Disparity observed in inheritance expectations between generations

by / ⠀Finance News / May 14, 2024
"Generational Inheritance Disparity"

New research indicates a substantial disparity in inheritance expectations between adult children and their elderly parents. Factors such as increased life expectancy, financial instability, and changing attitudes towards inheritance contribute to this discrepancy, highlighting a crucial need for transparent financial planning within families.

The current generational shifts in socio-economic dynamics and attitudes are compelling reasons to revisit traditional inheritance expectations. The trend toward active aging and prolonged careers makes the elderly financially independent, lessening the perceived necessity to leave substantial sums for their children.

Conversely, adult children increasingly rely on inheritance wealth due to stagnating wages, inflation, and student loan debts. This compels the need for informed financial planning to navigate the intricate inheritance landscape.

Moreover, this research promotes an argument for policy change in fields like social security, healthcare, and tax laws. It prompts a call to action for lawmakers to consider both current and future generations’ needs, ensuring more equitable financial systems.

Liz Koehler, the leader of advisor engagement at BlackRock’s wealth advisory enterprise, asserts that a significant wealth transition from baby boomers to succeeding generations has begun.

Generational mismatch in inheritance expectations

This shift is expected to reshape the financial landscape, prompting a need for more dynamic and tech-oriented strategies in the industry.

However, despite these estimates, there’s a significant discrepancy between what younger generations expect to inherit and what their elderly parents plan to give. This gap in understanding hints at potential financial strain for the younger generation and the looming threat of insufficient savings for many older adults.

Interestingly, Alliant Credit Union states that about 68% of millennials and Gen Z members expect to receive an average inheritance of $320,000. Conversely, 55% of baby boomers plan to bequeath less than $250,000, indicating a generational disparity in inheritance expectations.

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The Federal Reserve Bank of Boston reveals considerable racial discrimination in inheritance distribution, contributing to racial wealth disparity. Consequently, addressing the systemic racial wealth divide is called for.

Experts suggest the mismatch between expectation and reality stems from inadequate financial discussions and the financial pressures of high healthcare costs and extended life expectancies. Isabel Barrow, the director of financial planning at Edelman Financial Engines, advocates for robust financial discussions within families to ensure a comfortable future for all.

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