Baby boomers, who were born between 1946 and 1964, are the wealthiest generation to have ever lived. A recent study from financial firm Charles Schwab suggests also they are the least likely generation to need to share that wealth with their offspring.
Wealthy U.S. boomers say they might reasonably use their money on themselves than share it with their kids now or leave behind an inheritance once they die, Schwab’s study found. When asked about preferences of handing down their wealth with the following generation, a disproportionate share of boomers — 45% — chosen “I need to enjoy my money for myself while I’m still alive.”
In contrast, only 11% of Gen Xers (born between 1965 and 1980) and 15% of millennials (born 1981 to 1996) said the identical.
Then again, 34% of boomers said that they need to preserve their wealth so that they can leave behind an inheritance. The remaining 21% said they need their kids to have the option to enjoy their wealth while they’re still alive (and not leave an inheritance).
Schwab’s study on generational wealth transfers, which was released in December, surveyed 1,005 high-net-worth Americans with no less than $1 million in investable assets. It follows separate research that shows wealthy Americans are way more prone to be those abandoning inheritances than individuals with low-to-middle incomes.
The scale of those inheritances — for those planning to depart one behind — also has lots to do with age, Schwab’s study found. Gen Xers plan to depart behind essentially the most generous inheritances, valued at $4.8 million, while millennials expect to pass $4.7 million on to their kids.
Boomers said they’re planning to depart behind the least, at $3.1 million.
Collectively, boomers have accrued about $85 trillion — accounting for roughly 50% of all household wealth within the U.S, in accordance with the most up-to-date data from the Federal Reserve. Gen Xers hold nearly $47 trillion, while millennials have $23 trillion.
Don’t bank on the ‘Great Wealth Transfer’
Schwab’s study casts doubt on whether the “Great Wealth Transfer” will profit younger generations as much as they may hope.
For years, economists and analysts have been projecting that a large trove of wealth held by boomers and their elders will soon flow to younger generations. Some $124 trillion — the overwhelming majority of which is held by Americans 65 and older — could change hands by 2048, in accordance with an estimate by the financial consulting firm Cerulli.
In other words, the Great Wealth Transfer could be “essentially the most significant transfer of wealth intergenerationally that we have ever seen on the earth,” Chayce Horton, a senior analyst at Cerulli, previously told Money.
But that’s under the idea that the cash actually gets into the hands of younger generations. Schwab’s study is only one indicator in a growing body of research that implies older Americans might find yourself depleting their wealth before it gets passed on — each voluntarily and involuntarily.
Except for selecting to not pass on any wealth, some older Americans are watching their fortunes shrink quickly as they face the skyrocketing cost of long-term care of their final years. In accordance with a 2019 report from the U.S. Department Health and Human Services, some 70% of Americans who reach age 65 ultimately develop a “severe” need for long-term care services.
Despite this, the vast majority of Gen Xers and boomers haven’t financially prepared for that likelihood, data from Northwestern Mutual shows.
Even for high-net-worth Americans, the prolonged cost of long-term care can easily eat into what would have been an inheritance. As an example, just part-time assistance for easy tasks from a home-health aide typically costs greater than $4,000 monthly.
And a personal room at a nursing home? Nearly $10,000 a month.
