Boomer inheritance boom may favor Americans already doing well
Visa economists estimate baby boomers will pass down $36 trillion, with much of it going to households expected to save or invest it.
By Frankie Delgado · News Reporter
3 min read
The long-discussed baby boomer inheritance wave may be less of a spending bonanza than some forecasts suggest, and it is expected to tilt toward people who already have money, according to a July report from Visa Business and Economic Insights.
Visa’s economists estimate baby boomers hold $93 trillion in assets. After accounting for debts, retirement spending, charitable gifts and taxes, the report puts the amount available to inherit at $36 trillion.
That figure is far below some earlier estimates that have placed the broader transfer as high as $124 trillion. Wayne Best, Visa’s chief economist, told CBS News that big headline numbers can miss the money that will be taken out before heirs receive anything.
“When people throw around $100 trillion, they don't think about all the deductions that have to come from it,” Best told CBS News. “You have to subtract liabilities, and boomers actually have a lot of mortgage debt.”
Average inheritance pegged at $515,000
Visa’s report estimates the average household receiving an inheritance will get $515,000. The analysis excluded the top 1% of U.S. households, which the report defines as those worth at least $13 million, because Visa said their spending habits do not reflect the broader population.
The report’s big takeaway is that the money may not flow through the economy as freely as a $36 trillion figure might suggest. Visa projects only $8 trillion of the inherited wealth will be spent.
The reason, according to the report, is that many recipients are expected to already be affluent. Rather than spend most of the money, those households are expected to save or invest much of what they receive.
Visa estimates that the $8 trillion in added spending would raise average annual consumer spending growth by about 0.1 percentage points over the next 20 years, bringing it to 2.1% per year.
Homes, trips and cars could get a lift
The report says the businesses most likely to feel the benefit include companies tied to home improvements and travel. Best told CBS News that heirs who already own homes may use inherited money to upgrade them.
“A wealthy person who receives an inheritance from a wealthy parent probably already has a home, but might use the money to improve that home,” Best said.
Best also pointed to airlines, cruise lines and some retail categories as businesses that could gain from the transfer, according to CBS News.
Visa also expects increased spending on vehicles and related costs, including insurance, maintenance, repairs and gasoline.
The report paints the baby boomer wealth transfer as a real force, but a concentrated one: a large pool of inherited money, narrowed by debts and other deductions, then largely routed to households that may already have the means to put much of it away.
This story draws on original reporting from CBS News.