The largest wealth transfer in history is underway as the Baby Boomer generation transfers assets of $84 trillion into the hands of younger generations — typically, Millennials and Gen Zers.
As the Boomers do this via wills, trusts, property purchases and gifts, the question becomes: How will the Great Wealth Transfer reshape the future of financial and cultural activity? Let’s talk about three of the primary areas that will be affected — capital infusions, family conversations and paradigm shifts.
Capital infusions
The assets Millennials and Gen Zers are inheriting from their Boomer parents (or grandparents) act as a capital infusion. With newfound money in their pockets, the younger generations stand to spend and invest this money in ways that deviate from generations past. How so?
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Millennials and Gen Zers are showing the world that they are focused on values when it comes to spending and investing their money. They are conscientious consumers who tend to spend on goods and services that are socially responsible, according to an AFLAC survey.
For example, newer generations of consumers are opting for organic, locally sourced produce or fair-trade products over conventional produce and products. These spending habits will ultimately shape the economy and culture, because spending habits and culture are inherently interlinked.
Similarly, the next generation of investors is opting to deploy capital into the entrepreneurial ecosystem by investing in their own entrepreneurial endeavors and/or those of others. Inherited capital could provide the financial security needed to take a risk, roll the dice and pursue an entrepreneurial idea.
An infusion of capital could also support the increasingly vibrant start-up and innovation ecosystem. There’s no denying that we’re traversing into an increasingly dynamic economic and investment landscape, one that Millennials and Gen Zers are eager to shape — with values in mind.
Family conversations
Such a vast transfer of wealth requires rich, intergenerational conversations to align value and values. Open, thoughtful and vulnerable conversation is necessary for families to unpack the rights and responsibilities that come with inheriting massive resources.
Parents (or grandparents) might discuss how they acquired their assets, how their assets are structured, plus their wishes and fears related to what happens to those assets after they’re gone. Family conversations can revolve around when to best transfer financial wealth, either during the older generations’ lifetime or upon their demise. These discussion topics are dynamic, but dynamic doesn’t have to mean difficult. In fact, talking about wealth transfer is a great opportunity to strengthen family ties, ensuring a strong family legacy extends from one generation to the next.
These family conversations also provide an opportunity to blend traditional perspectives with fresh perspectives.
Paradigm shifts
This monumental transfer of financial wealth is contributing to our evolving society and a new wealth paradigm. The next generation is clearly focused on spending and investing in ways that deviate from prior generations. For example, Millennials are redefining wealth creation based on technological advancements and societal shifts. These tech-savvy inheritors are acquiring investment information, knowledge and acumen through digital means and using what they learn to make their financial decisions.
Cultural issues and values also influence their financial decisions. As more capital lands in the hands of future generations, these shifts will become more pronounced.
Whether you are the direct recipient in the Great Wealth Transfer, or not, this shifting of assets has the potential to impact you, your business and those around you. The largest wealth transfer in history is providing us with a unique opportunity to reshape the financial and cultural landscape.
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Disclaimer
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
FAQs
This substantial increase in wealth is likely to lead to increased consumer spending, investment, and economic growth. As money is channelled into investments, the stock market could experience a surge. The large transfer of wealth could potentially change the dynamics of the housing market.
Who will benefit from the Great Wealth Transfer? ›
Gen X stands to gain the most wealth from the $84 trillion wealth transfer. While millennials and members of Generation Z are expecting the biggest inheritances in the coming years as baby boomers pass down their fortunes, Gen Xers will likely get the largest windfalls in the near term.
What's happening with the economy in the Great Wealth Transfer? ›
Research has found a great wealth transfer is underway, with research and consulting firm Cerulli Associates estimating an $84 trillion to shift from older to younger generations through 2045. Yet other experts say a retirement savings crisis may be brewing for some who have not set aside enough for their elder years.
What is the Great American wealth transfer? ›
Over the next two decades, Cerulli Associates estimates that baby boomers and the Silent Generation will pass down a combined $84.4 trillion in assets to younger generations. Dubbed the “Great Wealth Transfer,” this phenomenon is already underway and will impact millions of families.
