Great Wealth Transfer Expectations

[explanade]

So Baby Boomers hold over half the wealth in the US.

Potentially, Millenial and Gen Z heirs stand to inherit $90 trillion!

However, in a survey of 4500 adults, the expectations of heirs and the givers diverge, a lot.

The financial services company, Northwestern Mutual, recently surveyed over 4,500 adults and found that only a select few can expect a windfall of cash when their parents pass away.


Today, more than half of America’s wealth belongs to baby boomers, with most of it tied to their real estate as they hold off downsizing.


It’s perhaps why over half of Gen Zers and nearly 60% of millennials reported that they’re depending on their inheritance to achieve financial security and retire in comfort.


However, those sizing up their parent’s (or grandparent’s) property and envisioning a relaxed retirement are in for a huge shock: Little over 20% of baby boomers expect to leave an inheritance.


It’s not that the generation has forgotten about their young loved ones. In fact, 60% do have a will in place—but their children and grandchildren are more likely to find funeral instruction in it, than cash or their family home.


That’s because over half of the boomers surveyed are explicitly planning not to leave an inheritance behind. What’s more, only 11% of boomers said leaving something for the kids is their top financial goal.

Read in FORTUNE: Gen Z expect to inherit money and assets—but their boomer parents aren’t planning on leaving anything behind — FORTUNE

So as if there isn't enough friction between the generations -- OK Boomer! -- it seems Boomers and their children (and grandchildren?) are not necessarily on the same page.

Some of the possible reasons for this divergence in planned legacies and expected inheritances include people wanting to enjoy their money, including spending for their children now, to have shared experiences or helping them out financially.

Some told Fortune that instead of leaving large lump sums behind for the next generation, they’re treating their loved ones to the likes of holidays while they’re still around to witness the joy their money can bring.


“If you have money now do good now—don’t wait until you’re dead,” Elena Nuñez Cooper, who plans to pay for her friend’s honeymoon and splash out on charitable causes, recently told Fortune.


Others admitted they’re using their hard-earned cash to enjoy life to the fullest, including trips to Mexico and the music festival Glastonbury—rather than take it to the grave after decades of working hard.


“It’s such a shame to see people dying with so much money in a job they’ve worked in that they don’t enjoy, or with people they don’t like,” a personal finance coach James Beckett echoed. “They go on auto-pilot accumulating wealth and not thinking about what it’s for.”

A more unfortunate reason would be that a lot of wealth will end up being transferred to health care providers and care homes.

While many boomers don’t expect to pass anything onto the next generation, nearly half do have plans to address their future healthcare costs in retirement.


So really, much of the Great Wealth Transfer will probably wind up going to hospitals and care homes.

Meanwhile, Boomer parents are helping children with down payments to purchase homes or just paying for living expenses, like cell phones and video streaming subscriptions or just letting them live in their homes rent and living expenses free after college.

 

[Luvtoride]

Interesting article and survey. I’m sure that Millennials and Gen Z kids and grandkids will be just fine when it comes to inheritance.

We like many here have discussed and the article indicates follow this philosophy…
”Some of the possible reasons for this divergence in planned legacies and expected inheritances include people wanting to enjoy their money, including spending for their children now, to have shared experiences or helping them out financially.”

Our kids and grandkids fall into this experience/ expectation. So many of us here that are comfortable in our retirement financially, want to see our heirs benefit from the wealth we have accumulated while we are still alive! This is also when our heirs can use it most!

My mom died 5 years ago when she was 85 and I was 62. She was not wealthy by any means but the value of her house and assets that my 2 siblings and I shared, while nice, did not make a big difference in my financial life. At my age, most of our big life expenditures were behind us ie. college, weddings, etc. why not help your kids and grandkids out with those expenses while we are here to enjoy it and while our heirs need it the most?

 

[street]

That is a very interesting article. My plan has always been to leave a legacy to my only son and his Family. We don't cheat ourselves out of what we want and need and live very well along the way.
I'm one that doesn't want to die with 0$.

