Canadian baby boomers will inherit an estimated $750 billion in the next decade, according to a new CIBC Capital Markets report. It will mark the country’s largest-ever wealth transfer and is expected to alter the retirement landscape.
There are currently more than 2.5 million people over the age of 75 in Canada, about 45% of whom are widowed, according to the report. That’s a 25% spike from the level seen 10 years ago.
“We estimate that the coming decade will see close to $750 billion exchanging hands, almost 50% more than the estimated amount of inheritance received over the past decade,” said Benjamin Tal, report author and CIBC Capital Markets deputy chief economist. “The transfer is estimated to boost the asset position of Canadians 50-75 years old by no less than 20%.”
Over the next decade there will be even more Canadians aged 75 and older, according to the report. That will represent not only the largest number of people in that age group on record, but also the wealthiest, with a total estimated net worth of more than $900 billion. Tal said the coming wealth shift could impact not only the retirement landscape, but also other economic factors like labour force participation and real estate markets.
According to the report, just over half of Canadians between 50 and 75 have received an inheritance. Of those, half received it within the past decade. The average inheritance was $180,000, with British Columbia leading the way in the amount of the average bequest. More money is going to people already in higher income brackets, the report found; Canadians who earn more than $100,000 inherited almost three times more on average than lower-income Canadians. Those with higher education levels also received more.
About 40% of higher-income Canadians saved or invested their inheritance, while lower-income people tended to use the money for daily expenses, the report found.
“Simply put, if wealth is not evenly spread across society, then inheritance will repeat the pattern and exacerbate inequality,” Tal said.
Peter Lee, managing director and head of CIBC Private Wealth Management and CIBC Woody Gundy, said the massive wealth transfer coming in the next few years highlights the need for tax and estate planning.
“The shift of assets down to baby boomers and from baby boomers to Gen-Xers requires a clear and sound roadmap with healthy family discussions in order to protect and ensure that wealth isn’t lost in the transfer,” he said.
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