Marketplace - Keeping it in the family

Episode Date: December 13, 2024

Older Americans will pass on more than $120 trillion to heirs and charities over the next 25 years, according to a wealth management company’s study. But financial advisers caution against assuming you’ll get lucky — half of the “great wealth transfer” will come from just the top 2% of households. Also in this episode: Insurance grows pricier, the Consumer Financial Protection Bureau limits bank overdraft fees and less than 10% of Americans moved last year — the lowest proportion since the Census Bureau began keeping track in 1948.

Not all economic indicators are created equal that we know, but they all do tell us something. From American public media, this is Marketplace. In Los Angeles, I'm Kyle Rizdall. It is Thursday today. This one is the 12th of December. Good as always to have you along, everybody. As surely as day follows night, with the consumer price index comes in close proximity the producer price index. CPI yesterday, PPI today. The first, prices at the retail level.

The latter, prices at the retail level. The latter, prices at wholesale. The Bureau of Labor Statistics told us this morning that the PPI was up four-tenths percent in November from a month earlier. That is more than people had been guessing. Year on year, wholesale inflation is at three percent. Without casting too many aspersions here, it is fair to say that PPI is the less popular sibling of the CPI. But as Marketplace's Sabri Beneschel reports, that does not mean it's not important.

You go to the grocery store, you pick up the eggs, you see the price of the eggs up almost 40% year over year. And you put the eggs right back down. Not today, Satan. Not today. That is how we see inflation, and that is what the Consumer Price Index measures. But what we see is not the whole picture. Businesses see a whole other world of inflation.

They see prices we don't. If we think about manufacturing, it could be things like inputs like copper or the chips that go into the computers. Scott Helfstein is head of investment strategy for Global X ETFs. If we think about restaurants, that could be something like the staff and their employment costs. Now, why might we care about a price that we can't see? Because it rolls downhill.

Well, with price increases for producers, they're going to pass them on to consumers in the months to come. Kurt Rankin is a senior economist with PNC Financial Services Group. Think of oil prices when oil prices rise, we see that immediately at the gas pump. We might not see that immediately for plastics that might be manufactured from that oil. And then eventually, the retailers to have to pay more to stock those items past those price increases then on to people buying them. So the producer price index captures all of this and that is why we care. It's kind of like a ghost of Christmas yet to come situation. Today's PPI number was complicated. Overall prices from a business perspective were up four tenths of a percent in

November. Bob Murphy is a professor of economics at Boston College. The services component actually dropped slightly, but the goods component moved up. Services, barbershops, healthcare, restaurants, prices in that world have been the hardest to control. So the fact that inflation is slowing down there is good news. The fact that goods inflation perked up

isn't necessarily something to worry about yet, mostly because goods inflation has been low to nonexistent for the past year. So what does all of this mean? This provides a little more legs to inflation for a month or two or three, but is not something that's going to be sustained. So he says inflation probably will fall further, but it might take a while. In New York, I'm Sabri Benishor for Marketplace. On the topic of inflation and, by extension, interest rates, this item, the European Central

Bank cut its benchmark interest rate today. Inflation is down quite a bit over there, 2.3% there, 2.7% here. Our economy, though, is still way stronger. Also, and for your calendar, the Fed meets next Tuesday, Wednesday. The phrase I want you to keep in mind here is hawkish cut. We will explain in the weekly wrap tomorrow. Wall Street today, not a winner. Details, numbers, you all know the drill. Here's another installment of our semi-regular series, You Can't Fight Market Forces. The Consumer Financial Protection Bureau finalized a rule today that will require banks and credit

unions with more than $10 billion in assets to cap their overdraft fees to, with some exceptions, $5. The CFPB says that will save households billions of dollars a year. Thing is, the banking sector has been moving away from charging those fees for a good couple of years now. Bank of America trimmed its fee back in 2022. Capital One and Citibank have eliminated them entirely. Why? Here's Marketplace's Justin Ho. Even though we've seen a wave of big banks voluntarily ratchet back their overdraft fees, it was not entirely driven out of altruism.

Julie Hill is dean at the University of Wyoming College of Law. She says the CFPB has made it clear for years that it would be scrutinizing overdraft fees. So banks decided to just bite the bullet and act early. Hill says it also helped that interest rates had been rising. So banks loans were pulling in more revenue in situations like that. Banks don't really care that much whether they get income from fees or income from interest. Meanwhile, many people have been sitting on extra cash ever since the pandemic, says Chris Duncan, chief lending officer at LaSalle State Bank in Illinois. We really saw coming out of COVID

a pretty significant decline in the overdraft activity in some of our customers. Duncan's bank is too small to be covered by the new overdraft rule, but it recently put a daily limit on overdraft fees, and it won't charge any fee if a customer overdraws less than $10. We kind of always look at the regulations that are passed and kind of assume that eventually

those regulations will trickle down to banks our size. That said, banks don't want to do away with overdraft fees either. Robert James II, a CEO of Carver Financial Corporation, a company with two community banks in Georgia and Alabama. He says when a customer overdraws their account, the bank is essentially lending them money Carver Financial Corporation, a company with two community banks in Georgia and Alabama. He says when a customer over draws their account, the bank is essentially lending them money to cover, say, an electric bill. That's a service to you.

That's a service to the electric company. And ultimately, we've got to, you know, be able to earn something for being able to provide that service. James says at his banks, customers have to opt into overdraft services. And many do. In order to make sure that they can essentially pay a certain bill or meet an obligation before they have access to their regular income. And since many of his customers operate on limited incomes, James says he's hoping to

provide overdraft services for as long as he can. I'm Justin Ho from Marketplace. ["Sense of You", by Justin Ho & The Censors, playing in background.] As I believe I've said a time or two on this program, the Census Bureau is an underappreciated source of really insightful data about this economy. Durable goods orders, housing starts and sales, the trade gap, also and perhaps even less appreciated what the Bureau calls geographic mobility and migration. They've been keeping track of where Americans are moving since 1948. And last year, it turns out, was the least mobile year we've had since that first survey

almost 80 years ago. Less than 10% of people in this economy moved in 2023. Marketplace's Samantha Fields has more on that. It used to be much more common for people to move than it is today. In the 1950s and 60s, about 20% of Americans moved in a given year. But now? We are pretty much a non-mobile society. William Fry, a demographer at the Brookings Institution, says there are some big trends that have contributed to this long, slow decline in mobility since the 50s and 60s.

Back then, there were many more renters, and renters tend to move more than owners do. And it was a younger population. And younger people tend to move more than older people do. So today? Fewer young people, fewer people moving. Charlie Doherty, senior economist at Wells Fargo, says there's also been a steady increase in the number of households where both partners work. You know, finding two new jobs is a whole lot more challenging than just finding one.

So that's another big factor, I think, that's holding down the move rate. More recently, economist Jed Kolko says the pandemic has also played a role. The increase in remote work makes it easier for some people to stay put while finding a new job. And then there's the housing market of the last few years. Housing prices have skyrocketed, interest rates have jumped, and both inventory and affordability are near all-time lows. That's for renters, too.

Coco says it can be hard to find a place to move, even if you want to. And the big decline in mobility that we've seen just in the most recent years is a decline in shorter distance moves, moves maybe just across town. And those are moves that tend to be more about housing than about new job opportunities. So far, Logan Motoshami, lead analyst at HousingWire, says this lack of mobility doesn't seem to have been much of an issue for the economy. This will become a problem for our economy when the labor market gets softer and people start losing their jobs and they can't find anything local. Especially if it's still so expensive and challenging to move. I'm Samantha Fields for Marketplace.

I'm Samantha Fields for Marketplace. You wake up, get a cup of coffee or tea or whatever your choice is. You want to know what's going on in business and the economy first thing in the morning? Have I got a deal for you. David Brancaccio and the gang on the program about the producer price index and how manufacturers are struggling to keep their costs slow and what all that has to do with what consumers are paying. But even though inflation is off its peak, price levels, as economists like to say, are still elevated. And tariffs loom come to change in administration.

So retailers are kind of a twixt in between, as you'll hear in today's installment of our series My Economy. My name is Eric Bauer and I am the owner of Turner Hat Company, which I purchased this year in March. We have four main styles. We have Western straws, so traditional kind of white cowboy hats. We do Western felts, so kind of same idea, but in felt. And then the other two segments that are big for us are, I call them like leisure and outdoor hats, but those are things like lower priced straws and palms that you'd use to cut your

grass or go outside and play some golf. And then we also do a line of sporting hats for things like hunting and fishing that are more focused on just keeping the sun off your neck or keeping you a little bit warmer when you're out on on an early morning. 50% of our cost is just getting the product to us. The other big line items for us are people and then transportation. So we source our products from China and Mexico.

So with Ocean Freight from China, we also pay about 25 to 30% tariffs on products coming from China, and that all adds to the product cost. And then on the other end of the equation, hats are fairly low value and fairly large, and so shipping them out to our individual customers takes up another big chunk of our operating costs. operating costs. We had gone into or we're going into 2025 thinking about the customer relationship, and that is now kind of a number one B priority to the number one A priority, which is stabilizing

our supply chain and making sure that we're still profitable on the products that we carry. And so the big thing that we're worried about are large tariffs on products from Mexico that currently have no tariffs on them. And then increased tariffs on products from China that have, like I said, 25 to 30 percent tariff on them right now. So we are literally day and night seeking other suppliers across the world. So we're looking at places like Sri Lanka, Bangladesh,

Pakistan, Vietnam, Columbia, basically anywhere that's manufacturing hats just on the chance that these tariffs kind of come to play because if they do, we would have no choice but to pass those costs on to customers if we can't negotiate lower costs from the suppliers or find another supplier in a country without the tariffs on them. So if we're getting 25 increase on our raw product cost then the end consumer is going to see a 25 increase in

in their product and so any increase in that that price that the customer pays has a really big impact on our demand. That's why we've sprung into action to try to find suppliers where we wouldn't be affected and keep our costs as low as possible because it's really important to our customers. Tell you what, it takes guts to be a small business person, huh?

Eric Bauer, newish proprietor of the Turner Hat Company. Whether headwear is your thing or not, we want to know what your economy is like. So tell us, won't you? Marketplace.org slash my economy. Coming up. So it's not like a lifeboat's coming anytime soon. Oh, that's not good. First though, let's do the numbers. Dow Industrial is off 234 today, about a half percent forty three thousand nine hundred and fourteen the Nasdaq down 132 seven tenths percent nineteen thousand nine hundred and two

S&P 500 off 32 points about a half percent six thousand and fifty one Costco's due to report earnings today after the close so let's do some big box here shall we Costco during the session off six tenths percent Walmart owner of the competing Sam's Club as well subtracted nine tenths percent BJ's wholesale clubs which were started by discount department store chain Zaire back in the 1980s, in case you didn't know, slumped 1.2% today. Heard earlier from Justin about banks and overdraft fees, so let's check in with some financial institutions, shall we?

Bank of America out of Charlotte, North Carolina, flat. Wells Fargo slid one and a tenth percent. JPMorgan Chase, which has a head office in New York City, but is incorporated in where, where, where? Delaware. Declined to 8, 10%. I was not planning on that rhyme, actually. You're listening to Marketplace.

Hey, this is Kimberly Adams, co-host of Make Me Smart. Listen up, because for this week only, we are offering all Marketplace merchandise at a discount. So you can snag our popular Marketplace sweatshirt for just $8 a month, or maybe you and the investor in your life could use some matching glass mugs. That's only $5 a month. We're even offering our brand new Merino wool socks featuring Kai, David and yours

truly for a one-time gift of $15. These deals won't last long, it's our way of thanking you for getting your year-end donation in a little bit early. This offer expires at midnight on Friday, so don't wait, get yours now at marketplace.org slash donate. This is Marketplace. I'm Kyle Rizdal. Let's just stipulate here that nobody likes paying their insurance premiums. If everything works out all right, you don't crash your car, you don't have big medical expenses, and your house doesn't have any problems.

Sometimes, though, life has other plans and those checks from the claims you make come in really handy. But when your premiums go up, and up as they have been, car coverage rates are up almost 13% from a year ago, overall inflation, as I mentioned a couple of minutes ago, 2.7% here. Well, when premiums go up like that, one might fairly ask, what the heck? Marketplace's Kelly Wells did. Inflation is hitting just about every type of insurance because the stuff and people we're insuring cost more to fix. Parts and labor for car repairs are more expensive, construction materials and labor for home

repairs are more expensive, along with most other goods and services in the economy. Stephen Shore, who teaches insurance and risk management at Georgia State University, says some may be surprised that insurance rates are still going up now that inflation is stabilizing. That's because insurers are playing catch up. And insurers have to show state regulators their costs have gone up before they're allowed to raise prices. One big area where prices have increased noticeably is health insurance. Here's David Marlett, who teaches insurance at Appalachian State University. As health care costs go up, to see a doctor, to get prescription drugs, that drives the health insurance premiums.

As do the rising wages of health care providers. Another sector feeling the pinch of inflation is car insurance, says Rob Hoyt, who teaches risk management and insurance at the University of Georgia. Part of the problem is some of the minor accidents end up escalating in cost pretty significantly. Cars are more complex nowadays. A little fender bender isn't just a dented bumper and some scratched paint, but also a broken rear-facing camera or motion sensor. GINNY CARLSON

And then there's a whole lot of work that has to go on by the technicians to reset a lot of that technology after it's been repaired. GINNY Which means longer repair and car rental times. Oh, and more labor costs. Drivers are familiar with paying for liability insurance, but that's not restricted to cars. Say someone falls and breaks their arm on your slippery stairs. Kimberly Lilly, chair of the California Legislative Action Committee's Insurance Task Force, says in our more litigious culture, they may be less likely just to say, forget about it.

And more likely to say, I saw someone else make $200,000 off this kind of accident. I'm going to sue you and try and get that money too. And as residents of California and Florida already know, home insurance costs are surging. Lily says that's because of climate change. The result of the planet warming up is that we have more severe hurricanes, we have more fires, and we're having a much larger loss than we ever used to have. And while a slowdown in general inflation might help the insurance industry to some extent, climate change, shifting social attitudes, and fancier cars will keep pushing up premiums,

Lilly says. They're going to have to continue to charge more. That number is just going to be bigger. So plan for it. Because unless insurance companies can raise their rates and stay profitable, they'll stop insuring altogether, a challenge that residents in fire and flood-prone states have already begun to face. I'm Kaylee Wells for Marketplace. There are, says the aforementioned Census Bureau of these United States of America, a hair more than 76 million baby boomers living in this country right now. That is data from the 2020 Census.

They will, those boomers, eventually, as will we all, pass. And when they do, economists and financial planners expect that in the aggregate, the economic power they are going to leave behind will be what has come to be called the great wealth transfer. By one estimate, more than $100 trillion in assets will flow from older generation Americans to their heirs and favored charities over the next 25 years, mostly through inheritance but also through gifts made before, well, you know. Gen X is going to be the first in line, as it were, then their children, millennials

and Gen Z. What's going to be interesting to see is what kind of difference that money might make. Here's Marketplace's Mitchell Harmon. Gerard Busello works as a proposal writer in the Washington, D.C. area. He's 29, so a young millennial demographically, and a pretty fortunate one at that. I have benefited from the financial planning my parents put into my higher education, as well as help they provided in down payment assistance for the purchase of a new home. Most of his friends are renters and saddled with student loans.

