What About that $10-Trillion Inheritance Windfall for Baby Boomers? Don't bet on It!
Back in the early '90s, two economists at Cornell University predicted that 'baby boomers' were going to be the beneficiaries of the largest transfer of wealth in the history of the world: $10.4 trillion. "That's 12 zeros," points out CPA Michael Deschamps in a newspaper column.
In fact Boomers' bequests from parents could even exceed $10.4 trillion, according to Dr. Neal E. Cutler, and Dr. Steven J. Devlin of the Boettner Center of Financial Gerontology at the University of Pennsylvania. Currently more than half of all the wealth in the United States is held by people over the age of 55.
However, Cutler and Devlin go on to point out that this $10.4 trillion hand off won't happen all at once. There will be a 45-year bequest period from 1995 though 2040. And if you were already thinking of ways to spend the windfall, consider this: when you divide $10.4 trillion by the number of potential recipients, the amount of the average bequest falls considerably. Substantial numbers of boomers will receive little or no inheritance.
On the yes side, however, is new research from the Social Welfare Research Institute. SWRI forecasts a wealth transfer of $41 trillion, four times greater than the previously predicted $10.4 trillion. How can this be, when people are living longer and presumably continuing to spend during that time? SWRI's John Havens found two key trends: a later retirement age and the increased numbers of retirees who continue to work. So, retirees can spend without affecting the wealth transfer. Even the $41 trillion estimate could be a conservative figure, according to the SWRI.
Well, whether it's $10.5 trillion or $41 trillion (what's a few trillion between generational soulmates), the key thing to remember is this: Boomers will receive a relatively small part of the transfer, with the larger portion being transferred to succeeding generations.
The lesson: active retirement planning is not a luxury for Boomers, but a necessity.
From the Long Beach Press Telegram: "
