Americans appear wary of the economy's future, as only 27 percent of people younger than age 60 expect to receive an inheritance during their lifetime, and if they do receive something they say they will spend it on debt or save it for retirement, according to a new survey.
The survey, conducted in August by Princeton Research Associates International for Interest.com, found that 42 percent of people would invest any inheritance in a retirement account, while 18 percent would use it to pay off debt and only 3 percent would spend it on luxury items like cars or jewelry.
This pessimism about receiving an inheritance and the plans to spend it responsibly are signs that Americans are worried that the recent volatility of stocks and the housing markets will decrease the value of any assets that could be passed on to family, says John Mayo, an economics professor at Georgetown University's McDonough School of Business. People are also living longer and paying increasingly expensive health care costs, which could make it harder for the elderly to save money for their families, Mayo added.
"Those things will erode the wealth positions of the elderly," Mayo says. "Those factors also indicate that inheritance levels may dip in the future."
Approximately 64 percent of people ages 60 and older reported they plan to leave some kind of inheritance, which reflects that people often pass on their homes, Mayo says
It is more challenging for young people to save for inheritance when they struggle at making down payments on housing, so improvements in housing prices would have a large impact determining whether inheritance levels improve as families pass on their homes, Mayo says.
Younger generations also might not be expecting an inheritance because parents might not be sharing their financial situations with their kids as a way to discourage early requests for financial help and to keep them from getting their hopes up about an inheritance, according to the Interest.com survey.
Erin Baehr, a certified financial planner with Baehr Family Financial, told Interest that the recession has changed her clients' attitudes on whether to spend inheritances on vacations or luxury purchases, and that people are more inclined to save that money for a rainy day.
"People I talked to before the recession might have been more inclined to spend the money on something else," Baehr said.