The older population in the United States is already making history as the largest population of seniors ever recorded. A primary reason for the dramatic increase in the number of older Americans is the aging of the Baby Boomers. As they move into their retirement years, they are breaking records causing everyone to take notice. Not surprisingly, the largest senior population in history also has a historic amount of wealth. Traditionally, experts would expect that wealth to be passed down to millennials; however, that may not happen this time around because Baby Boomers are apparently quite the spendthrifts. The Indianapolis estate planning attorneys at Frank & Kraft discuss whether millennials will ever see the wealth of the Baby Boomer generation.
The Stakes Are High
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 Indianapolis Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions about how to pass down your estate assets, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
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