Social Welfare Research Institute Director Paul Schervish (right) and Associate Director John Havens.
The researchers evaluated their original analysis in light of subsequent economic trends and conditions and issued a new report confirming the validity of the initial projections. That report, "Why the $41 Trillion Wealth Transfer Estimate Is Still Valid: A Review of Challenges and Questions," has been cited by a number of media outlets across the nation, including The Wall Street Journal, which heralded the news. SWRI's report is published in this month's issue of The Journal of Gift Planning, a leading publication for fundraising professionals and financial planners.
"This forecast is one of the few whose gleam has not been dimmed by the current gloomy climate," said SWRI Director Prof. Paul Schervish (Sociology) and Associate Director John Havens, authors of both reports, in a recent statement.
"After reviewing a broad range of challenges and questions concerning the $41 trillion estimate, we believe that the estimate that originally brought a wave of optimism to charities and fundraisers remains not only valid, but conservative."
SWRI's 1999 projection became one of the most cited statistics about the economic future of the country. The $41 trillion number, the lowest of three scenarios initially projected by SWRI, was four times higher than the previous highest estimate of wealth transfer. It was officially adopted by the Council of Economic Advisors, incorporated in analysis by the Congressional Budget Office, and was favorably reviewed by the Bureau of Labor Statistics.
The prospect of such large amounts of wealth being transferred revolutionized business as usual in the financial and nonprofit worlds, according to the SWRI researchers, and provoked immediate changes to practice. Financial firms added intergenerational themes and philanthropy to estate planning; charities conducted all-hands meetings to strategize about how best to participate in the coming windfall; some communities extrapolated wealth transfer estimates for state and county levels from the study. The projection also inspired futuristic re-imaginings of philanthropy's potential, they said.
In the new report, Schervish and Havens concluded that "the relevant question is not whether $41 trillion will be transferred, but how much more than $41 trillion will be transferred."
SWRI considered a broad range of issues and challenges, among them: the implications of recent economic trends for wealth transfer; whether the value of personally held wealth has significantly changed since 1999 and how trends toward lifetime giving may interact with bequests to charity.
SWRI researchers looked carefully at how the spending down of savings occasioned by increased lifespan would potentially affect their wealth transfer simulation.
"While people are living longer, their increased consumption at the end of life is being balanced by a number of trends," Havens points out. "Two of the most important are later retirement age and the increased tendency for the elderly to work at least part-time during retirement. Furthermore, our estimates were sufficiently conservative that retirees can easily spend down a larger chunk of their wealth without affecting the $41 trillion total, which we based on long-term trends in economic growth and life-cycle savings rates."
SWRI researchers found that, contrary to expectation, personal wealth has not dropped significantly below the 1998 estimate of wealth, on which the original report was based.
Although the dramatic shrinkage in foundation endowments and the evaporation of the wealth of some high-tech leaders have recently received a great deal of attention, Havens emphasizes that a close look at the numbers on individual wealth tells a different story - one with a happier ending.
"Personally held wealth stands at about $32 trillion in the second quarter of 2002, almost exactly where it was in 1998 when we developed the projection," he said. "Individuals rebalanced their portfolios so that the drop in stocks was offset in part, for example, by growth in real estate."
Because individual wealth has not fallen below the 1998 level used in the first report, the World War II and baby boom generations in particular will be giving away just as much wealth as when the researchers first prophesied a "Golden Age of Philanthropy," Havens added.
"It is important to note, however, that the wealth transfer is going to be split unevenly between the wealthy and the non-wealthy," Havens said. "In 2052 we will be able to look back and say that two thirds of the transfer came from only 7 percent of estates - the very wealthiest."
The researchers also caution baby boomers against assuming that the $41 trillion wealth transfer will be their financial cushion for old age: Their share is expected to be only about $7.2 trillion.
The complete report is available on line at www.bc.edu/swri.
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