A friend of mine asked me a question yesterday: are baby boomers wealthier than their parents?
The leading edge of the boomer demographic is generally unprepared for retirement. For most Canadians, paying off the mortgage and acquiring RRSP savings are the primary savings strategies. The Survey of Financial Security, in a report from 1999, found that among those people aged 55 to 64 only 75% owned homes and the median value of owned homes was $130,000. 25% were renting. Only 67% owned RRSPs with a median value of $50,000. The data means that a third had no RRSPs and another third had less than $50,000 in RRSP savings.
Basically, 21% of households near retirement in 1999 had no retirement savings at all and the savings of the next richest 32% of households averaged only $40,000. The survey quite rightly describes those amounts as futile.
It gets worse. CIBC’s economist estimates that 40% of Canadian households have no financial savings outside of their personal savings and chequing accounts. And the savings rate in Canada is at its lowest level since the 1920s.
So. What will save the poorly prepared baby boomers? For some, it will be continued employment. For others it will be government assistance. And, for some, it will be their much wealthier parents.
- Canadian baby boomers are expected to inherit an estimated one trillion dollars in bequests over the next 20 years.
- Four in ten Canadians will inherit money, with some expecting to receive $500,000 or more.
- One-third of those expecting to inherit will receive between $25,000 and $100,000; fifteen per cent between $100,000 and $500,000; and four per cent will be higher than $500,000.
- Between eight and 10 million bequests are expected as a result of the record accumulation of wealth in Canada since World War II.