This post is a follow-up to last week’s discussion on the Schervish/Havens “Wealth Transfer” projections from the late 90s (and re-estimated around 2006). Good news is that we should have a new set of projections – ones that should be real eye openers for the need to invest in planned giving!
Even with updated “Wealth Transfer” projections on the horizen, there are still some facts already glaring at the nonprofit sector right between the eyes. Fact: there are a lot of baby boomers and they are rapidly approaching planned giving revenue status. In other words, this cohort will start passing away in terms of numbers that it’s inevitable that planned giving numbers will skyrocket. In some sense, it’s a numbers game – the numbers are on the side of planned giving as boomers start reaching their 70s in a few years.
But, of course, there are so many other factors that could impact charitable estates and other planned gifts: retirement savings, longer lives, health care costs, inflation, spending habits, caring for elderly parents, divorce rates, ethnicity, etc… In fact, it seems practically impossible to accurately predict what will be with planned giving in the future (except, of course, for the BC folks).
Now to the main point of this post and the message to think about. The impact of childlessness on charitable bequests is well documented – I recall somewhere in the numerous reports I’ve read over the years that those without children left around 7 times more dollars in their charitable bequests (still searching for that source!) than those with children.
Professor Russell James, of course, has given us some very interesting looks at this issue. Take a look at this slide and let my commentary take you through it.
This slide comes from Professor James’ research on planned giving habits based on data from a large health and retirement study conducted over 15+ more years. It shows us the percentages (among those who actually have wills or trusts) that include charity in their estates – broken down by four key categories. Those with grandchildren (less than 10% of this groups leave charitable plans), those with just children (less than 15% with charitable plans), and then those without children (either married or unmarried).
The conclusion is clear from the slide: childlessness is a huge factor for inclusion of charity in estate plans.
That is what the past data is telling us – not surprisingly.
What about going forward? What are some of the big differences between the soon to be retiring generation of baby boomers vs. their predecessors?
Well, you could have guessed it – childlessness is a huge differential between the two generations. Women in the boomer generation pursued more careers and more successfully. Got married later, if at all. Higher divorce rate, too. Here is one more interesting slide from Dr. James:
This is a really cool slide which takes a little explaining. It just looks at women between ages 40 and 44 at yearly intervals and their rate of childlessness. Women who were in this age range in the 1970s until the early 1980s generally had a rate of less than 11% childlessness. This group happens to be in their 70s and older right now.
But, as the red line enters into baby boomer territory, starting around 1984, we start seeing a huge uptick in childlessness rates. In other words, not only are there more women about to enter their 70s due to the baby boom, but the percentage of those who never had children more than doubles.
Get the message? The numbers of women in their 60s is already much greater than the pre-boomer population in their 70s. But, add in this factor of childlessness among this group, it seems incredibly obvious that nonprofits need to adjust and of course, invest in their planned giving programs!