In the next 10 years there will be a massive transfer of wealth from one generation to another and it could have a profound effect on today’s economy.
With over 2.5 million Canadians over the age of 75, the estimated size of the inheritances that will move to the next generation tops out at $750 billion*. That’s a lot of money to change hands!
Until now, this money has not been in circulation. However, when it does become available to the next generation that might change.
The beneficiaries plan on using the money in many ways – starting up their own businesses, investing it in their retirement or as an inheritance for their own children. This can have a kick-starting effect to the economy by boosting jobs and making disposable income grow.
The average inheritance transfer is expected to be $180,000, and while many will put some of it into their own retirement savings accounts or future inheritance for their own children, it is expected that a good portion will be used to fund the beneficiary’s lifestyles.
Probably the most important decision any of the recipient GenXers with this influx of cash could make is to talk with their financial advisor. There will be tax implications to consider, and good advice can ensure that the money is not squandered on purchases without lasting value. We have all heard stories of inheritances that get decimated by wanton spending, only to leave the beneficiaries in a worse state than when they began.
If you are heading into your retirement years and have saved up an inheritance to pass to your children and to their children, your greatest gift is not actually the money, but the conversations and agreements you can come to, which ensure that the money is spent wisely and well.
* Source: http://www.canindia.com/canada-baby-boomers-to-inherit-750-billion-in-next-10-years-cibc/