meets the personal desires and needs of a loved one with terminal illness—are as of yet poorly understood. The bitter debate over physician-assisted suicide continues without any resolution.
Not surprisingly, some elderly parents are experiencing financial pressures, especially as the result of the ebb and flow of the U.S. economy creating an erratic housing market, outsourcing of U.S. manufacturing jobs to Asia, and a loss in good wages due to the de-skilling of the workforce. In an era of fiscal constraints, family support will take on greater salience, and, as a consequence, researchers will need to uncover the mystery of the new meanings of what finances convey in adult child and parent relationships in the twenty-first century.
Among other issues to explore is the pressing concern certain to consume the attention of elderly parents of at what point in life wealth should be passed on to heirs. Because of the high costs of education, parents will need to ask themselves whether they should consider factoring in tuition costs when determining inheritance or whether children should wait to receive all of their inheritance. Once again, because parents don’t want to be a burden to their children and children want their parents to have the best care possible, the tradeoffs in decisions about paying for health care could be problematic without previous family discussion about the various alternatives. In the future, how families weigh the strengths and weaknesses of options in long-term care planning for aging parents and their own situation will be critical in light of the generational equity issues associated with health care spending. For this reason, studies should look in great detail at the effect of age-group differences within the Baby Boomer cohort on retirement planning.
Finally, applied research examining the role of the legal community and the government in helping aging families is a fertile area for research. Much needed empirical information still remains to be produced on how to make informed decisions about one’s financial legacy. Understanding the implications of the decision-making process for family well-being could help adult children and their elderly parents enjoy the time spent together during the parents’ fourth age and could unravel the complexities and nuances of this critical process.
Exploring the financial implications of family ideologies and wealth transmission for future generations of daughters and sons will require a bold new approach. Social scientists and policy makers will need to consider carefully the situation of ethnicity, marriage, and family from a different point of view in the light of potential changes in old-age welfare policies. All of these factors will influence the decision to accept this challenge.