What is the greatest wealth transfer in history? ›
Here's an explanation for how we make money . The biggest wave of wealth in history is about to pass from Baby Boomers over the next 20 years, and it's going to have major impacts on many facets of life. Called The Great Wealth Transfer, $84 trillion is poised to move from older Americans to Gen X and millennials.
What is great wealth advantage? ›
GREAT Wealth Advantage 4, a regular premium investment-linked plan, helps you achieve your wealth goals in a simple, customisable way — investing regularly to build wealth towards your financial goals and having the choice to pass on your legacy to your loved ones.
What happens in a wealth transfer? ›
"Wealth transfer” is the process of transferring wealth from one generation to another, and there are several strategies that you can pick from to do so. Each comes with its own unique set of advantages and disadvantages, so it's essential to investigate all of them before deciding where to place your own assets.
How does the wealth effect impact the economy? ›
In macroeconomics, a rise in real wealth increases consumption, shifting the IS curve out to the right, thus pushing up interest rates and increasing aggregate demand. A decrease in real wealth does the opposite.
Who will inherit $30 trillion? ›
McKinsey estimates that by the end of the decade, women in the United States will control most of the baby boomers' “unprecedented” US$30 trillion in assets — a wealth transfer nearly as big as America's yearly gross domestic product.
Will Gen Z be the richest? ›
Gen Z — those born between 1997 and 2012 — will soon become the wealthiest generation ever, according to a recent report. The "Spend Z" report from NielsenIQ projects that Gen Z will have the fastest growth in spending power, reaching an estimated $12 trillion by 2030 and overtaking baby boomer spending by 2029.
There are 2 primary methods of transferring wealth, either gifting during lifetime or leaving an inheritance at death. "Upstream" gifting, that is, making a gift to an older family member rather than directly to a younger family member, may be advantageous.
How much money will Gen Z inherit? ›
By the numbers: The Great Wealth Transfer
Millennials (1981-1996) will inherit $27 trillion. Gen Z (1997-2012) or younger will inherit $11 trillion.
How is wealth distributed in American society? ›
Wealth distribution in America has become increasingly concentrated since 1990. Today, the share of wealth held by the richest 0.1% is currently at its peak, with households in the highest rung having a minimum of $38 million in wealth. Overall, roughly 131,000 households fall into this elite wealth bracket.
How much is the great wealth transfer? ›
MILWAUKEE, Aug. 6, 2024 /PRNewswire/ -- As younger generations anticipate the $90 trillion "Great Wealth Transfer" predicted by financial experts, a minority of Americans may actually receive a financial gift from their family members.
What is the top 1% of millennials? ›
When Millennials Make the 1% Mark — For Their Age Group. Consider that millennials are toward the younger end of earners, which plays a role in where they fall on the net worth continuum. “They hit the top 25% at around $50,000 and the top 1% at about $175,000,” Jennings said.
Why are baby boomers so rich? ›
From the end of World War II to the 1970s, many of today's baby boomers benefitted from stable jobs and a strong economy.
Who benefits from generational wealth? ›
Generational wealth is financial wealth and assets that can be passed down from one generation to the next. Most people plan to pass on their wealth to their children or other designated heirs, giving them the gift of greater financial security.
Who will inherit boomer wealth? ›
By the numbers: The Great Wealth Transfer
Baby boomers (born 1946-1964) will inherit $4 trillion. Gen X (1965-1980) will inherit $30 trillion. Millennials (1981-1996) will inherit $27 trillion. Gen Z (1997-2012) or younger will inherit $11 trillion.
Are millennials not ready for wealth transfer? ›
A vast $90 trillion wealth transfer over the next 20 years will likely make millennials “the richest generation in history,” according to consultancy Knight Frank. “The millennials are very ill prepared [to handle this wealth],” said family wealth management expert Salvatore Buscemi.
