Inheritances could be a saving grace for baby boomer retirees, a new study reports.
According to “The MetLife Study of Inheritance and Wealth Transfer to Baby Boomers,” this population segment will inherit $8.4 trillion, of which $2.4 trillion has already been received.
Most boomers will receive the remaining $6 trillion in late middle age upon the death of the surviving parent. Most inheritances are passed from parents to children (63% of inheritances and 74% of dollars), according to the study, authored by the Center for Retirement Research at Boston College for the MetLife Mature Market Institute.
However, given the recent economic crisis and the accompanying fall in housing and stock values between 2007 and 2010, the amount of wealth transfer may decline 13%, from $6 trillion to $5.2 trillion.
Two-thirds of boomer households will receive some inheritance over their lifetimes, with a median amount of $64,000. Although the incidence of receipt increases with income, 50% or more of households in all income groups will eventually receive an inheritance.
Although high-wealth households will receive significantly more than low-wealth households, inheritances have a much bigger impact on the latter group.
Other key findings:
- Although only 17% of boomers had received an inheritance by 2007, two-thirds will eventually receive one. The incidence of receipt increases with income, but 50% or more of households in all income levels will eventually receive an inheritance.
- Among those receiving an inheritance, the median amount is $64,000. The distribution of inheritances, however, is highly unequal. The mean amount received over a lifetime is $1.5 million for the wealthiest Americans, compared with $27,000 for the least-wealthy Americans. But the distribution of wealth is unequal even within income groups, with the mean ranging from $335,000 for the wealthiest to $8,000 to the least wealthy.
- Although inheritances are important, the timing and amount of the receipts of any particular household are highly uncertain. Wealth may be consumed by medical and long-term care costs, or simply as a result of living longer than expected.
- Wealth also is subject to fluctuations in the stock and housing markets, so an anticipated inheritance is not a substitute for adequate saving for retirement.
Review the full study here.