NCPA - National Center for Policy Analysis


March 29, 2006

The vast majority of baby boomers cannot count on an inheritance to help them out of their coming retirement crisis, says the New York Times. Even as the aggregate amount of inheritances increased sharply over the years, the inheritance received by the typical American declined, thanks to changing demographics, increased life expectancy and poor retirement financing.

Researchers at the Federal Reserve found:

  • The median inheritance of 30 years ago was $10,000 more than today's inheritances, adjusted for inflation.
  • The median inheritance in 2004 amounted to about $29,000 in today's money: hardly life-changing money.
  • While the overall amount of inheritance now hovers at $200 billion annually -- and will reach $25 trillion by mid-century -- a mere seven percent of heirs consume 50 percent of these figures.

What caused the decline in per-person inheritance?

  • Baby boomers must share inheritances with more siblings than the previous generation.
  • The baby boomer's parents, while richer than ever, live much longer and must spend much more on health care costs.
  • The average person between 60 and 70 years old will spend 58 percent of his or her wealth before dying, according to researchers at the RAND Corporation.

Ironically, the concern over health costs and other expenses of old age even applies to those worth tens of millions of dollars, says Fitz Patrick of Citigroup. They often wonder if they will outlive their money.

Source: Eduardo Porter, "Inherit the Wind; There's Little Else Left," New York Times, March 26, 2006.

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