Boomers to Inherit $8.4 Trillion: Will That Rescue Their Retirement?
Boomers will inherit $8.4 trillion over their lifetime. That's the latest news from a study just released by the Center for Retirement Research at Boston College and sponsored by the MetLife Mature Market Institute. While $8.4 trillion may sound like a lot of money, that won't bail out boomers' retirement. Let's dig down on the numbers to see why.
According to the Inheritance and Wealth Transfer to Baby Boomers study, the median inheritance is estimated to be $64,000 per boomer. This means that half of all boomers will receive less than $64,000, and half will receive more. Double this amount if you're part of a married couple.
For a quick estimate of how much retirement income that might generate, let's apply the four percent rule. That results in an annual income of $2,560 generated by the $64,000. Double that if you're married. While this income helps, it certainly won't be enough for a secure retirement.
In addition, the study shows that the amount of wealth is quite skewed; the top ten percent would receive a median amount of $335,000, while the bottom ten percent would receive a median amount of just $8,000.
Also, more than half of the wealth is quite illiquid: 33 percent is in housing and another 18 percent is in business assets. So it may be hard to quickly cash in these assets to use during retirement.
Finally, there are some important uncertainties regarding these inheritances. For one thing, you don't exactly know when your parents may die; you also don't know how much money they might have to spend on medical or long-term care bills. These bills could end up being quite significant, leaving you with little to no inheritance.
The bottom line for me is this: Most of you won't be able to count on an inheritance to bail out your retirement. So tell your parents to enjoy their money, and develop your own plan to secure your retirement years. This way you won't be frustrated, tapping your fingers impatiently, as you wait for your inheritance while your parents continue to live.
More on MoneyWatch:
- IRA and 401k Retirement Drawdown: Tips to Make the Four Percent Rule Work
- In Your Fifties With Inadequate Retirement Savings? Here's Your Plan
View all articles by Steve Vernon on CBS MoneyWatch»
Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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