Saw this today and thought it was quite informative, so gifting the article in case anyone wants to read it. There are quite a few graphs showing data as well as writing about it:
I know H and I have benefited from our lives, and then some from my mom’s when she died in 2019, with probably a bit more from his dad within the next decade. But I also know quite a few people who essentially have nothing, sometimes due to their own choices, but many times not.
It is not a surprise that inheritance of wealth tends to increase wealth inequality over generations.
Everyone’s naval gazing over this- the idea that people leave assets to their children when they die- is something that I, as a millennial, simply don’t get.
It’s assumed where I live that your parents have already died and left you hundreds of thousands of dollars if not more or that they are living and can gift you this money if you talk to a realtor here. I literally had one drop me when I explained that I “only” had 300k in cash for a downpayment.
People who have accumulated wealth have always left it to their children when they died if they weren’t able to substantially help them during their lifetimes. They weren’t all Jeff Bezos, either.
I have a friend who inherited money from a grandparent recently- almost half a million- and she asked me how she could hide it from state taxation. When I explained that no, you can’t, she was upset that I didn’t have some secret because she assumed that I did based on my background.
What would be really interesting would be to see the same chart in the US going back to 1830 or so. The time frame on this one is not wide enough to tell us anything but the obvious- that some people die with nothing, some people don’t, and the ones that don’t often leave it to their families. In other words, what happens in Europe happens here.
Don’t forget that the $12.9m estate tax exemption mentioned in the article snaps back to $5.6m in 2026.
$12.6 million is above the top 1% (99th percentile) of net worth for 80+ year old people, and $5.6 million is about where the top 3% (97th percentile) starts, according to Net Worth by Age Percentile Calculator – United States . So not an issue for most people, though maybe the percentage on these forums is higher than 3%.
At the opposite end of the scale, at least 2% of 80+ year olds have net worth of $0 or less (negative = in net debt), and at least 5% of 80+ year olds have net worth of $1,000 or less (including those with $0 or less).
The estate tax exemption should be indexed for inflation. It may not be $5.6 million. If it falls back to the $6-$7 million range, expect a lot more credit shelter trusts.
What will affect more people will be AMT. AMT was eliminated for many people after the TCJA.
The TCJA’s greatest contribution to the “donut hole” full pay upper income college parents was the AMT calculation changes.
Your post resonated with me (and I’m a boomer!)
When we were house-hunting in 1987 (sold a house in a small midwestern city for a few thousand dollars less than we’d paid for it) and moved to a high cost of living area, I had several realtors explain “If you could up your budget by 50K you’d be seeing much nicer houses”. I’d say “How does one just “up their budget” Our salaries are our salaries (two professionals with excellent credit scores) and our downpayment is our downpayment” and they’d get all uncomfortable and say “Isn’t there anyone in the family interested in helping you?” which was kind of hilarious.
We would joke to each other “we’re such losers that nobody in our families are interested in helping us” which wasn’t true. But if this family member kicks in $50 and another kicks in $100 ( which would have been truly generous given their circumstances at the time), does that help?
Hugs! I get where you are coming from…
I don’t know about 1830 but as recently as 1980’s the exemption amount for estate tax was $650,000. That prevented easy transfer of wealth. I wish we lower the exemption amount. It will be better for the society if more people make it on their own than spending time going to clubs living on inheritance.
ERISA was passed in 1974. IRAs and other similar retirement vehicles that came out of this are the most important tools most people have to accumulate wealth . Most people did not have this opportunity until then. It is no coincidence that a lot people were able to better their financial positions since their introduction. It is still the single most important set of tools average Americans have to accumulate wealth. Ditto for 529s and paying for education. That’s generally a good thing.
This author has exactly the wrong story. What he should show is the percentage of families that came from poor or modest means and have been able to put themselves in a better financial position as a result of saving in these vehicles.
But that would not support the call for confiscatory policies would it.?
