Generation Z Overconfident About Inheritances

September 19, 2012

It seems that a fair number of Gen Z kids, those ages 13 to 22, are expecting a big payday when it’s time for the reading of their parents’ will. After all, big inheritances are often the story line in movies, TV shows and the stuff of urban legend. Unfortunately for the kids, it’s probably not going to happen. Fewer than one in five will get any kind of bequest at all, a consequence of the Great Recession and changing times.

There is a larger problem than just hurt feelings and dashed expectations. Financial experts say the younger generation isn’t saving for their retirement, betting instead on a big haul from mom and dad that will keep them comfortable for the rest of their lives. Parents, meanwhile, have seen their stock investments, 401k’s and other retirement nest eggs go into the tank. Their focus now is on having enough money to live through their own retirement and cover medical bills. Nearly 40 percent of Generation Z expects to inherit a substantial chunk of money, but only 16 percent of parents say they might be able to provide one.

The investment firm TD Ameritrade surveyed adults with at least $100,000 in assets and found that 58 percent do not see leaving an inheritance as a primary goal. Forty two percent said saving for their own retirement was the most important objective, and a scant 2 percent said creating inheritable wealth is in their plans. Young adults who have come to depend on their parents for everything from a place to live to a college education to spending money don’t realize how shaky the ground is under their parents’ retirement prospects.

Low rates of return on investments make it impossible to live off the interest. Social Security and Medicare may not survive in their present form for much longer. The rising cost of health care and longer life spans pose the greatest threat to parents’ finances. A parent or parents who live for 20, 30 or more years after retirement will have to be sure there is enough cash stashed away to cover medical bills that may not be covered by whatever health insurance system comes next. So, sorry kids. It’s not that mom and dad don’t care about your future security. They’re just looking out for their own right now.

Source: USA Today, “Younger people expect inheritance that won’t exist,” Christine Dugas, Sep. 9, 2012

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