The population of older Americans is the largest it has ever been – and experts tell us the number of seniors will continue to increase over the next couple of decades at least. The primary reason for the surge in the number of older Americans is the fact that members of the Baby Boomer generation are moving into their retirement years. One consequence of the historic size of the Baby Boomer generation is that they also have a historic amount of wealth that could be passed down to millennials – but not all experts think that will happen. As it turns out, Baby Boomers are quite the spendthrifts, meaning millennials may not see the wealth expected to be passed down as the Lincolnshire estate planning attorneys at Hedeker Law, Ltd. explain.
How Much Wealth Is at Stake?
Experts tell us that millennials, now the largest generation in the workforce, are poised to inherit $30 trillion to $60 trillion in inheritances and wealth transfers from older generations over the next two decades. Needless to say, that’s a historic transfer of wealth – if it actually comes to pass. Not everyone thinks it will happen though.
Will that Wealth Make It to Future Generations?
According to a recent article in Financial Advisor, Gabriel Garcia, managing director and head of relationship management for BNY Mellon Pershing’s Advisor Solutions business, is one of the experts who is skeptical that all that wealth will make it to the next generation. In fact, Garcia played down the potential for a huge upcoming intergenerational wealth transfer in the article saying, “Boomers, at a rate of only 40 percent, identify themselves as having a plan to leave behind an inheritance to their heirs. They spent a lifetime of providing for others—college educations, buying first cars, helping to buy first homes, paying down debts, paying for weddings. Now boomers spend $40 billion on consumer goods and $120 billion on leisure travel each year. They’re three times as likely as Gen Xers or Millennials to spend $10,000 on landscaping or interior décor. Boomers are quite a spendthrift generation.”
The other expense that is likely to eat into boomer wealth? Health care. Garcia argued that boomers are planning to live longer, and thus they will spend a lot more on health care than previous generations. Add on other common retirement expenses like taxes, philanthropic endeavors and spending on children and grandchildren, and a large portion of boomer wealth could dissipate before it can be passed on in an inheritance. “It getting passed down directly is frankly something that I challenge,” said Garcia. “I don’t think it’s the most likely scenario.”
What a Difference a Generation Makes
The generation preceding the boomers—often called alternately the “silent generation” or “the greatest generation”—developed passing down inheritance as part of their core values during the Great Depression, said Scott Klososky, founding partner of Future Point of View, a technology and cybersecurity firm. Klososky described his grandfather, who lived a frugal, simple lifestyle in order to pass down an inheritance to his grandchildren, as a good illustration of the silent generation’s ethos. “The older generations came up in a world that was tougher,” he said. “My grandfather came up in the Depression. They were reusing tinfoil. They reused every glass jar—they didn’t throw it in the trash. In the greatest generation, you saw the world differently. You could die—you could literally starve to death—if the economy drops through the floor. For them, saving money and passing it on was maybe a matter of life or death.”
Contact Lincolnshire Estate Planning Attorneys
For more information, please join us for a FREE estate planning seminar. If you have questions or concerns about your own estate plan, including how to ensure that some (or all) of your wealth makes it to the next generation, contact the experienced Lincolnshire estate planning attorneys at Hedeker Law, Ltd. by calling (847) 913-5415 to schedule an appointment.