According to https://www.census.gov/content/dam/Census/library/publications/2022/demo/p70br-181.pdf , the biggest contribution to household wealth is home equity, about twice as much as retirement accounts in aggregate. Other financial assets are either much less widely held or much smaller per household.
Not to mention that all appreciated assets are inherited at the stepped up value on day of inheritance, with no capital gains tax owed. Ain’t America a great country? Working people pay high taxes on their earned income, and wealthy people who collect and inherit their money, pay little to nothing.
I am a boomer, and I swear DH and I have spent the entire past year trying to get our parents to spend their money on themselves instead of sitting on it to hand down. We tell them all the time “you worked hard and saved to make this part of your life easier, not to give it all away”.
Almost 50% of Americans pay Zero federal income taxes.
Also, whoever earned all that wealth paid taxes along the way, at a much higher percentage than most Americans.
Your point is different than mine. From 1974 until the end of 2022 the S&P 500 returned 15,821%. During the same period, housing increased by 589% on average (clearly some areas did better or worse than others). The tax-deferred IRA investment is powerful for growing a nest egg and available to many people through their employers often with a matching contribution. The key is get more people participating.
In a society where a not insignificant number of households couldn’t come up with a $750 car repair (the vehicle which gets them to work every day) it is hard to imagine that’s it easy to get people contributing to their IRA, Dadsays!
People living paycheck to paycheck don’t have excess money to put away for retirement. People living large (spending more than they earn, putting the rest on a credit card) have difficulty with deferred gratification. People with poor financial planning skills assume “my dad retired on social security and so will I” without having the wherewithal to realize that they won’t be able to live on social security.
Etc.
It ain’t so easy!
We are seeing a wealth transfer from my parent’s generation to our generation (boomers) and to millennials. Some comes from my mother’s will to kids and from my father’s trust (activated when she died) to grandkids. Some comes from a living grandmother who is lending ShawD money against what she will inherit as part of a downpayment for a house.
The transfer from boomers is not yet really taking place in our family – though a few of our friends had made big contributions to kids buying expensive houses (e.g. $2.5 MM).
I know my upbringing and my husband’s was different than many I see here on CC.
But my parents were of the mind that once we graduated high school, that was the end of them supporting us. They were very working class. Other than one family vacation with our kids, we were on our own. My mom is still living and I’m hoping that the money she has left will keep her in her independent living facility. Or what she needs for the rest of her life.
My in laws paid for my husband’s college, which my husband and I paid forward for our kids. They have accrued a hefty amount of money and assets now. But it was never shared with the kids. If they don’t spend it in their final days, it will pass down to my husband. Or my children if my husband passed before them.
But no down payments. No vacations. No helping with college for our kids. My mil thinks she’s being exceedingly generous that she gifts us $500 for Christmas and feeds us.
My husband and I are retired. Our parents are in their mid to upper 80’s. I’m not counting on any inherited wealth. Maybe when I’m 80?
I do find that and maybe it’s what I see on CC. That there is a perception that parents now need to DO for their adult children. It’s not just CC but IRL also. Pay for the expensive college, take the adult children on great vacations, pay for the outrageously expensive wedding. And then quit your job to watch the grandkids. None of these things our parents did for us.
Maybe I just know too many people who have way more accrued wealth than us. I’m hoping our savings are going to carry us through the rest of our lives.
I’ve know this situation first hand. I wonder how many others here do. Vilifying tax-deferred investments, which help so many people, because it can’t help ALL people is completely ridiculous. Maybe everyone can’t participate today, but they might someday soon, or maybe never. Either way, these vehicles democratized investing. And the author decries their value?
Same here. No real inherited wealth despite parents that worked all their lives. All gone now but we got a little money at the end. Less than $50,000 altogether, enough to make some improvements on the house and take a vacation. We were just happy and relieved that none of them outlived their money.
Our kids will probably inherit much more, between us and particularly their aunt(my sister) who never married and who adores them (and they adore her). Matter of luck and timing sometimes.