Busello's parents are professionals in their 60s and pretty well off, but they've told him they'll be spending to live well in retirement rather than trying to hold on to their wealth to leave an inheritance when they die. But my expectation is not actually to receive anything. That is not something I can or should plan around. A massive wave of inheritance is something wealth managers are planning around, though, says Andy Smith at Edelman Financial Engines. This is a huge part of my client meetings now, the largest transfer of wealth in history.

And it's poised to make many new millionaires. In a report published back in 2021, Cerulli Associates calculated that over the next 25 years, $84 trillion would be passed from older to younger generations. Analyst Chase Horton just crunched the numbers again. We find that has increased to 124 trillion. There are a few reasons. Inflation, soaring stock and home prices, plus increasing wealth concentration among the richest and oldest Americans.

Horton says half of the great wealth transfer will come from just the top 2% of households, those with 10 million or more in net worth. And the majority of the wealth they're transferring is going to be left to the top 2% of heirs, which is obviously not a widespread equitable distribution. Generationally, the sharp rise in family gifting and inheritance will mostly benefit Gen X early on. Millennials in Gen Z will have to wait a decade or more to really start increasing their share.

So it's not like a lifeboat's coming anytime soon. For some, it's probably not coming at all. Financial services firm Northwestern Mutual regularly asks Americans about their inheritance plans and expectations, and advisor Jessica Majeski says they don't add up. More people are expecting to receive an inheritance than planning to leave an inheritance. Twenty-two percent of Boomer and GenX households plan to leave money. But yet there's 32 percent of millennials and 38 percent of Gen Zers who hope or expect

to receive an inheritance. And majority of them consider that money critical to their financial security and retirement. Majesky isn't exactly surprised. All the stories they hear about Social Security potentially not being there for them. I think it creates some angst and expectation that they'll need an inheritance. But she says relying on one is bad financial planning. It's gonna be like gravy on top, right? Like we're not going to build that into the plan

because anything can happen. The parent that you thought was gonna leave you in an inheritance could live well into their 90s. In his planning practice, Andy Smith at Edelman Financial Engines says most younger clients have pretty prosaic ideas of how to use money from a family gift or inheritance. When I asked how do you think you're going to spend $100,000 windfall, maybe 40 percent,

you know, it's going to go to housing, paying bills, payments on debts or loans. Gerard Buccello doesn't think getting a one-time windfall from his parents would be licensed to change his entire life. Mitchell Hartman, Founder and CEO of New Sello, New York City, New York City Would I quit my job? Absolutely not. Move to a bigger house? Almost certainly not.

He says he might use some of it to help a friend or relative in need, or take a really long vacation. I'm Mitchell Hartman for Marketplace. As final note on the way out today, did you ever watch that show Hot Ones where various celebrities attempt to hold a normal conversation with the host while eating progressively hotter and hotter chicken wings? It is entertaining in a peculiar kind of way. Anyway, did you ever wonder how much this show that started as a random YouTube series and its production company might be worth? If your answer was $82.5 million, go to the

head of the class Buzzfeed, which through a long, complicated series of events, owns it. Announce the sale today to a consortium of investors. John Buckley, John Gordon, Noya Carr, Diantha Parker, Amanda Peacher, and Stephanie Seek are the marketplace editing staff and Mirbid Bawi is the managing editor. And I'm Kai Rizdal. We will see you tomorrow, everybody. This is APN. I'm Phil Buchanan, the president of the Center for Effective Philanthropy. My co-host, Grace Nicolette, and I are bringing you the latest season of Giving Done Right, the show with everything you need to know to make an impact with your charitable giving.

Whether you give away a few hundred dollars a year, a few thousand, or even a few million, we're going to help you be smarter and give more effectively. A new season begins on September 19th, so be sure to subscribe on Apple Podcasts, Spotify, or wherever you get your podcasts.