Wealth Transfer? Boomers Banking on a Mirage

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Under-saved boomers have long believed that a tremendous generational transfer of wealth will save their retirement. Estimates have put the expected bequest from boomer parents at $10 trillion to $30 trillion. Well, don’t count on it.

Boomer parents continue to break the mold in terms of how long they live. Meanwhile, health care costs for those in old age are soaring, the recession has zapped elders’ nest eggs, and with interest rates so low boomer parents don’t have the income they once projected—and are systematically spending down savings to maintain their lifestyle.

It all points to a disappointing final tally. The Wall Street Journal reports that among boomers, 56% now say they expect to receive less than $50,000. Just 5% expect more than $250,000. Allianz Life found that only one in five people past the age of 72 believe they have a duty to leave their kids money. So there won’t be a lot of game-changer inheritances in coming years.

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This will come as a shock to some boomers, who at one point may have expected a retirement bailout from Mom and Dad. What they’re getting instead is a double-whammy: Not only is there little or no money in the parental till, but they are being asked to help the same parents that once looked like a golden goose. In some cases these parents not only need money, but boomer kids’ time as well as they require increasing levels of personal care giving.

The Journal notes how much longer we are living:

“Thanks to medical gains, a 65-year-old man has a 60% chance of living to age 80 and a 40% chance of reaching 85. For women, the odds are 71% and 53%, respectively. All of this has made the 85-and-over age bracket the fastest-growing segment of the population.”

The Boston College Center for Retirement Research found that falling asset values has reduced projected inheritances for baby boomers by 13%. The Center for the Study of Aging at Rand Corp., a nonprofit, found that individuals have reduced their wealth transfer expectations by 19%. Even the affluent are pulling back. Merrill Lynch found that among those with at least $250,000 in investible assets only 41% said preserving inheritances was a top concern, down from 54% in 2009.

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This is the new normal–and it’s the face of a quiet crisis. Retirees without guaranteed lifetime income, and with interest rates so low that they have no safe means of investing for meaningful income, wind up exhausting their savings to make ends meet. One in three adults age 60-plus say they don’t feel prepared financially to live to 85; almost one in two say the same about living to 95, according to Northwestern Mutual Life.

It’s one thing if this crisis merely leaves unprepared boomers to sleep in the bed they have made. But it’s quite another if it leaves largely conscientious elders short, calling on their already taxed offspring for financial help.

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