By Nick Ravo With the wealthiest generation of elderly people in
the country's history reaching the end of their lives, economists
are trying to predict what will happen to their money.
The assumption is that a wave of inheritances will provide their
children, the baby boom generation, with a windfall. But the
federal government is also expected to keep its eyes on the money,
and some economists predict a push for higher inheritance taxes to
help solve the budget crisis.
``There has been a great run-up of wealth among the elderly,''
said Robert B. Avery, an assistant pofessor of economics at Cornell
Much of this accumulation was built between the late 1940s and
the late 1960s, when real wages and savings rates were higher and
housing costs were lower. For the middle class, the most
significant factor may be the escalation of real estate prices over
the last 20 years.
``It's a substantial amount of wealth,'' said Frederick A.
Elkind, vice president and director of the TrendSights division of
the Ogilvy & Mather advertising agency, which forecasts buying and
``And there is a potential for a substantial amount of money and
assets to be released or transferred to the baby boomers.''
Not everyone believes there will be an inheritace boom. Cheryl
Russell, the editor in chief of American Demographics magazine and
the author of ``100 Predictions for the Baby Boom Generation,''
acknowledged the unprecedented wealth of today's older people, but
she argued that the size of the baby boom generation has grown
faster than the size of the parents' estates.
``Most people will inherit only a middling amount of money,''
Russell also maintained that a variety of variables,
particularly health care costs, may reduce the size of many estates.
``It's counting chickens before they hatch,'' she said.
But many economists say that even when rising medical costs and
other factors are taken into account, inherited wealth is expected
to become a significant economic force.
According to Cornell's Department of Economics and Housing, the
total worth of estates at death is expected to rise from $924.1
billion between 1987 and 1991 to $2.1 trillion between 2007 and
2011. The estimates are in 1990 dollars.
``Inheritances as a proportion of total wealth have been
increasing over the last 20 to 25 years and will certainly continue
increasing in the future,'' said Edward N. Wolff, a professor of
economics at New York University.
In all, the 64 million baby boomers stand to inherit an
estimated $6.8 trillion between 1987 and 2011. Of course not
everyone will benefit equally.
According to the Cornell study, the richest 1 percent of the
population will divide one-third of the worth of the estates, each
receiving an average inheritance of $3.6 million; the next richest 9
percent will divide another third for an average inheritance of
about $396,000; the remaining 90 percent will share the rest. …