Here’s How Much Boomers Are Giving Their Kids
Money has always tended to flow from parents or grandparents to children and grandchildren, whether it’s as outright gifts, help with living expenses or paying for things like school. But the pace of that inter-generational transfer of wealth has picked up in recent years — and it could be threatening the retirement prospects of some baby boomers, according to a new report from the Employee Benefit Research Institute.
The report finds that the number of cash transfers going from older households to younger family members increased from 1998 to 2010. High-income households are more likely to provide support to their adult children, but middle- and low-income families are also providing cash to younger family members. Overall, from 2008 to 2010, households of adults aged 50 to 64 gave an average of $8,350 to younger family members, and households age 85 and older gave $4,787 to younger family members.
“For older households, cash transfers can reduce their retirement assets, raising concerns about retirement security, particularly for low-income groups,” EBRI research associate Sudipto Banerjee said in a statement.
Related: Sandwich Generation Squeezed Once Again
In just 5 percent of families, wealth is passed from the younger generation to the older, and the amounts are far smaller. During the same period, households age 85 and older received an average of $359 from those in younger generations.
The EBRI numbers confirm a trend highlighted in other recent reports. A 2013 Pew study found that about half of adults ages 40 to 59 have provided some financial support to at least one grown child in the past year, with more than a quarter of them providing the primary support.
Obviously, the economic climate of recent years may be a big reason for the increased cash flowing from parents to their grown children. More than half of parents of millennials think that it is harder for today’s young adults to live within their means than it was for them, according to an April Bank of America survey.
Chart of the Day: Boosting Corporate Tax Revenues
The leading candidates for the Democratic presidential nomination have all proposed increasing taxes on corporations, including raising income tax rates to levels ranging from 25% to 35%, up from the current 21% imposed by the Republican tax cuts in 2017. With Bernie Sanders leading the way at $3.9 trillion, here’s how much revenue the higher proposed corporate taxes, along with additional proposed surtaxes and reduced tax breaks, would generate over a decade, according to calculations by the right-leaning Tax Foundation, highlighted Wednesday by Bloomberg News.
Chart of the Day: Discretionary Spending Droops
The federal government’s total non-defense discretionary spending – which covers everything from education and national parks to veterans’ medical care and low-income housing assistance – equals 3.2% of GDP in 2020, near historic lows going back to 1962, according to an analysis this week from the Center on Budget and Policy Priorities.
Chart of the Week: Trump Adds $4.7 Trillion in Debt
The Committee for a Responsible Federal Budget estimated this week that President Trump has now signed legislation that will add a total of $4.7 trillion to the national debt between 2017 and 2029. Tax cuts and spending increases account for similar portions of the projected increase, though if the individual tax cuts in the 2017 Republican overhaul are extended beyond their current expiration date at the end of 2025, they would add another $1 trillion in debt through 2029.
Chart of the Day: The Long Decline in Interest Rates
Are interest rates destined to move higher, increasing the cost of private and public debt? While many experts believe that higher rates are all but inevitable, historian Paul Schmelzing argues that today’s low-interest environment is consistent with a long-term trend stretching back 600 years.
The chart “shows a clear historical downtrend, with rates falling about 1% every 60 years to near zero today,” says Bloomberg’s Aaron Brown. “Rates do tend to revert to a mean, but that mean seems to be declining.”
Chart of the Day: Drug Price Plans Compared
Lawmakers are considering three separate bills that are intended to reduce the cost of prescription drugs. Here’s an overview of the proposals, from a series of charts produced by the Kaiser Family Foundation this week. An interesting detail highlighted in another chart: 88% of voters – including 92% of Democrats and 85% of Republicans – want to give the government the power to negotiate prices with drug companies.
