The Blubber

Boomers hold half of America's wealth — but they're going to spend it on themselves before their kids have a chance to inherit their money, per BI.

As the baby boomer generation enters its elder years, there's a growing curiosity and concern about the fate of their wealth among economists, estate planners, and families across the nation. The prevailing assumption is that as this aging generation passes away, their wealth will cascade down to younger generations, offering financial relief to families grappling with economic challenges. However, this scenario is more complex than it seems.

Key Points:

• The conventional theory posits that when the baby boomers' parents or grandparents pass on, millions of Gen Xers, millennials, and Gen Zers will potentially receive a substantial financial inheritance that could help them improve their financial situations.
• Baby boomers hold an immense amount of wealth, with approximately 55.8 million Americans aged 65 and over, constituting around 17% of the population, collectively owning half of America's wealth, which amounts to $96.4 trillion.
• Nevertheless, most of the wealth held by the older generations in the United States will be absorbed by long-term care expenses and end-of-life costs. What remains will predominantly flow into the hands of those who are already relatively affluent.

According to a 2019 study conducted by researchers at the Federal Reserve, individuals within the wealthiest 1% of the American population who reported receiving an inheritance over the preceding three years stated that they received an average inheritance of $719,000. Those expecting to receive an inheritance in the future estimated an average inheritance of $941,000. In stark contrast, individuals within the bottom 50% of the wealth distribution, who received an inheritance, reported an average inheritance of $9,700. Those anticipating future inheritances estimated an average of $29,400. Even for families falling within the 51% to 90% income range, the average inheritance amounted to $46,000, which is far from life-altering financial support.

Research from the University of Pennsylvania revealed that the likelihood of someone receiving an inheritance over any given five-year period stands at 7.4%. The likelihood increases as one's wealth status improves. Individuals in the top 5% of earners had an 11.2% chance of receiving an inheritance over a five-year period. Initially, the Penn researchers found that the median inheritance among all survey participants was slightly over $12,000. However, this figure encompassed individuals who reported receiving no inheritance. When the researchers computed the median inheritance among those who actually received one, the amount substantially increased to $183,914. Families in the top 5% who received inheritances significantly outpaced the rest, receiving a median inheritance of $424,343.