No, America, the Promised Boomer Inheritance Transfer Will Not Change Wealth Inequality

  Not quite the dead giveaway we expected

The same-old/same-old mega-wealthy families, even with estate tax issues, are simply going to maintain that 1% class of Americans who own more than half the nation’s wealth. Yet Boomer estates have been touted as the greatest expected transfer of inflation corrected wealth in our nation’s history: they call it the great “generational wealth transfer.” Tens of trillions of dollars according to some overly optimistic economists. But if you haven’t noticed, the cost of the here-and-now has risen exponentially. That certainly does not impact mega-billionaires at all. Aside from the legions of tax lawyers and accountants the mega-wealthy have engaged to move assets into trusts or in offshore businesses, the cost of life doesn’t really impact them very much.

But for retirees, many on fixed incomes, and older Americans, they have Congress to thank for failing sufficiently to increase Medicare or Social Security – which MAGA mislabels as “creeping socialism” or “entitlements.” With the Medicare “donut hole,” a horrific unfunded and inadequate national retirement system (other than for government employees), limited managed care benefits, and other exorbitant costs that are not covered by Medicare, older Americans are struggling as few modern generations have. Except the mega-rich who have been wildly successful in keeping their taxes low by borrowing (the federal deficit) based on the credit of all taxpayers.

Marley Jay, writing for the December 29th NBC News, shares this sad story in shocking detail: “The story goes that baby boomers are going to give tens of trillions of dollars to their heirs over the next few decades… The ‘generational wealth transfer’ has become a media fascination, both for its eye-popping size and because it might help younger generations as they face doubts about their financial security.

“That shift is already in the works, and will continue for a couple of decades. According to wealth management firm Cerulli Associates, some $53 trillion will be passed down from boomers to their Gen X, millennial and Gen Z heirs, as well as to charities. That includes both gifts during their lifetimes and inheritances afterward… But the overwhelming cost of health care for older people means most people in those later generations won’t inherit much, even if their elders seem well-off today.

“The bulk of the trillions will go from one group of already wealthy people to another. Cerulli estimated that 68% of the wealth transferred between 2020 and 2045 — which includes boomers as well as older generations — will come from U.S. households with at least $1 million in investable assets. And only 6.9% of households have that kind of wealth to begin with, Cerulli added… That might be obvious, but the notion still raises the prospect of large numbers of people getting a life-changing amount of money, a last gift from a parent or grandparent that meaningfully alters their circumstances.

“Collectively, baby boomers benefited a great deal from America’s economic growth over the second half of the 20th century. The economy boomed in their childhoods as the U.S. became a superpower, and as adults, they had an easier time buying low-cost housing than their children or grandchildren would. Those who bought homes benefited as those properties increased in value. They’ve had the most time to benefit from the U.S. stock market, which has soared roughly 4,000% since 1969.”

Oh, there will be a reasonable pile of wealth passed down to the next generations, but hardly the predicted windfall. For the vast majority, it probably won’t even cover a downpayment in this hyper-inflated housing market. And we still have absurd healthcare costs. We remain the only major developed country on Earth without universal healthcare (which normally covers vision, dental and hearing loss). Our overall pension/retirement system also lags most of the developed world. So how does this reality impact inheritances? Jay continues: “According to the Bureau of Labor Statistics, people under the age of 65 reported spending an average of $5,209 per year on their health care in 2022, while those over 65 reported $7,540 annually [for costs not absorbed by Medicare].

“A study published in 2004 showed that some 60% of lifetime health care spending — a majority, for the average person — happens after age 65… It’s an issue that becomes more severe even as retirees age: Their health care is not only more expensive, the costs increase at a faster pace than everything else does. Citing government data, the nonprofit firm KFF [formerly the Kaiser Family Foundation] says that between 2000 and mid-2023, prices for health insurance, prescription drugs, medical equipment and other health care items increased 114%, while prices for consumer goods and services rose 81%.

“It’s a problem that puts many older people in a financial bind. The Senior Citizens League argues that living costs for seniors have long outpaced inflation and hikes in Social Security payments, especially for people living into their 80s and beyond. Improvements in health care mean there will be more long-lived boomers than any generation before them… But the cost of that health care means many of them will see their retirement savings go quickly if their health declines and they need long-term help.

“KFF, which does research on the health care industry, says the median annual cost of a private room in a nursing home was $108,405 in 2021, while a year in an assisted living facility cost $54,000. A year’s worth of support from a home health aide costs $61,776… Tens of millions of retirees get their health insurance through Medicare, which generally doesn’t cover long-term care facilities. It also doesn’t cover services like dental or vision care… Many people on Medicare get additional premiums for drug coverage under Medicare Part D, Medicare Advantage coverage, or supplemental insurance. But the out-of-pocket costs can add up quickly for people who have limited incomes.”

It’s what happens when a major political party has narrow-focused on cutting government spending, regardless of who gets seriously hurt, in order to keep taxes low for the richest in the land. Like that massive Trump era corporate federal income tax rate cut from 35% to 21%, which added trillions to our federal deficit. There wasn’t much in that for most of us. Corporate profits are soaring these days.

I’m Peter Dekom, and as long as Republicans (now MAGAs) can convince those who would benefit the most from programs like Social Security, Medicare, etc. to vote against their own self-interest, expect more income/wealth inequality and an increasing cost of getting old.