Baby Boomers to Inherit Trillions

Dec. 27, 2010 -- "A very nice amount. We were pleased. It reduces my anxiety about retirement." Brian is talking about the inheritance he received 12 years ago. "It's why I have a boat. It's why I drive a Lexus and can afford to belong to a private club."

Brian, 62, who asked that his last name not be used, actually inherited twice — first from his grandfather, then again later from his parents. He calls getting $900,000 "a pleasant sensation."

It's a sensation most baby boomers — adults aged 46 to 64 — can expect to enjoy, according to a new study just released. "Inheritance and Wealth Transfer to baby boomers," commissioned by MetLife from Boston College's Center for Retirement Research, says that two-out-of-three boomers should get something, with $64,000 being the median amount. The study anticipates an inter-generational transfer of wealth totaling $11.6 trillion, including some $2.4 trillion that has already been gifted.

Who'll get what? The study predicts distribution will be "highly unequal."

The wealthiest boomer households will get by far the biggest inheritances, with $1.5 million as the average. The average for the poorest will be $27,000. Median amounts for top and bottom will be $335,000 and $8,000, respectively, according to the study.

Though the study was prepared before the economic crisis hit, John Migliaccio, MetLife's director of research, has since examined the impact of the recession on the dollar value of the wealth transfer. The recession has cost would-be inheritors $800 billion, or about 13 percent of their patrimony. "Not earth-shattering," he calls the decrease, noting that potential inheritances will recover as the economy at large recovers.

David Baxter, senior vice president of AgeWave, a northern California research and consulting company that studies people over 50, says the MetLife study is in sync with AgeWave's own research. The transfer, he says, will come at "a unique moment."

On one side stand the donors -- the Greatest Generation, "famously frugal, having lived in the shadow of the Great Depression." Many retired with generous pensions. On the other stands the Most-Improvident Generation, whom he calls "famously un-frugal." They've not come close to saving for retirement, and their mean financial assets per household are less than $60,000. For somebody in those circumstances, he says, "inheriting $64,000 is going to be a big deal."

Big Inheritance No Sure Thing

He and Migliaccio both stress that the boomer's inheritance is far from a sure thing. Jerry Gerber, whose subscription service Millionaire Insights studies persons of high net worth, calls an $11 trillion inheritance "pie in the sky."

Today, notes Gerber, everyone, including the boomers' parents, is living longer. And a lot can happen in an older person's final years. The end of life can get expensive, eroding parents' savings. Whether there will still be money left after a protracted illness or years spent living in a nursing home is hard to say.

Transfers, if and when they come, will follow the death of the boomer's surviving parent, says the MetLife study.

That was the case for Mary Crane, 51, a consultant in Manhattan who teaches social skills to lawyers and executives. Her mother died in 1993, but she inherited nothing until after her father's death in 2005.

Crane says the knowledge she might someday inherit had no influence on her. "I never viewed it as somehow owed to me, nor was there any guarantee I'd receive anything. I told my dad he ought to go through as much of his money as he could while he was still alive — he ought to enjoy it." In the end, she and her siblings wound up receiving about $150,000 each.

AgeWave's Baxter notes that while such amounts have the power to make the recipient's life a little nicer, they're not game-changing. "No panacea," calls them. Typically they won't be big enough to fund retirement or offer permanent financial security.

What might boomers do with their found money? Baxter thinks that while the generation so far has tended to spend money on trappings of the good life (whether they could afford them or not), it may behave differently in future. "I think we're moving into a time when boomers will be spending less on things and more on experiences. They're showing more appreciation for the importance of family and of relationships. I think in future years we'll see them spending, say, on vacations with their adult kids or with their grandchildren. "

Inheritances are Changing Lives

Still, the money has allowed him to take time off, travel, buy art and generally "to fluff up the house." It's also made it possible for Leonard, a San Francisco real estate agent, to flirt with a new career: doing voice-over work. "What it does is this: you have options. That's what it gives you, and that's very nice."

Mary Crane eventually used her inheritance to make the down-payment on a small co-op apartment, which she treasures as her nest. Could she have afforded it without her inheritance? Yes, but getting the inheritance certainly helped.

Her comfy little home, she says, is a constant reminder of her parents. "At least once a month, at some moment when I'm most enjoying it, I thank mom and dad."