Boomers may be inheriting less than thought


Attention, baby boomers: If you've been hoping to inherit a pot of money after your parents pass on, you might want to rethink it.

Boomers aren't going to be inheriting as much as they think, said Laurence J. Kotlikoff, an economics professor at Boston University, who co-wrote a study in 2000 on boomers' inheritance prospects.

He stands by his conclusions.

For one thing, boomers can expect to receive 15 percent to 20 percent less in their inheritance than they would have gotten three years ago because of the stock market meltdown, he said. Boomers also face thinner bequests because their parents are living longer and will spend more of their money in retirement.

"They're going to have to spend more of their wealth on themselves because of big cuts in Social Security benefits, and I anticipate major tax hikes," he said. "Wealth is so unevenly distributed in the country that it would just be unrealistic for more than a very, very small minority to think they're going to get a lot of money."

A few years ago, people were talking about the largest intergenerational transfer of wealth in history due to take place, with boomers the recipients.

At one point, experts estimated that parents of boomers were worth an estimated $14 trillion to $18 trillion. One report projected that about $10 trillion in bequests would go to boomers between 1990 and 2040, or an average of $90,000 per bequest.

But for many experts, that view has changed.

"All along, boomers may have been counting on this as part of their retirement income stream, but they've been barking up the wrong tree," said Dr. Sandra Timmerman, a gerontologist and director of the MetLife Mature Market Institute, which studies aging issues.

Boomers' parents aren't just living longer, they're also working longer.

"People are realizing that they don't have enough to retire on," said Jaime Galvan, a certified financial planner at Spectrum Strategies LLC in Addison, Texas. "Most of them are working longer so they don't become dependent on their children."

Seniors will need all the money they can get, considering how fast health care and long-term care costs are rising.

"The longer you live, the more likely you are to develop conditions that require long-term care," Timmerman said.

"As people seek a supportive environment in their later years, they will, in many cases, choose assisted-living facilities, which offer a combination of social, physical and emotional support, and promote independence," Timmerman said. "It can be costly."

About two-thirds of assisted-living residents pay for their stay out of pocket, according to a 2001 survey by the National Center for Assisted Living.

Most long-term-care insurance plans provide coverage for assisted living, but Medicare doesn't, Timmerman said.

Retirees also can no longer expect to live off their former employers' paternalism, experts say.

"More employers are doing away with retiree health benefits and reducing them," Timmerman said.

Meanwhile, not everyone agrees that bequests will go down.

"The markets may be down, but the largest intergenerational transfer of wealth in history is still coming to town," said a report from the Boston College Social Welfare Research Institute.

More older Americans in the labor force may actually add to the wealth transfer, the institute said.

"Regardless of wealth, the final estates of those who remain in the labor force will have a larger value than the estates of those who do not work during retirement years," the report said.

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