Ten trillion dollars is a lot of money.
It's about equal to the combined gross national products of the United States, France and the United Kingdom.
It's 15 times the total assets ($648 billion) of the world's largest bank (Bank of Tokyo-Mitsubishi Ltd.). It's 60 times the 1996 total revenue of General Motors Corp. ($168 billion).
And it's in the process of changing hands through inheritance -- from America's senior citizens to their baby boomer children -- in the largest intergenerational transfer of wealth in history. (Baby boomers are those Americans born between 1946 and 1964.)
This transfer could bring vast and varied change, as spending patterns, charitable giving and lifestyles may all be affected. Or perhaps, as skeptics insist, the $10 trillion will hardly dent American society.
"Hundreds of billions are already flowing to our children," says Carter Henderson, 72, a Florida-based financial consultant and author of "Funny, I Don't Feel Old: How to Flourish After 50."
A rising stock market, paid-off homes and cheaper health care, he says, make today's older Americans the most financially secure group of seniors who have ever lived. Others also cite lifetime habits of thrift and saving, influenced by the Great Depression, as contributors to the accumulated wealth of senior citizens.
The $10 trillion figure comes from a 1993 Cornell University study by economists Robert Avery and Michael Rendell. It predicted that the number of millionaires in the country would triple in the next 20 years from 1.5 million to between 4.5 million and 5 million.
The wealth transferred will be narrowly distributed -- one-third to the wealthiest 1 percent of the population, one-third to the next 9 percent and the last one-third to 90 percent of the population. Still, do the math: A third of 10 trillion, divided by 90 percent of the population (about 270 million), averages out to about a $13,000 legacy for every man, woman and child among even the least-favored Americans.
In fact, says John De Marco, a consultant to PSI Global, a financial-services market research and consulting firm in Tampa, Fla., the overall average inheritance will be $96,000 and the median $26,000 -- figures consistent with the past 20 years.
He thinks the effect may be small. The trillions of dollars will change hands over a 50-year period to about 70 million boomers. "Not a lot of millionaires are going to be made by this inheritance," De Marco says.
Still, lots of money will be going to lots of boomers. What will they do with it?
"Everyone you talk to has a different crystal ball," says Paul Clolery, editor in chief of the Non Profit Times, a 34,000-circulation business publication for nonprofit managers. He's not expecting charities to bathe in a shower of gold.
Nonprofit "organizations waiting for a windfall will be waiting a very long time," he says. Nonprofits, Clolery says, are trying to tap into the money before the boomers get it by aggressively encouraging planned giving and tax planning by senior Americans to reduce the amount of taxable money in their estates.
As for baby boomers, Clolery says many still have to budget for children, bills, retirement and later-in-life luxuries, so they are not giving large amounts to nonprofits. Some nonprofit agencies are anticipating the money, he says, but the good organizations "don't just expect it to drop in their laps."
David Schaeffer, director of gifts planning for the American Cancer Society, says nonprofits are well aware of the coming transfer of wealth -- "and we're all trying to educate our own donor bases on the importance of estate planning."
His organization has seen an increase in legacies and planned gifts -- at $132 million for fiscal 1997, up from $115 million and $103 million the previous two years. He attributes the increase partly to the intergenerational wealth transfer.
Clolery agrees that most nonprofits are seeing an increase in planned gifts and legacies -- but not necessarily as a result of newly inherited wealth. Rather, he thinks nonprofits have been getting more savvy about soliciting those who have money to give.
But most of the boomers' inheritance is not going to be flushed back for investment or donations, De Marco says.
It will go to everyday expenses -- "to buy a piece of bedroom furniture, pay off a credit card. It's a regular part of the flow of wealth through the economy," he says. "Consumer spending is much more affected by the general economy, unemployment, recession, the stock market and increases in real wages," than by occasional windfall spending.
But that in itself will help to keep the economy stimulated, says Gary Kamimura, an economist at the Washington State Employment Security Department in Olympia. Baby boomers are big spenders, he notes. The 1991 recession was mild in part because baby boomer spending helped prop up the economy, he says, and even now, though Wall Street is jittery, consumer spending -- particularly on durable goods such as cars and electronic equipment -- has kept the economy from "going into the tank."
But if the stock market continues to wobble, Kamimura suggests, boomers may "recognize that spending based on anticipated earnings from stock market portfolios is not a guaranteed thing."
Edward Spehar, vice president in Merrill Lynch's New York global securities department, says the wealth transfer is a driving force behind strategy planning in all financial services. "There is a big savings market out there that is just going to get bigger," he says.
To tap those savings, the life insurance industry, for example, is pushing products to build assets instead of traditional protection-oriented life insurance.
Not all potential effects of the transfer will be positive, warns Harvey Cox, professor of divinity at Harvard University. Money can often do as much harm as good, he says. People who acquire large sums of money sometimes lose their values and sense of morality.
"When accumulating money becomes an obsessive goal," he XTC says, "then it's spiritually destructive. You gain the whole world and lose your whole soul. The whole question is if you think responsibly and generously about the money once you have it."
Cox has been teaching for 25 years: His early students were baby boomers. He recalls that when the boomers were students in the early 1970s, they were more interested in money than are students today.
He guesses that the baby boomers inheriting the wealth haven't changed. "While it's maybe not ultramaterialism," he says, "they're still concerned with making sure they have financial security for themselves."
He places more hopes in the boomer's children, the current generation of students. "They would rather do something else -- write poetry, play music, have some adventures that don't have a dollar sign in front of them."
But Stephen Pollan, author of "Die Broke," hopes there won't be any $10 trillion inheritance. "Inheritance makes absolutely no sense," the New York writer and consultant says. "It forces older people to put the quality of their death before the quality of their life."
He urges seniors to spend it all on themselves.
One big chunk of change
$10 trillion: The baby boom generation, now 34 to 52 years old, has begun to inherit the wealth saved up by their thrifty parents. Most of the wealth will go to those who are already richest, but the average legacy over the next 20 years will be $96,000. Many sectors of society want to tap this giant pool of money.
Charities: Donations are rising at many nonprofits, although the organizations tend to credit the booming stock market rather than baby boomer generosity. Charities are marketing themselves aggressively to the senior generation, hoping to siphon some of the wealth before it gets to the boomers.
Culture: Maturing boomers with windfall money might support cultural institutions. But many commentators say that boomers have always been selfish and will probably spend the money on themselves. That could fuel a lasting economic boom -- and even generate tax revenues to fuel government activism.
Satisfaction: Religious scholars warn that not even $10 trillion can buy happiness. If they haven't already become well-grounded people, the inheritors of this wealth could lose their moral bearings and live broken lives. Some think the boomers' children are a better bet to use money wisely -- if it ever gets to them.
Pub Date: 9/25/98