 

[Dalton]

The median net worth for people in their 60s and 70s is around $400k. I can certainly understand that the half that are below that number, with all the fears of cancer and long term memory care, nursing home costs, and wanting their surviving spouses to be taken care of, don't have leaving an inheritance as their top priority. I would expect their priority to be to not be a burden on anyone, if at all possible, similar to my priorities. If I need to move into long term care, hopefully my estate can cover my needs. If there is money left for my heirs that would be great.

 

[Koolau]

So Baby Boomers hold over half the wealth in the US.

The tone (at least at the beginning of that article) seems to promote some sort of generation envy. But why WOULDN'T Boomers have the biggest chunk of assets? They've w*rked entire life-times, saved and invested for many years and had time for the magic of compounding to occur. The other generations will catch up in time - assuming they do what Boomers did with their money. None of this should be a surprise or reason for envy IMHO.

 

[RetiredHappy]

We are spending freely, but we do want to leave an inheritance for my son. Fidelity Retirement Planner thinks we will leave him mid 7 figures, and I hope "it" is right.

 

[catii]

DW & I are at $5.87 million, & still going up. Our problem is figuring out who gets our estate. Our daughter has been disinherited (tried to kill my ex-wife), youngest son is in permanent state care for something similar (in another state), & oldest remaining child lives about five miles away, but is planning a permanent move to Japan next year. One grandson lives in Japan, other grandson is still in college, & granddaughter isn't interested in "money." That leaves a lot of $$ for charity! Still need to figure who/what will distribute assets without spending a ton on trust lawyers.

 

[brett]

Lots of adverts where we live for investment advisory services.

Several mergers and acquisitions in that marketplace as well. From what I can see those firms are also offering tax advice/services, estate planning planning/advice, etc. One stop shopping for some high net worth individuals.

There is a great deal of money out there that is about to transfer. The industry players see this as a strategic opportunity for growth.

 

[Route246]

Had lunch with my nephew (35). Asked him about raising his toddler son, whether or not he's going to screw up like his parents did (my generation). This is all generalized and figurative and not necessarily targeting my brother and his wife. Young baby boomers and old Gen X really left a legacy of screwed up kids, again I say this as a generalization. I blame this on credit cards and access to easy money for the most part. My generation did a good job of sheltering our kids from adversity (again, not myself in particular, my generation in general), hence there are terms like helicopter parents (hovering, micromanaging, overprotecting, controlling, etc.) came into vogue for us. The winners in all of this? Medical professionals dealing with teen depression, big pharma who gets to medicate this generation, credit card companies who continue the ruse and counselors who get to treat the fallout.

He told me they are being very careful, letting him fail, letting him hear about adversity like money struggles and when he gets old enough making sure he earns his own money doing chores and later working in menial service jobs and learning that handouts are not going to happen. I have faith that Gen X's children may turn the corner and lose the pretentiousness of their parents, come back down to earth and learn to live within their means, but then I am an eternal optimist.

 

[CardsFan]

During accumulation, leaving an inheritance was never a priority. The priority was to not be a burden on our DS in our old age. We often (kiddingly) told him if there was anything left, it was an accident.

Now that we are quite comfortably retired, with a WR under 2%, we DO plan for it, but not at the expense of depriving ourselves.

Unless the SHTF, we will likely leave about as much as we started with in retirement, adjusted for inflation. He has no idea how much we have, and is planning his own retirement.

 

[explanade]

The tone (at least at the beginning of that article) seems to promote some sort of generation envy. But why WOULDN'T Boomers have the biggest chunk of assets? They've w*rked entire life-times, saved and invested for many years and had time for the magic of compounding to occur. The other generations will catch up in time - assuming they do what Boomers did with their money. None of this should be a surprise or reason for envy IMHO.

There is definitely envy and it existed long before this article.

I think it's just a statement of fact. The Boomers are one of the wealthiest generations in history.

That certainly has bred some resentment by younger generations.

 

[Sunset]

There is definitely envy and it existed long before this article.

I think it's just a statement of fact. The Boomers are one of the wealthiest generations in history.

That certainly has bred some resentment by younger generations.

Just imagine how much angst and worry younger generations would have if we had all blown our money and not saved a dime... asking the kids when we can move in with them as we can't afford food.

 

[badatmath]

The last time I got money from my parents it was college tuition. There was no "help" in anything since. . . nor did it really occur to me there should be.

Looking back now a modest amount (8-10K) when I got this house would have enabled me to buy a slightly bigger and easier to resell place which would have made a huge difference overall and upped my standard of living a touch.

Much more than the same or 10 times that would make now.

 

[athena53]

Greetings from London, where I'm about to leave for Stockholm for a Baltic cruise and spend more of my kid's inheritance!

These articles seem to fall into two extremes: (1) Baby boomers have
nothing saved for retirement and will be dependent on their kids and social safety nets, and (2) baby boomers are sitting on piles of hoarded money. There are people at both extremes, of course. I guess I'm a "hoarder" but, as the article mentioned, I don't want to outlive my savings even if I need LTC. That's my top priority.

It's easier with only one child but I feel the balance is right; I gift DS and DDIL 15-$20k total each year, pay for family experiences (a nice restaurant meal and taking the kids for a hotel overnight when I visit, family trips to Chicago, a one- hour plane flight from them), and I'm loading up the 529s for the 3 grandchildren. My balance is still growing. I don't want them scrambling to find a facility that takes Medicaid if I need LTC.

 

[pletal]

DW & I are at $5.87 million, & still going up. Our problem is figuring out who gets our estate. Our daughter has been disinherited (tried to kill my ex-wife), youngest son is in permanent state care for something similar (in another state), & oldest remaining child lives about five miles away, but is planning a permanent move to Japan next year. One grandson lives in Japan, other grandson is still in college, & granddaughter isn't interested in "money." That leaves a lot of $$ for charity! Still need to figure who/what will distribute assets without spending a ton on trust lawyers.

We have the same situation. No children and do not know where to leave the money. I work with charities and realize many are not very good managing a windfall of money at one time.

 

[pb4uski]

DW received a very modest inheritance from her DM and I received a mid six-figure inheritance from my parents.

I agree with athena53 that the prime directive is to never be a financial burden to our two kids.

I've already told our kids that they'll just get whatever is left when the second of us dies, thought we will likely do some bequeaths to charity. They are both doing ok... one very good and the other just ok... but they are both fine with that they get what is leftover so no particular expectations have been set. I someimes joke with them that if there is anything left over that it is estimating error on my part, but in reality that isn't true at all.... reslistically there will be substantial leftovers. That said, from our lifestyle they both know that was are well off but have no real idea about what their inheritance will be and are proceeding as if there will be nothing, which I think is healthy.

That said, we probably should consider gifting to the kids at some point... not because they need it or we need to reduce our taxable estate but to give them a little of their inheritance in advance so thy can use that money to make their lives better.

We'll probably tilt things a bit towards the kid that is doing just ok... he decided not to go to college so the money that we had saved for his college money is theoretically still in our coffers. No separate 529 or anything like that... just comingled with our funds.

And if we have what I think we will at the end we will fund the grandkids college. I've also toyed with the idea of a family education fund... a permanent trust that would manage money and then make grants and/or low interest loans to the lineage for higher education.

 

[FIREd]

My (divorced) parents are baby boomers. My 77-year old mother has a lot of debt and I'm not even sure whether she has a positive net worth. On my 76-year old father's side, things are murkier. He's pretty secretive about money but he does seem to be doing well financially. I know for a fact that he owns a pretty large number of real estate properties but I have no idea whether those properties are mortgaged or not. So I personally prefer to keep my expectations low.

I'm a GenXer myself (by the way why would GenZ and Milleniums expect to inherit from Boomers? GenX is first in line it seems). I'm not married and have no children. I only have one Millenium niece. She's nice to me but I feel like she's a bit too comfortable with the idea that she will inherit large sums of money from her grandfather (my father) and me. At best it seems like a lofty expectation and at worst a terrible miscalculation. I know that my sister (also GenX) fully intends to enjoy any inheritance she gets from my father so there may not be much left for her daughter. And in my current will my niece only gets a small portion of my wealth - the rest going to my partner and to charity.

