There was an article published on December 29 on NBC News, and the headline was “The wealth transfer from boomers won’t save Generation X and the Millennials”. This article got my attention, and I was interested to read that what I have been talking about for the last few months especially, was mentioned in this article.
The Wealthiest Generation in World History
The article refers to the fact that the baby boomer generation is the wealthiest single generation in world history. This baby boomer generation had their careers in the 70’s, 80’s and 90’s and earned good money. They were well positioned compared to previous generations, and even the generations after them from a financial standpoint. Given the average age of the baby boomers, it is estimated that this generation will likely pass away during the next 30 years.
One would imagine that the wealth transfer from the baby boomer generation would help the next generation. It seems that Generation X and the Millennials are not as financially secure as their parents. The home ownership rates are also lower, and the salaries are not allowing them to keep up with the cost of living. Many of the Generation X and the millennials have debt, and as a result, they won’t be able to save money as their parents did.
The article quotes that $53 trillion will be passed down from the Baby Boomers to Generation X and the millennials. It sounds like a lot, but almost 70% of the wealth that will be transferred between the year 2020 and 2045, will come from 7% of US households. These are the boomers who have at least $1million in investable assets and are considered wealthy. The other 93% of the households are splitting up 30% of the wealth, and they represent the middle-class families.
No Inheritance for the Next Generation
It looks like the boomers, who have saved over a few hundred thousand dollars in assets, will likely not be leaving money to the next generation. Considering what could happen if they get sick and need long term care, they will need to spend their money on healthcare. The annual retiree healthcare statistics, indicate that a 65 year old single person needs to spend about $157,500 to cover their health care expenses in retirement. A married couple may need to spend as much as $315,000, while some people are paying more than that.
Medicare Won’t Pay
Based on what the Alzheimer’s Association tells us, one in three seniors are going to have dementia. This means they will likely need long term care and since the government doesn’t pay for nursing homes, they have to pay privately. This costs between $150,000 – $180,000 a year currently. If you have saved several $100,000, believing that you can leave that money to your children, it may not be possible. We are led to believe that after paying into the system for 40 years, we will have health care coverage when we retire at 65.
However, Medicare pays for acute care, but not nursing home expenses. It is unfortunate that many retirees only find this out when they are 65. As a result they have to pay privately, and only when they go broke will Medicaid pay for the nursing homes. This means that the kids of the boomer generation will find it tough from a financial standpoint, to afford long term care. Many of them were hoping to get an inheritance to help them financially, should they need long term care later in life.
Unfortunately, they will not be able to afford to pay for long term care when they may need it. This is based on the fact that they are not making enough money now to afford it later. Essentially, the wealth transfer from the boomers to their children will likely not happen. This is because the boomers will have to pay for their long term care expenses.
Let Us Help You To Transfer Wealth
While we call ourselves elder law attorneys, I don’t like the word ‘elder’ in this instance. Most of my clients who are retirees, are not old and they think elder law is for old people. Maybe it would be better to classify elder law as “Retirement Law”. At the Sechler Law Firm, we teach people about how this ‘broken’ government system requires people to go broke. We do asset protection work, and we use trusts to protect assets from this long term care system.
Asset Protection is the Key
I appreciate that you have worked hard and want to save your house and money for your family or favorite non-profit. I doubt you want to lose your money to long term care expenses or taxes. Rather, let us help you to transfer some wealth to your children, by doing asset protection. When I meet with my clients, we talk about their net worth. Most of them tell me they want to leave an inheritance to their loved ones. Estate planning is exactly that. It is not just death planning – it’s about doing asset protection.
Come To Our Free Workshops
If you’re curious about doing good planning and protecting assets, come to our Three Secrets to Protect Your Legacy Workshops. Visit our website and register for a workshop best suited to you. The workshops are free, and you will learn all about wills, trusts and taxes. We will talk about revocable trusts and irrevocable trusts, and why you should use one. You will also learn about probate avoidance. Essentially, you will learn what you need to know to protect yourself from the risks that retirees face.
You can read the news article here or listen to the Podcast of this blog article on YouTube here.
