A Gift That Will Last a Lifetime

I still have Jack-o-lanterns on my porch, and I just received a stack of catalogues in the mail telling me about the hottest gifts for the holidays.  It seems like too much, too soon.  And for many, the months of November and December are filled with far too much.  They are filled with too much food, too much hoopla, and too much spending.  In fact, it is estimated that the people of the United States will spend $2,875,000,000¹on Thanksgiving Dinner Food in 2016.  (That’s right, we’re going to eat almost $3 BILLION dollars.)  But, that’s nothing.  It’s literally a drop in the year-end spending bucket.  It is estimated that Americans will spend a whopping $52 BILLION² on holiday shopping between Nov. 1-Dec. 16th.

We don’t do this to be lavish or excessive.  We do too much, because it is a way for us to show our love.  It is a way for us to share our hopefulness and happiness with the people in our lives.  Far be it from me to criticize—I have been caught up in the frenzy of buying the new shiny gizmo or gadget for my sons.  I know it is money spent on tomorrow’s trash, but I do it anyway because I want to see the glimmer of excitement in their eyes.  I do it because I love them so much and I want to give them the things that will make them happy.

However, in recent years I have made a bit of a shift in how I look at gifts and giving.  I spend a lot of my professional life researching and studying the state of American Retirement, and even though I look at the information on a daily basis, every day I am stunned by what I read and see.  The lack of savings and the lack of financial preparedness of Americans is a frightening epidemic.  So, I have changed the way I give gifts to my sons.  I still give them one shiny new thing that will delight them, but in addition, my husband and I make contributions on their behalf to a number of financial vehicles that will provide them with a much more meaningful glimmer of excitement in the future.

First of all, we have and have had a life insurance policy in place since the boys were just a twinkle in our eyes.  We recognize that one of the greatest gifts that we can give our children is the peace of mind that they will have financial means if ever we are unable to be there to take care of them.  Ultimately, buying life insurance is a gift that we give ourselves too, because it gives us the comfort of knowing that if something unforeseen were to happen to one or both of us, there would be money available to meet our needs.

Secondly, we are a funding a 529 plan³ for each of our sons.  A 529 plan is a tax-advantaged, state-sponsored savings plan designed to save for future college costs.  We allocate a designated amount of money each month for the benefit of each child, which will help to ensure our boys can avoid debt when they are starting their future.  Today, the average 32 year old has a student debt balance of $34,500, and the young Americans that are carrying this debt find it so burdensome that 30% of those surveyed said they would sell an organ if it meant they could erase their student loan debt⁴.

Next, we are planning for retirement with a sensible and balanced plan that takes future income needs into account.  Now, at first blush, it may seem that this is not necessarily a gift for our children, but it most assuredly is.  In Kathy Robinson’s article “The Sandwich Generation”, and according to the Pew Research Center, 48% of Middle-Aged Adults provide financial support to a retirement aged parent.  By saving for retirement we can help ensure that we will not be a financial burden upon our children when they are in the prime of building their lives.  Fixed annuities are an incredibly valuable component to consider when creating a retirement income plan, because they provide a minimum guaranteed⁵ interest rate and they allow for your accumulated savings to be converted to a stream of retirement income (called “annuitization) that can never be outlived.  Assuring that our retirement plan has a guaranteed income component lessens the likelihood that we will need to rely on our children for financial support in our retirement years.

Lastly, during the holidays we make a charitable donation as a family.  We love the Heifer organization.   Heifer International is a charitable group whose mission is to end hunger and the cycle of poverty in the United States and abroad.  We actually took a family trip to visit the Heifer Ranch in Little Rock, Arkansas.  Every year Heifer International sends out a catalogue that allows you to purchase the gift of livestock for communities in need of food and economic sustenance.  Every year, we flip through the catalogue and choose a gift that we would like to give to others to make their lives a little bit brighter and better.  We do this because it makes us feel good, and it allows us to share our hopefulness and happiness with others.

There are so many gifts that we can share with the ones that we love.  While those gifts that are wrapped in bright packages can bring an instant feeling of joy and delight, the gifts that will last a lifetime are the ones that we plan for over time that show our love for years and years to come.

Bryan Pritchard contributed to this article.

¹Statistics Brain Research Institute, Thanksgiving Statistics, September 2, 2015

²Statistics Brain Research Institute, Holiday Shopping Statistics, October 2, 2015

³529 Plans are subject to investment risk and do not guarantee that you will accumulate enough money to cover college expenses.  By investing in a plan outside your state of residence, you may lose available state tax benefits.  529 Plans are subject to enrollment, maintenance, and administration/management fees and expenses.  Make sure you understand your state tax laws to get the most from your plan.  Tax-free withdrawals apply to qualified educational expenses only.  If you make a withdrawal for any other reason, the earnings portion of the withdrawal will be subject to both state and federal income tax and possibly a 10% federal tax penalty.

⁴Desperate and In Debt: 30% of Millennials would sell an Organ to Get Rid of Student Loans”—Forbes, September 9, 2015

⁵Guarantees are dependent upon the claims paying ability of the issuing company. Because they are meant for long-term accumulation, most annuities have surrender charges that are assessed during the early years of the contract if the contract owner surrenders the annuity. In addition, withdrawals prior to age 59 ½ may be subject to a 10% Federal Tax Penalty.

Please contact the 529 plan sponsor to request an Official Statement which provides more information and which should be read carefully.  You should consider the investment objectives, risks, charges and expenses associated with the Plan before investing.

Bryan Pritchard is a registered representative of Equity Services, Inc., Member FINRA/SIPC, a Broker/Dealer affiliate of National Life Insurance Company. One National Life Drive, Montpelier, Vermont 05604. (800) 344-7437. This information is intended to be educational in nature, and does not constitute an endorsement or recommendation of any financial product, service or the suitability thereof for you.