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Why most boomers can expect to inherit little

An expected $41 trillion wealth transfer will be eaten by high healthcare costs, increased longevity, and diminishing market returns.

By Kathleen Connell / July 14, 2008

Wake up, baby boomers. Despite frequent media references to a $41 trillion generational wealth transfer in the United States from 1998 to 2052, the vast majority of Americans should not expect to get rich from an inheritance.

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"Inheritance is a privilege, not a right," says Nancy E. Frank, a financial planner in New York City. Her advice to those fortunate enough to receive an inheritance: "Live life as if you haven't inherited money."

For most baby boomers, an inheritance will not be part of their future. According to a 2006 AARP study, 19 percent of boomers ages 44 to 62 had already received an inheritance with only 15 percent still expecting one.

Wishful thinking regarding inheritances also extends to the amount of money that will be received. The median inheritance reported by AARP is $49,000, barely enough to pay for one year at a private college. Only 2 percent of baby boomers who got an inheritance received more than $100,000, according to Tiburon Strategic Advisors, a financial-services consulting firm in Tiburon, Calif.

Jeff Camada, a financial planner from Jacksonville, Fla., urges his clients to be self-reliant.

"Our experience is that clients with wealthy parents of $2 million or more in assets have no expectation of an inheritance given their parents' longevity and soaring healthcare costs," he says. "Boomers are concerned that their parents enjoy their lives."

Yet many boomers are hoping that an inheritance will bail them out of a retirement shortfall. Only 38 percent of those ages 45 to 55 and 41 percent of those 55 to 65 have more than $100,000 saved for retirement, not including their primary residence or defined benefit plans, according to an April survey by the Employee Benefit Research Institute.

So here's why less than one-third of all boomers can expect to get an inheritance:

•Retirement costs have soared over the past few years. In particular, healthcare costs have increased at double-digit levels with Fidelity estimating that retirees will need $225,000 in retirement to cover non­insured healthcare costs.

•Longevity is increasing, with almost one out of three 65-year-old women and one out of five 65-year-old men living to age 95, according to TIAA-CREF.