For decades we've been hearing about the billions of dollars the baby-boom generation would inherit as their elderly parents (the richest elders in history) passed on. But a new study of inheritances finds their impact declining rather than growing. The study, published in The Journal of Economic Inequality and reported on in the Monthly Labor Review, uses 1989 to 2007 data from the Survey of Consumer Finances to examine the impact of inheritances on household net worth.
The impact is a fizzle, not a boom. Rather than increasing as a share of household net worth during the 1989 to 2007 time period, the inheritance share fell from 29 to just 19 percent. Where did the money go?
No one knows for sure, but here's my theory: The prime suspect in the disappearance of all those billions is the health care industry. Perfectly positioned to siphon family wealth from long-lived elders, the health care industry has transformed the long-awaited inheritance boom into a health care facilities, services, and salary boom. According to the Employee Benefit Research Institute, the average man aged 65 or older needs $122,000 in savings to cover 90 percent of his out-of-pocket health care costs in retirement. The average woman needs $139,000. Those numbers are conservative because they do not include the extraordinary cost of long-term care.
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