This boom could have a massive impact on the Canadian economy, further dividing the rich from the poor. The Canadian Baby Boomers are to inherit around $750 billion in the span of the next 10 years.
If it goes through, this will be the largest transfer of wealth that Canada has ever seen and could flip the retirement scene, as stated by a CIBC Capital Markets report. This adds up to a 50% increase in the inheritance money families have received in the past.
As the report was released, it stated that over 50% of Canadians aged between 50 and 75 received inheritance dating back to 2006, averaging at $180 000. People with the largest transfers live in B.C., where a lot of the most valuable real estate in the country is located. Next is Ontario and Quebec; however, in other provinces the average inheritance turned out to be less than $100 000.
As a person receives a large amount of money after the passing of their parents, there are other people who get a lot less or even nothing. This unbalanced distribution of inheritance reveals that there is a lot of commotion behind this, as stated by CIBC. The bank’s deputy Chief Economist, Benjamin Tal, states how more money is going to Canadians who are in higher income brackets already. The same goes for those with a higher education
Wealth Transfer Influences
CIBC didn’t find a specific reason behind this trend; however, Tony Majorino, the vice president and head of RBC Wealth Management told the Financial Post that this is an example of “transliquification”, which has been a part of wealth management for the past decade. He states the obvious of how each generation wants to see their next generation of children do better. Resulting in parents aiding their children.
In addition to transliquification, there is a saving mentality imprinted in Canada’s older generation. Some of these people peaked in their lives during the great depression, where the choice was between eating dinner or heating your home. This resulted in their generation having great value for the dollar, working extra hard to provide for their children, and saving all that they could. Many of these investment decisions have paid off (as we can see now). These people’s children, the Baby Boomers, will in turn receive the result of their parents hard work.
Where will the Money Go?
The greatest concern for this uneven wealth transfer is the further inequality between rich and poor. In addition, Canada’s top economists worry about the impact it will have on the families which receive these funds. Tal states that a household might increase their spending, maybe even too quickly or using a portion of the funds too large leaving nothing for savings. Other families might keep passing the inheritance down to their children, or gift it and so forth.
However, whether a Baby Boomer or not, it’s always important to work with a financial adviser to make a plan on how to make your money grow. Whether you decide to invest in stock market or a property, or even put it away for retirement, out advisors at Arbetov Insurance are always here to help! As Canadians live longer and healthier, the Baby Boomers must ensure they have enough. They must prove to Canada’s oldest generation how their hard work in difficult times has paid off. A secure financial future for their children is what they worked for, make your parents proud and use your money wisely. For a plan on how to manage your finances and money growth, talk to us at Arbetov Insurance today!