U.S. Trust, part of the Global Wealth and Investment Management unit of Bank of America, issued a new report Monday, concluding that twice as many well-off young adults are making provisions to protect their wealth and to care for aging parents than did the baby boomer generation before them. This flies against the stereotype that today’s young people are more selfish than previous generations.
Insights on Wealth and Worth
The 2012 Insights on Wealth and Worth report looked at 642 high net worth and ultra high net worth adults in March and found “distinct differences” in the way generations manage their wealth, especially as it relates to making provisions for an extended family.
Gen X and Gen Y
The study found that 40 percent of those surveyed aged 18 to 46 — those of the so-called Generation X and Generation Y — have plans in place to care for elderly parents when the time comes.
Fifty-four percent have paid medical expenses for family members.
A full 38 percent are personally funding the long-term care of an elderly or ailing family member at this time.
Thirty-three percent have purchased long-term care insurance for that purpose.
Seventy-six said they felt a responsibility to hang onto some of their wealth to leave to their children.
Of the baby boomers surveyed — those aged 47 to 66 — only 20 percent had plans in place to care for their elderly parents.
Only 30 percent are currently financing the long-term health needs of a related loved one.
A mere 6 percent of them have purchased long-term care insurance for a family member.
Just 55 percent said they felt a need to leave some of their wealth to their children after they are gone.
Is there a ‘selfish generation?’
Keith Banks, president of U.S. Trust, said that he did not believe the findings indicated excessive stinginess on the part of baby boomers. He pointed to the obvious fact that much fewer of the older adults surveyed had living parents to care for than those in the younger demographics. He felt the difference to be more related to the economic environments in which they were raised.
“Our survey points to a shift in generational behavior and outlook, most likely shaped by personal experience and societal responses to economic realities. The next generation has not experienced the consistently strong economic growth or investment returns that baby boomers experienced during the longest bull market in history.”
Financial planner Jim Lee says that older Americans are realizing they have not prepared sufficiently for retirement and so are keeping their wealth tighter to their vest than may have in a younger day.
Lee, author of “Resilience and the Future of Everyday Life,” said:
“Many boomers are beginning to realize that they are underfunded for retirement in any traditional sense. Given record low interest rates and a decade of minimal returns for the stock market, some boomers have been spending down their portfolios sooner than they anticipated. Add longer life expectancies into the mix, and you’ve got a recipe for smaller inheritances.”