Optimism on Boomers’ Inheritance Misplaced : Wealth: Much of their parents’ income ends with death and today’s retirees, relatively speaking, also are consuming more.

As the parents of the baby boomers reach their final years, there has been much discussion about their wealth and what it may mean to the boomers themselves.

Today’s elderly are the best off in U.S. history, so it stands to reason that they should have a lot of money to leave to their offspring. It wouldn’t be evenly distributed, of course, but the intergenerational transfer might be enough to make up for the poor saving rate for which the baby boomers are famous.

But this optimism may be misplaced.

While it is true that today’s senior citizens are wealthier than any previous generation, two factors make it unlikely that the boomers will ever see a large share of that wealth, according to a recent study.

First, a far greater share of wealth possessed by today’s elderly is in the form of annuities--streams of income that last for a lifetime but end when the recipient dies. While older Americans have done very well with the run-up in house prices and their own savings, much of their generation’s overall well-being is derived from government programs, such as Social Security, Medicare and private pensions. In economic terms, these are assets, and they show up in many calculations of wealth.

A generation ago, a far greater share of older people’s assets were in forms we traditionally think of as wealth, and which could be passed on to heirs. Social Security, pensions and other annuity-type wealth are good in that they can’t be outlived, but neither can they be passed on to offspring.

The second factor that will limit bequests to baby boomers is that seniors today are consuming far more than they did in the past, and are consuming more relative to younger generations.

For the seniors, this is good news. Much of their increased consumption is in the form of medical care, which has meant longer, healthier lives for many of them.

But for younger people, the prospects are alarming, according to economists studying the nation’s saving rate, its demographics and the economic relationships between generations.

Studies done by these economists, who include Laurence J. Kotlikoff of Boston University and Alan J. Auerbach of UC Berkeley, indicate that the increasing flow of annuitized incomes to the elderly has already drastically reduced the volume of bequests.

In 1990, they calculated in a study published earlier this year, bequests in the United States totaled $208 billion. But if these people had been able to bequeath the same proportion of their wealth as would have been the case in 1960, total bequests would have been two-thirds higher--$344 billion.