Don't count on the so-called great wealth transfer to save your retirement.
It turns out inheritances barely move the needle when it comes to retirement readiness, according to new research from the Center for Retirement Research at Boston College. Even factoring in inheritances, 51.6 percent of households are at risk of falling short on savings—i.e., they won't have enough to sustain their pre-retirement standard of living in retirement. If those inheritances weren't in play, 52.4 percent of households would be at risk.
In other words: receiving an inheritance has been a retirement-saver for less than 1 percent of households. "Don't count on inheriting your way out of this problem," said Alicia Munnell, the center's director.
Researchers also looked ahead—after all, the greatest generation is expected to transfer $12 trillion to their heirs over coming years, and baby boomers in turn will pass on about $30 trillion, according to a 2013 Accenture report. Assuming twice as many households inherit, the rate of those with inadequate retirement savings would drop from 51.6 to 50.7 percent, the Center for Retirement Research found.
"If you add it all up, they're going to get lots of money," said Munnell. So why does it have such a small impact? "The people who get [an inheritance] weren't at risk in the first place," she said. Inheritances tend to increase by income group, with high earners being both more likely to report receiving an inheritance and more likely to inherit a high-value asset.
"It's always dangerous to assume you're going to have a pile of money dropped on you," she said. For the more at-risk lower- and middle-income workers, that assumption isn't panning out.