The “wealth transfer” from Baby Boomers to their heirs has long been a popular topic of discussion in both the financial and academic world. Now, recent economic research has found that this transfer of wealth may not be quite as large as traditionally thought.
This research was conducted by the UK-based Institute for Fiscal Studies (IFS), which studied the transfer of wealth from Baby Boomers to their heirs in various countries, including the United Kingdom, the United States, and Japan. Through their research, they found that the amount of wealth transferred by the Boomers may be smaller than expected due to several factors.
The IFS found that rising land and housing prices were reducing the amount of inheritance passed down from Baby Boomers. In the UK, for instance, house prices were found to have grown 3.5 times faster than incomes since 1991. This is making it more difficult for Baby Boomers to build up large estates.
The impact of taxes on inheritances is also having an effect. In the U.S., estate taxes are reducing the amount of inheritance passed down to heirs. This is especially true for the wealthy, as estate taxes are often much higher for the wealthiest individuals.
Furthermore, the IFS found that Baby Boomers were increasingly choosing to spend their money rather than save it for future generations. This can be seen in the rise in spending on luxury goods and services. Additionally, the increasing cost of healthcare and education is increasing spending on these areas.
Overall, the IFS found that, while the Baby Boomer generation has accumulated considerable wealth, the amount that is passed down to their heirs is likely to be much smaller than traditionally estimated. This is particularly true in countries such as the UK and U.S., where rising property prices and estate taxes are reducing the size of inheritances. At the same time, Baby Boomers are increasingly choosing to spend their wealth rather than save it.
As such, the wealth transfer from Baby Boomers to their heirs is likely to be significantly smaller than expected. This should be taken into consideration by both financial advisors and individuals who are hoping to receive an inheritance.
