How Important Are Intergenerational Transfers for Baby Boomers?

Due to a changing retirement landscape, many baby boomers are likely to have insufficient resources for a secure retirement. One potential source that could improve their situation is inheritances. Using data from the Survey of Consumer Finances and the Health and Retirement Study, this study quantifies how much boomers can expect to inherit. Our best estimate is that boomers’ will inherit $8.4 trillion. Of this amount, $2.4 trillion has already been received, while the remaining $6.0 trillion is anticipated. We estimate that two-thirds of boomer households will receive some inheritance over their lifetime, with a median amount of $64,000. The estimates are based on data obtained before the economic crisis, so our analysis explores how the collapse in the stock and housing markets might affect the picture. Evidence from the previous economic crisis in the early 2000s suggests only a temporary reduction in prospective inheritances, which will be reversed as the economy recovers. However, given the severity of the recent crisis, we also considered a scenario in which inheritances fall proportionately with the decline in housing and stock values between 2007 and 2010. In this case, anticipated inheritances would fall 13 percent – from 6.0 trillion to $5.2 trillion. In any case, any prospective inheritance is uncertain. Parents or grandparents who expect to leave a bequest may revise their plans based on fluctuations in their asset values. Or they may exhaust their wealth due to medical costs or long lifespans. In short, boomers should not count on an anticipated inheritance to eliminate the need for increased retirement saving.