Boomer Generation Thriving on Estimated $9 Trillion Inheritance
Around $36 trillion will flow from one generation to another over the next 30 years, according to a recent report from wealth manager United Income. But much of that wealth will be going to the baby boomer generation.
The study, which used Federal Reserve and academic data, showed that from 1989 to 2016, U.S. households inherited more than $8.5 trillion, and over that same time period, the average age of recipients rose by a decade to 51 years old. More than a quarter of inheritances now go to adults 61 years or older.
“Wealth equal to nearly two times the size of the U.S. GDP is expected to be gifted to charities and heirs over the next few decades,” United Income founder Matt Fellowes recently told Bloomberg. “It’s a historically unprecedented amount that is almost incomprehensibly large.”
In 2016, Americans inherited $427 billion, the most recent data available. That figure is up 119% since 1989, even after adjusting for inflation.
Americans younger than 50 held just 16% of all investable assets in 2016, down from 31% in 1989, according to the Federal Reserve’s triennial Survey of Consumer Finances, leaving the rest to households 50 and older.
As a group, baby boomers inherited trillions from their parents, most of them members of the postwar generation that got almost nothing themselves. And, the inheritances are coming in handy for these boomers. The average recipient gets around $55,000, which is more than double their typical retirement savings.
“Most inheritances are going to older adults who have little in the way of retirement savings,” said Fellowes. “People receiving inheritances are pretty middle class.”
In 2016, the average inheritance received was about $295,000, which was up from $169,000 in 1989 after adjusting for inflation.
More Americans are living longer today without the safety net of a traditional pension, and the date suggests they are being frugal with their wealth to make sure it lasts. The result is more Americans dying before they can spend their savings.
Financial advisors often report having to encourage affluent clients to enjoy their wealth rather than hoarding it.
But the money left for middle-class Americans is wholly dwarfed by the inheritance that children of the very wealthy receive. Estimates from United Income don’t include gifts made during donors’ lifetimes, a typical move in estate planning for the ultra-high net worth cohort. United Income found a widening gap between the super-rich and everyone else.
The organization reported that the average inheritance has risen only about $15,000 in three decades, while that amount has more than doubled for the 0.3% of Americans receiving at least $1 million.
For comments, questions or concerns, please contact David Cohen
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