LOS ANGELES–In March, Sukran Sir lost her father. Then she lost her job.
There was more bad news: The 58-year-old Ventura County, Calif., resident was expecting to get unemployment benefits but hasn’t heard whether she qualifies, despite two phone interviews.
Sir, who goes by the nickname “Suki,” is counting on her inheritance to help turn things around. Sir’s father, Suleyman, a former aerospace engineer, left her about $80,000 in cash and stocks and the family home in Oxnard.
But even that gain won’t ensure a comfortable retirement, and it comes wrapped in complications.
“I have so many friends who are in my situation, either taking care of their parents or their parents have just passed away or are about to,” Sir said. “Our parents didn’t think very carefully about estate planning or trusts. He was like, ‘You’re my daughter, of course it is going to you.’ He thought there wouldn’t be any problems.”
Many baby boomers are finding out that the bequests they’d been counting on may not be quite the windfall they’d expected. They’re receiving less money than had been anticipated as recently as the 1990s, when experts were projecting a huge wealth transfer as the postwar generation passed on.
“The average inheritance is actually quite small, just fractionally above $40,000,” said Anthony Webb, senior research economist at Boston College’s Center for Retirement Research.
Webb attributed the diminished payout to stock market downturns and the recession. In addition, boomers’ parents are living longer and facing higher costs for health services and long-term care.
“The average home price in America is only a fraction of what it is in Southern California,” Webb said, “and it’s very easy for that housing wealth to be eaten up by long-term care costs and the like.”
Sir is better off than most. Her parents left her a mortgage-free home valued at about $420,000, bringing her inheritance up to about $500,000.
But estate planning can be confusing, and the hand-over isn’t always smooth.
Sir already has made a common mistake: She closed her father’s bank and credit union accounts shortly after his death and now she’s having trouble cashing dividend checks from an investment account because they were made out to her father’s estate.
“Do not prematurely close the deceased’s bank accounts,” said certified financial planner Sandra C. Field, who reviewed Sir’s finances. “Wait six months, nine months or even a year.”
Sir ran into more difficulties because funds from the credit union were made out to the estate.
It would have been easier for Sir if her father had established “payable on death” bank accounts naming her as the designated recipient or had set up a “transfer on death” designation affidavit, Field said.
Complicating the picture, Field said, is that rush of emotions that comes with an inheritance for adult children nearing the end of their working years.
“They are terrified about doing something wrong,” Field said. “They tend to have some debt, not a lot of savings…. Some view it as their last chance to save their retirement.”
Many people haven’t saved enough on their own to maintain their accustomed lifestyle in retirement. Among those ages 55 to 64 with 401(k) plans or IRAs, the average amount saved per household was just $120,000, Webb said, and they are the lucky ones. Among those with no 401(k) or IRA accounts, Webb said, “it’s pretty certain that they have virtually nothing in savings.”
Sir has about $100,000 in savings and investments as well as about $18,000 in credit card debt.
She dreams of being able to travel to places such as her native country, Turkey. She had planned to do some serious remodeling on her Oxnard home, perhaps even replacing the roof.
Sir would like to move eventually to the Santa Monica area, where she lived before she returned to the family’s Oxnard home in 2000 to help her father care for her mother, Ismet, who died in 2009.
Before that, Sir had spent summers in Ireland with her husband. They have been separated for years but never formalized the arrangement or divorced.
Unemployed since August, Sir said she would like to teach yoga or sell homes, once she gets a real estate license. Over the years, Sir has worked in product management and advertising in the publishing and music industries.
“I think I will be working until the end,” she said. “I can’t imagine myself not working, not being productive, not helping people.”
In the meantime, Sir is renting out part of her home for $700 a month.
The first stop on Field’s road map for Sir: Find a job.
“She’s going to need a job that pays at least $20,000 a year,” said Field, adding that “$40,000 to $50,000 in income would be even better and give her more options.”
It should be a payroll job with a salary and benefits rather than one as an independent contractor, as Sir’s preferred work as a yoga instructor or real estate agent often may be classified.
“She has no siblings and no children, so she is going to have to look out for herself,” Field said. “She needs a job that will provide healthcare and disability. I would really like her to find a job where she has a consistent paycheck, a consistent cash flow. When you are an independent contractor, you also pay more in taxes,” Field said.
“Her situation is not desperate. She has options,” Field said. “If she didn’t have the house, she would be in a different position. She is very talented and extremely personable, which should help her get hired.”
As soon as she can, Field said, Sir should have all of her inherited assets transferred to accounts in her own name. Some of those transfers began late last week, giving Sir access to some badly needed cash.
Once the stock Sir’s father left her has been transferred to her name, Field said, she should sell it and pay off the two of her three credit cards with high interest rates.
Field also wants Sir to keep a sharp eye on her budget to avoid running up more credit card debt. Now that Sir is in charge of the house and has taken on a tenant, she might find her expenses, such as home repair, higher than she anticipated.
Like many financial planners, Field thinks people tend to underestimate how much they are actually spending and advises they keep close track of expenditures for several months.
Once she finds a job, she should start 401(k) contributions as soon as she can. If that isn’t possible, Sir should begin contributing to an IRA.
She should also hold off on the $8,000 in home repairs and remodeling she had planned.
“Do the bare minimum in repairs for the house for two years,” Field said, which would give Sir time “to decide whether she would relocate to Los Angeles.”
If she does move south, Field said, Sir “could easily get $2,200 a month renting the home to a family.”
Field said that Sir should also consider getting a legal separation, which would allow her to file taxes as a single person. Filing married, but separately, as she has in the past, has stuck her in a higher tax bracket.
Because she has worked for much of her adult life, Sir can expect to receive $1,580 in Social Security when she reaches 66 years and two months in age.
Field said she would like to see Sir “put off taking your payments as long as you can until full retirement age. If you are working, delay.”
For Sir, it’s still a lot to consider and absorb, especially with the emotions still so tender just seven months after her father’s death.
There have been constant reminders of loss; when she was trying to prepare the room her tenant would be renting, several attempts at shampooing were required, for example, to remove any sign of the ruts in the carpeting from her mom’s wheelchair.
“I have been so overwhelmed and so concerned,” Sir said. “To me, it was just so complicated.”
