Nobody wishes to see their loved ones die so that they can reap a windfall. And because nobody wants to be associated with even having those ‘what if’ thoughts, very few topics are as taboo as the mighty inheritance.
Perhaps inheritances don’t need to be taboo any longer though. Why, you may ask? Because they will be very rare.
Nobody is entitled to an inheritance. But I am anticipating that anyone who does receive one will be considered part of an increasingly rare few.
If you’re a gen x’er or gen y’er, there are a few huge trends going against your chances of ever getting an inheritance:
1. The Boomer Generation isn’t as Concerned with Sharing their Wealth
In a recent U.S. Trust study, only 49% of millionaire boomers said that it was important to leave an inheritance to their children when they die. That was the millionaires – aka the ones who actually have money. For those who don’t have money to give? We’ll get to them in a second.
Boomers think they’ve earned their wealth and have every right to spend every last penny of it. And they are probably right (until we end up financing their debt).
2. The Boomer Generation Doesn’t Really have Much Wealth to Begin with
A very small percentage of boomers will actually have money to give.
In a study done by the Employee Benefit Research Institute on the total average retirement savings per American,
- Only 15% of respondents aged 44-54 have over $250,000 saved
- Only 19% aged 55+ have over $250,000 saved.
- 62% of those aged 44-54 have under $100,000 saved.
- 60% over the age of 55 have under $100,000 saved.
These numbers jumped out at me the most though:
- 44% of those aged 44-54 have less than $10,000 in total savings.
- 29% of those aged 55+ have less than $10,000 in total savings.
And of those, there is a good chance many of them are in debt.
3. Boomers are Living Longer
Boomers will live longer than any previous generation, on average.
The average life expectancy for someone born between 1919 and 1921 was 56.4. The average life expectancy for someone born between 1949 and 1951 is 68.1. That’s a 12 year jump. 12 additional years of living funded by savings is not cheap.
I don’t expect the boomers will take well to the fact that they may never be able to enjoy a relaxing retirement as their parents did. They will retire. And any savings they have left will quickly vanish.
4. Don’t Forget the Rising Cost of Health Care
Health care inflation has outpaced overall inflation in almost every year for the last 60 years. As boomers live longer, it’s going to cost a lot more to keep them alive and to put them into nursing homes. The average cost of a nursing home is over $50,000 per year and climbing. What little savings they did have could be depleted or turned into debt.
5. The Boomers Love Debt & Don’t Know how to Invest
The generation that raised the boomers (our grandparents) believed in a thrifty lifestyle that was not financed by debt. Education was cheap, housing was cheap, and pensions were aplenty. They could live off their pensions while holding on to any additional savings for emergencies and then to give as an inheritance.
All the boomers did were spend, spend, spend. They rebelled against their parent’s frugality. They are the generation that fell in love with mortgages, credit cards, and two fancy cars in every driveway.
Now that the retirement burden has been shifted to individuals, as 401K’s vs. pensions are now the norm, the boomers have shown little savvy in growing their savings through investments. There just won’t be any inheritance to bestow.
Instead of the “how much?” taboo subject around inheritance, perhaps the new taboo subject will be “who is supposed to pay off all your debt for medical/nursing care?”. That WILL become the new inheritance standard.
As uncomfortable as it may be, it’s one that is best discussed sooner than later.
Great post. Very interested and a lot of good data behind your arguments. I tend to agree with you. My parents don’t have much money and I’m not expecting an inheritance. That’s OK. I’m not entitled to it. I think this is going to become the norm. I just hope that I don’t go into debt paying for a nursing home.
This is how I explain it to baby boomer parents — If you didn’t care enough to save for your care in old age, you should not anticipate your children caring enough to pay those costs for you. Medicaid exists for a reason. Plan on using it as the alternative, bankrupting your children and ruining their (and your grandchildren’s lives) should not be something a rational person seriously considers. It’s one thing to have a parent move in with you (we did and it was awful – but she was mentally ill), it’s another thing entirely to need so much care that a facility is required. Medicaid.
I know a few people who are relying on the inheritance they expect to get. My husband and I always viewed an inheritance as a bonus, not a right.
Intersting stats you have.
My parents and many Boomers I know actually lived very thrifty lifestyles and are quite well off, living off their own investments.
I know my parents expected to leave us some money, but dad recently had an accident which will cause problems for him later, so I expect much of the money they planned to leave will be used now for his medical and I am fine with that.
I encourage my parents to spend what they have worked for and take the trips they want as I know my dad is anti debt and only ever spends what they can afford.
Interesting post, but are you sure the true increase in life expectancy is 12 years? It is my understanding that the poor life expectancy for the total population in the early 1900 was under-estimated due to the exorbitant amount of infant deaths. Perhaps the number we should be looking for is how much longer people in their twenties can expect to live in both time periods…
That is a good point that I considered. I am sure a decrease in infant mortality played a part in the bump in lifespan – I could not find data with that excluded. We have also been able to prolong life through medication and increasingly advanced medical procedures. So, it’s a combination of both.
Social security life tables show a life expectancy increase of about 5 years for adults who reach age 65 in 2005 compared to adults who reached 65 in 1900. Study was published in 2005 but extrapolated out to year 2100.
5 years was for males. Female expectancy increased 7 years at age 65 from 1900 to 2005.
reading this from a non-American perspective, this is kind of interesting for me to hear. America is much wealthier than my country, but where I’m from, we rarely have to worry about picking up financial obligations once people pass away and inheritances, though small, almost always exist for at least one offspring. fascinating statistics to say the least
This is an old blog but I would like to add to it. I am an older baby boomer and my sibling and spouses sibling are typical of low net worth, spent heavily on boats, 4x4s, campers, corvettes and collectible cars traded up houses 3x landing in McMansions with heavy McMortgages and lines of credit. We are the older childless nerd aunt/uncle who dress in clothes 2 styles old and drive 10 year old cars. We could care less about style though and still live in our first home bought out of college. Unbeknown to you and your parents we are worth 7 figures as we get our fun from investing and being debt free. Some of you still write to thank us when we send you a check for 25 bucks for your birthday or maybe $100 for your wedding. We have noted who is grateful and happy when they see us. They will receive an inheritance.
My parents always talk about how they’re trying to leave us something but I don’t want an inheritance from my parents, they have given me enough already. I just want my parents to fully enjoy the fruits of their hard work while they are here. it’s their money and I hope they enjoy spending it on them.
The best inheritance or legacy we can leave for our children and grandchildren is inheritance of godliness and wisdom.
Let’s be honest here. Inheritance doesn’t just pertain to the money parents have in accounts. Don’t forget about their paid off homes and any other property they may own. The cars they have and any stored items or possessions that will be sold. My coworkers father recently passed away and he had 4 siblings. After selling all the above each of them received in excess of 100k. That helped most of them either pay off the rest of their mortgages or add to their retirement funds. No not everyone has parents with assets like him but there are parents who were responsible with their finances in the 50s 60s and 70s.