Baby boomers, those born between 1946 and 1964, are recognized as the wealthiest generation in history. A study by Charles Schwab reveals that they are also reluctant to share their wealth with their children. According to this research, affluent boomers prefer to spend their money on themselves rather than allocate it to their offspring or leave an inheritance after their passing. In fact, when asked about their preferences regarding wealth distribution, a significant portion of boomers—45%—indicated that they want to enjoy their money during their lifetime.
In comparison, only 11% of Generation X (born 1965-1980) and 15% of millennials (born 1981-1996) shared this perspective. Conversely, 34% of baby boomers expressed a desire to preserve their wealth for future inheritance, while 21% preferred that their children benefit from their wealth while they are still living, rather than leaving an inheritance.
Schwab’s study, which was published in December, surveyed 1,005 high-net-worth individuals in the U.S. with at least $1 million in investable assets. This aligns with other research indicating that wealthier Americans are more likely to leave inheritances compared to those from lower income brackets.
The study further highlighted that the projected size of inheritances varies by generation. Generation X intends to leave an average of $4.8 million, while millennials expect to pass down $4.7 million. Baby boomers anticipate leaving the least amount, around $3.1 million.
Collectively, baby boomers control approximately $85 trillion in assets, representing around 50% of the total household wealth in the U.S., based on recent Federal Reserve data. Generation X holds nearly $47 trillion, and millennials possess $23 trillion.
The study raises questions about the anticipated “Great Wealth Transfer” to younger generations. For years, economists have estimated that an estimated $124 trillion in wealth, mainly held by individuals aged 65 and older, will transfer by 2048—potentially marking the largest intergenerational wealth transfer in history.
However, this assumption hinges on whether younger generations will actually receive this wealth. Schwab’s findings, among other research, suggest that older Americans may deplete their wealth before it can be inherited, for various reasons.
In addition to the decision not to pass on wealth, many older adults face rapidly decreasing fortunes due to the rising costs of long-term care in their later years. Reports indicate that approximately 70% of Americans reaching age 65 will require significant long-term care services.
Despite this reality, many Generation X members and baby boomers have not adequately prepared for these expenses. The costs associated with long-term care can substantially reduce the amount intended for inheritance. For example, basic part-time assistance from a home-health aide can exceed $4,000 per month, while a private room in a nursing home can approach $10,000 monthly.
photo credit: money.com
