Inheriting the World
Rich people pretend to be self-made, but inheritance played a huge role for many.
Using the 2016 Survey of Consumer Finances, we broke down mean inheritance levels by wealth decile. It is important to emphasize here that these are self-reported inheritances. Survey participants are asked to think back throughout their life and identify all the wealth transfers they have received and when they received them. Naturally this is prone to misreporting and, one would think, especially prone to underreporting, as people tend to forget what gifts they have received over the years.
Nonetheless, as you would expect, wealthier families are much more likely to have inherited wealth. Additionally, the wealthier a family is, the more they have generally inherited.
For starters, here is the percent of families in each wealth decile who have received any inheritance.
With the exception of the first decile, the trend is: the higher up you are on the wealth ladder, the more likely you are to have inherited money. Fully 37.8 percent of the wealthiest 10 percent of families say they have inherited money.
Here is the mean inheritance of each decile. Note here that the denominator for this mean includes both families who have inherited money and families who have not. Also note that the inheritance values are converted to 2016 dollars using the CPI-U-RS.
Finally, here is the same graph as above, but this time the inheritance values are converted to 2016 dollars by using the CPI-U-RS and by assuming a 5 percent annual rate of return.
Naturally, the graphs tend to show that, with the exception of the first decile, the wealthier you are, the more you have inherited. The wealthiest 10 percent of families have inherited $367,000 adjusting only for inflation and over $1.2 million adjusting for inflation and a 5 percent rate of return.
For the wealthiest 1 percent, the trends are exactly the same as with the lower percentiles. Around 41.4 percent of the wealthiest 1 percent say they have inherited some money. The below graph shows their mean inheritance level, with the first bar adjusted only for inflation and the second adjusted for inflation and an assumed 5 percent rate of return.
On average, the wealthiest 1 percent has inherited just under $5 million in current dollars.
Media coverage of the super-wealthy — for example, Forbes 400 — tends to emphasize entrepreneurs and other “self-made” scions. But in reality, inheritance plays a huge role in determining who winds up at the top and bottom of our society.