The Wealth Effect - Inheritance Myths

The Inheritance Windfall an Urban Legend

Economists, financial advisors, even government tax collectors all agree, the greatest generation were a pack of savers. As they pass away over the next 5-20 years will leave behind Trillions of dollars in wealth. Estimate figures range from 1 to 14 Trillion, I have just assumed Trillion(s). Will they leave their hard saved fortunes to their free spending Baby Boom kids? Or will they endow charities, arts, or grandkids?

In my mind, more important than the question of 'who gets all those Trillions' is how will this wealth be distributed and then spent. Wealth today is concentrated, with the majority of money being held by only 4% of our population. So it is logical to infer that at most 4% of Boomers would benefit by inheriting true windfalls of wealth, and that many of these are the same affluent Boomers today. Wealth will stay within wealthy families for the most part. Based on this assumption, a profound consumption spike of new found wealth is less likely. Instead, wealthy Boomers will grow ever so well healed, and those with 2 homes may buy a third or fourth.

The rich will grow richer, and the Boomers who are waiting for their parents retirement savings, to buoy their lack of thrift, may be disappointed to find the medical costs of their parents' longevity into their 90's and beyond may eat up any sizable windfall.

Who Needs Inheritance Anyway?

With the advent of the 401k, many Boomers wrote off the expectation of retirement income from Social Security and pension plans decades ago. "In the stock and real estate markets we trust", could be an apt theme. Today, the Boomer generation is the wealthiest segment of the population, in 2000, only 7.3% of Boomers are considered to be in poverty, and this is down from 9.8% in 1993.6 The average boomer household earns $56,500 and spends $45,149. So savings although not apparent, is occurring.

"In a national study of bankruptcy conducted in 1991, Teresa A. Sullivan and her coauthors showed that half of the individuals who filed for bankruptcy protection were baby boomers. In another study, Sophie M. Korczyk noted that 8 in 10 baby boomers expect to work, at least part time, after they "retire," but only a third expect to scale back their lifestyle during their retirement years" from The U.S. Bureau of Labor Statistics in 2005. Given conflicting statements like these, how do we determine if the Boomer Generation is wealthy or bankrupt? The answer is "both", and lies in the size of this generation - 78.2 million persons. The haves and have nots still exist today; some figures suggest the gap is widening, but America has a way of masking this gap. Even middle class Americans are finding ways to afford new levels of luxury, this again is Besting. If you can't afford to live like a Millionaire, you can certainly afford to rent the lifestyle for your vacations each year. With options like timeshare, destination clubs and fractional ownership you can even own a slice of the Billionaire Life.

"I'm ain't gettin' inheritance, maybe I will just work until I'm in the grave! Would you like fries with that?"

-- Anonymous Boomer

This is an expert from the new book: "Besting - Better Nesting" www.BetterNesting.com which explores the housing demands of the Boomer generation.

Bob Waun is the author of a new book on this trend called: Besting http://www.betternesting.com . He is CEO of Vacation Finance, America's First Second-Home Lender and a leader in the resort and second home industries.