Baby boomers are on the cusp of giving mass amounts of money to their children.
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During the next 30 years, a staggering $36 trillion is expected to flow from Boomers to Gen X, according to a report from wealth manager United Income. Already, the amount of bequests is growing: In 2016, Americans inherited $427 billion, up 116 percent from $195 billion in 1989.
Still, inheritances only represent about half of one percent of all wealth in the U.S. changing hands.
“Wealth equal to nearly two times the size of the U.S. GDP is expected to be gifted to charities and heirs over the next few decades,” United Income founder Matt Fellowes told Bloomberg. “It’s a historically unprecedented amount that is almost incomprehensibly large.”
In total, more than $8.5 trillion was transferred to individual households during this time period.
But as old Americans grow their wealth, it’s widening the wealth gap between generations. Americans under the age of 50 held only 16 percent of investable assets in 2016, down from 31 percent in 1989, according to the Fed’s triennial Survey of Consumer Finances.
Between 1989 to 2016, the average wealth among U.S. households expanded by 95 percent, or from $353,000 to $690,000, according to Federal Reserve estimates, suggesting that inheritances have increased as well. At the same time, the average age of recipients increased by a decade to 51. More than 25 percent of inheritances now go to adults over the age of 61.
Interestingly, the number of households that are receiving an inheritance has remained relatively flat over the past thirty years, hovering around 20 percent. The median household that receives an inheritance of close to $55,000 has about $69,000 in annual income, no college degree, $25,000 in retirement savings and $303,000 in wealth, mostly in housing.
It’s evidence that estates often go toward shoring up the retirement security of older Americans, the report concluded.
“Most inheritances are going to older adults who have little in the way of retirement savings,” Fellowes said. “People receiving inheritances are pretty middle class.”