 

[Lorenzo]

My parents were Greatest Generation aka Silent Generation, and both died essentially penniless, and at somewhat early ages. I got my father's beat-up car and a storage unit with junk in it that I didn't touch, and that was all. Fortunately, I had uncles who paid for the funerals.

 

[Andre1969]

I'm a GenXer myself (by the way why would GenZ and Milleniums expect to inherit from Boomers? GenX is first in line it seems).

It depends on what ranges they're using to define "Gen-X", "Millennial", and "Gen-Z". Gen-X was originally 1965-1983, but they kept shaving years off of it and prematurely aging the Millennials as time went by. I've seen some sources shrink Gen-X to as narrow as 1965-1979! And I've seen Millennials pushed to somewhere around 1980-1995.

So in theory someone born in 1964 could get knocked up in 1979 at the age of 14-15, and give birth to a Millennial in 1980. I'd imagine there are a good number of Millennials who have Boomer parents, although I'd guess the bulk of them were still Gen-X. And, any late Boomers who were waiting until their 30s to have kids were popping out Gen-Zs, so it's not out of the realm of possibility.

Plus, it's more fun to blame the Boomers, because by and large, they have more resources, so they're an easier target. And, it just drives home the point that, for ages now, Gen-X is the forgotten generation! Gen-X usually doesn't whine as much as the younger ones and we weren't coddled as much, or at least that's the perception.

 

[MichaelB]

I enjoy these articles because they give me a reason to look again at the Fed reports on US finances (here). It is a treasure of data. The article itself does a good job of provoking some generational resentment, which I think is misplaced. It misses the much bigger issues, which are also thornier and require a more thoughtful analysis.

Total wealth of 55+ is $150T (not a typo). See the graph below. It is roughly 1/4 real estate, 1/4 equities, 1/4 pensions, and 1/4 other. A few observations regarding these numbers.

- Just the increase in total wealth over the past 5 years is more than the entire US public debt.

- Most of the wealth being transferred to the next generation is (or will have been) untaxed. That debt has helped create an enormous amount of individual wealth.

- The shortfalls in the SS trust and Medicare are due to more benefits being paid than contributions made primarily by the same group (Boomers) that has accumulated all this wealth.

- If the US public debt is paid by the same generation that inherits the accrued wealth, it seems both less unfair and less of an issue.

 

[Exchme]

I read the article but there wasn't much meat there. It may matter to overly optimistic heirs individually that mom & pop aren't planning to leave much, but at a macro level, it all works out. Ownership of assets moves along to those alive to enjoy it, regardless of whether that transfer happened via inheritance, gifts to heirs, in exchange for services, gifts to charity, etc.

 

[Spock]

We don't have any kids.
All of the adult nephews have the financial ability of a turnip.
At this point IF there are any savings leftovers (pre-inflation projection = 3M, now = ?), it will be spent on a solid gold (or silver plated depending on $ available) coffin.
They say you can't take it with you, but I intend to try.
Or I could go the bonfire route:

 

[pacergal]

Our kids don't expect it, but they know if we don't need/use it for LTC, there will be some for them.
They also know that we are sharing/spending some now on them. They get a small cash gift every Christmas, we go on a vacation as a family every year (Just got back from Hawaii!, but mostly local trips) and we have helped each child individually over the past few years.
They both have offered/expressed interest in us living with them if needed as we age. They are great kids! Generous, thoughtful, kind. Couldn't have wished for them to turn out any better. And have given us wonderful Grandsons!

 

[Dash man]

We’ve shared our trusts with our two boys and explained our plans. We give them $20-25k each Christmas and they each live in a townhome rent free, that they will inherit when we pass.
We told them they’ll each get $2M of our estate if we still have it, 1/2 each if we don’t. After the $4M we begin distributing some to siblings, charities and our church, and some more for the boys.
We’ve funded the grandkids 529 plans along with two nieces and a nephew whose parents/grandparents can’t help them. We’re considering a generational skipping trust to pass some to the grandkids.

 

[Kings over Queens]

At my age, most of our big life expenditures were behind us ie. college, weddings, etc. why not help your kids and grandkids out with those expenses while we are here to enjoy it and while our heirs need it the most?

This was a big takeaway in Die with Zero for me, and how we are proceeding as we age.