The great impending wealth transfer...that isn't?

Many baby boomers plan on leaving a lot of money to their children. On the other hand, many millennials will receive a lot less than they think when their baby boomer parents die. It sounds like we have a communication problem.  

Recently, the New York Times published an article¹ titled: “A Wealth Shift That Could Leave Some Younger Americans Behind.” In it, they note that “Millennials often overestimate how much they expect to inherit from their baby boomer parents.”

For years, we’ve read about the wealth transfer that has now begun from baby boomers to their adult children. What’s less clear is how much money will ultimately be transferred because there are a lot of caveats involved.

What happens, for example, if baby boomers live longer than projected? The costs for assisted living or nursing care can greatly diminish even the most robust portfolio, and those costs can linger for years if a parent lives well into his/her 90’s. The math is simple: The higher the costs, the lower the inheritance.

Similarly, depending on how assets are invested, seniors may see their portfolios tumble due to stock market losses, especially if those losses occur later in life,

One study quoted in the Times article noted the disparity between expectations and reality: “A survey conducted two years ago by Alliant Credit Union found that just over half of millennials who anticipated inheriting money expected that they would get at least $350,000. However, 55 percent of boomers who say they plan to bequest assets say the amount will be less than $200,000.”

Advice for millennials and all other adult children with aging parents: It would be very prudent to have a conversation with your parents about money. Focus on addressing the question: Do they have sufficient assets and income to afford the care they might need as they age? Will they be able to age in place? If not, where can they go? Remember, your parents worked a lifetime to accumulate their savings, and those assets should first be used for their lifestyle and care. (It’s not your money!)

There are situations where certain strategies can be used to safeguard assets for seniors while still ensuring they receive appropriate care. A conversation with an elder-care attorney can help in that regard.  

Advice for baby boomers and other seniors: If you think having the ‘money talk’ with your children is hard, think about how hard it might be for them to initiate the conversation. Think back; you likely never had this type of conversation with your parents. Frankly, those types of conversations rarely occurred years ago. Admittedly, having the ‘money talk’ with your adult children might lead to an unsettling discovery: Not only might you not have sufficient money to leave them after you die, but you might also not have enough money to pay for your golden years. As sad as that may sound, it’s best discovered before reality occurs. The nightmare scenario for an adult child who is nearing retirement is learning he/she must pay for his/her parent’s care. 

Money is never an easy topic, both within households and among family members. It’s important to remember, however, that prudent planning requires honest input. If your financial plan includes inaccurate information, the results may be very disappointing.

1 White, Martha C. “A Wealth Shift That Could Leave Some Younger Americans Behind.” The New York Times , 28 Apr. 2024.