I previously reported here on the often-quoted statistics suggesting that baby boomers will reap a mega-windfall of trillions of dollars – one of the largest intergenerational transfers of wealth in history – as their parents, the WWII generation, passes away. Well, it’s not that simple. Demographic trends and increased wealth disparities in the U.S. are deflating the inheritance expectations some baby boomers may have been banking on. The following are excerpts from an article entitled For boomers, not-so-great expectations of a windfall, making the following sobering points:
Longevity, with resulting long-term care and health costs, is at the root of diminishing inheritances, but there are numerous other factors:
Fewer traditional pensions to fund longer lives.
Reverse mortgages that allow the house asset to be “spent” before death.
An inheritance pie that must be split among an average of 3.3 boomer children and the grandchildren – not to mention charities and alma maters.
Active older adults choosing to use their money to enjoy retirement.
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Even Paul Schervish, who co-authored the oft-quoted research predicting the huge wealth transfer, says most Americans shouldn’t count on a mega-inheritance to bail them out in retirement.
About 40 percent will go to estate taxes, fees and charity, said Schervish, director of Boston College’s Center on Wealth and Philanthropy.
After that, mostly the children of the rich will benefit, with the wealthiest 7 percent of estates spinning off half the money to heirs.
The remaining 93 percent of heirs will divvy up the rest. “They’re not going to fund their retirement on that,” Schervish said.