GREAT Expectations

American Demographics, May 1, 2003

THE ECHO EFFECT

Ultimately, the real beneficiaries of any wealth transfer will be the grandchildren of today's seniors: Generation Y, those born between 1977 and 1994, who are now in their teens and 20s. It's safe to say few of them have even thought about retirement. Yet in Schervish's projections, they get the biggest slice of the inheritance pie: $17.8 trillion.

Why so much? For all the wealth that the World War II Generation enjoyed, Boomers are even wealthier. Plus, many frugal Boomers will likely let their own inheritance trickle right through to the next generation. Research indicates that Boomers are more willing to pass money to their heirs than their parents were. In a 2001 Allstate Financial survey of 1,004 Boomers, 67 percent said that they planned to have money left at the end of their lives to give their children as an inheritance. Economist Kotlikoff predicts that inheritances will rise to more than 8 percent by 2050 from about 3 percent today, thanks to the Boomers' relative wealth and their purchase of term life insurance. As he concludes, "It is the Boomers' offspring - not the Boomers themselves - who can expect a bequest bonanza."

But some experts claim even this may be wishful thinking. Gen Y is the second-largest population group behind Boomers, and this young cohort will also have plenty of outstretched hands for bequests as they age. The big question is whether Gen Y will suffer because of their parents' spendthrift ways. If Boomers continue saving little and running up large credit card balances into retirement, there may not be much left to pass on.

So even as Boomers fret about their parents frittering away their inheritances, there's no assurance that they will behave any differently themselves. It's possible that all they'll have left to bequeath is a ragged old family heirloom: the bumper sticker that declares, "Retired - Spending My Children's Inheritance."

Michael J. Weiss, a contributing editor at American Demographics, is a journalist, author and marketing consultant.

Why the Rich Get Richer

Only a small percentage of Americans will ever receive an inheritance. According to one analysis, just about 7 percent of the population will inherit money - and then typically less than $25,000. A mere 1.6 percent will receive more than $100,000.

PERCENT OF POPULATION RECEIVING INHERITANCES

Boomer Pipe Dreams?

The $41 trillion wealth transfer estimated by Boston College has been widely debated for years. While this model calls for Boomers to receive $7.2 trillion in inheritances, others claim that the figure is much too high.

PROJECTIONS FOR GENERATIONAL WEALTH TRANSFER, 1998-2052

Eroded Assets

One reason for declining inheritances is the depressed stock market, which has erased $8 trillion in shareholder wealth since 2001. The losses have hurt stock owners between the ages of 50 and 70 in many ways.

Heirs Apparent

15 WAYS to find out who's in the money

FREE DATA RESOURCES

GOVERNMENT, ACADEMIC AND OTHER NONPROFIT RESEARCH ORGANIZATIONS THAT PROVIDE INFORMATION AND PROJECTIONS ON INHERITANCES: