The so-called "inheritance boom" for millennials is nothing to celebrate
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Somewhere between forcing Chocolate Orange segments down your claggy throat and panic-buying New Year’s Eve tickets, you may have seen the news on Friday the 29th of December that Everything Is Going To Be Okay. That’s right, all of it. It is time to relieve all of the knotted dread that binds your stomach whenever you think about the future. It is time to stop asking “when will adulthood really start though?” Because the money is coming. All of the money. And everything is going to be fine.
According to a think-tank called The Resolution Foundation, 20-35 year-olds are set to receive unprecedented levels of inheritance from their baby-boomer parents. The report indicates that inheritable wealth is going to double in the next decade, reaching an all-time peak in around 2035. “The large sums of wealth accumulated by older generations will provide a major boost to younger generations’ wealth accumulation and living standards in years to come,” the foundation added. See? Brilliant.
At least, if you only went by the headlines you’d think that. You’d think that soon balance was finally going to be restored, and that generation no-home was finally going to feel some of that sweet trickle-down. Sadly, the truth is a little more complicated than that.
As the report also points out, some millennials are going to see increased levels of inheritance, but that by no means counts for all millennials. Nearly half (46 percent) of non-home owning 20-35 year-olds have parents that don’t own a house either, meaning they will never receive the bumper transfer of wealth that would allow them to buy a home themselves. By contrast, more than 80 percent of millennials who are already home-owners have parents who own their own home. As you’d probably expect, the real beneficiaries of the inheritance boom will be the people who need it the least.
What the inheritance boom really means is a further entrenchment of wealth disparity. The report finds that millennials with property of their own worth £200,000 or more have an average parental property wealth of £195,000 per sibling, whereas millennials who don’t own their own home have average parental property wealth of just £85,000 per sibling. This means the rich are set to get a lot richer. The baby boomers who are accumulating wealth will eventually pass it down, but it will stay within the same families, in the same places, in the same minority of wallets. The “inheritance boom” will result in a near-doubling of the absolute wealth gap within our generation.
As the report also adds, “people tend to couple up with those who have similar inheritance expectations to their own.” This is termed as “assortative mating” and basically means that rich people tend to shag other rich people, further ossifying the flow of wealth within a certain quarter of society. More than ever before prosperity will be defined by your privilege, and the idea of social mobility an even more distant myth.
Of course there are some other people who will stand to benefit, like the squeezed-middle of non-home owning millennials who are waiting on property wealth from their parents. Surely this is good news for them? Well, again, given that the baby boomers’ wealth is largely locked up in property – property they are living in – the wealth transfer will mostly take the form of inheritance after death rather than gifts while they are alive. Given lengthening life expectancies, the report suggests that the average age most 20-35 year-olds can expect to enjoy their inheritance, is 61. 61. You know who else is 61? Mel Gibson. You won’t be able to afford a house until you’re as old as Mel Gibson is now.
As an aside, is a society in which wages are so low and property is so expensive that you have to literally wait for your parents to die before you can enjoy their quality of life a good thing? Can't make Christmas that fun.
Millennials are half as likely to own a home as their parents were, so the news that the baby-boomers – the gatekeepers of our insecurity – were due to hand down record levels of wealth sounded like the break we’ve been waiting for. And clearly the money is coming – it’s just that it might not be coming to you. Rather than spreading the accumulated wealth of our parents’ generation, the next few decades look set to further seal off opportunities to anyone not born into money.
With inheritance tax threshold in the UK currently as high as £325,000, it's difficult to see how that can possibly change. The inheritance boom will largely be bank transfers between those that already doing alright.
So yeah, happy new year.