Belief in huge inheritance is a pipe dream

Recent articles in the press stated that retails sales for luxury goods are booming. Apparently, the coming generation is counting on inheriting “trillions of dollars” from its parents.

That is only a pipe dream, one that will vanish as reality sets in. If baby boomers are counting on inheriting money to meet their retirement needs, they will be in for a rude awakening.

Nowadays people seem to talk about and count on an inter-generational transfer of funds, but their belief is without much foundation.

First, it should be recognized that the very wealthy distort that data about the money involved. The Thomsons, Westons, and the Irvings, for instance, slant the data. Including their assets in any survey paints an unrealistic picture.

Excluding that group leaves about three million households. According to the best estimates, their total net worth is $700 billion, $233,000 per household, to be divided by say two children. Household wealth includes all of the overvalued common stocks, which eventually will shrink inheritable assets.

That would be the total if everybody died at the age 65. However, that fortunately no longer is the case. Seniors, particularly the wealthy ones, take care of themselves, and they could live to about 80 or 85 years. Furthermore, that assumes both spouses are the same age, but usually women outlive men, and they will require care, financial and other assistance. With increasing longevity, more and more are moving into some form of assisted living arrangements. A good caring home will cost today at least $60,000 a year, and much more in ensuing decades. In addition, many will require extra help from some organization on a daily basis, and driving in cars for appointments, or for entertainment.

Once seniors move out from their homes, their houses are sold. The housing market in Canada is in shambles, and with dismal prospects. The baby boom generation now wants  smaller homes as it has fewer children, so the large, family home today is up against an already weak market. Condos currently are beset by extraordinary fees for maintenance as the majority of them were built many decades previously. Their inevitable sale will accentuate the glut on the market. Few should believe that the real estate market will  be a source of wealth in the future.

For all those reasons, people will have to face reality. There simply will not be very much money that will be inherited. Baby boomers had better prepare themselves to be financially  self-reliant


Bruce Whitestone