What Is the “Great Wealth Transfer”?

As the Baby Boomers pass on, their heirs are set to receive between $30 and $80 trillion collectively. This event – the largest transfer of generational wealth and assets in U.S. history – is the “Great Wealth Transfer.” 

Understanding the Great Wealth Transfer

The Baby Boomer generation contains all individuals born between 1944 and 1964, and is often considered the wealthiest generation in history. 

Their enormous prosperity stems from a unique set of post-WWII geopolitical and socioeconomic circumstances that saw them enjoy: 

• Low university tuitions 
• Plentiful, affordable housing
• Strong labor protections that boosted wages and benefits
• Decades of strong real estate and stock market growth 

Thanks to this economic bonanza, Baby Boomers’ portfolios contained over 50% of U.S. wealth in 2021. By comparison, their Millennial children – often regarded as the poorest modern generation – held just 6%.  

What the Great Wealth Transfer means economically

As Baby Boomers age into retirement and beyond, their beneficiaries will experience the largest transfer of generational assets ever. What this means societally and economically is guaranteed to be complex. 

For instance, younger generations are generally less risk-averse than Baby Boomers. Combined with higher debt loads and soaring prices, many have avoided investing or sought alternative assets. Younger generations are also more socially conscious and likely to consider forward-thinking investments. 

If trends hold true, the Great Wealth Transfer could see a long-term shift from traditional markets into new avenues of innovation and growth. 

How does the Great Wealth Transfer affect you?

Thanks to fluctuating stock and real estate prices, pinpointing the exact value of the Great Wealth Transfer isn’t simple. Regardless, the full value is unlikely to trickle into future generations. 

Here’s why. 

1. People are living longer

On average, human lifespans are growing as prices – including medical and end-of-life care bills – rise. The combination of higher expenses over more years means that many Baby Boomers will likely spend more of their savings than expected. 

Many Boomers have also re-evaluated their priorities post-pandemic and are spending on experiences, rather than saving for future beneficiaries. 

2. The Great Wealth Transfer will be uneven

One irrefutable fact is that those who have more money can leave more money. As a result, descendents of less well-off Boomers won’t experience the same life-changing wealth as those in better-off families. 

Some financial experts predict that Baby Boomers may skip their children in favor of passing wealth to grandchildren or charities. 

3. Uncle Sam will take his cut

Baby Boomers won’t just leave cash; their wealth will also take the form of:

• Stock market and real estate investments
• Life insurance policies
• Retirement plans
• Trusts

Each of these vehicles carries important estate tax consequences for inheritors. Boomers who fail to plan ahead may leave their beneficiaries with larger tax bills. 

Inheritors will also have to consider the tax implications of capitalizing on their inheritance. That could look like capital gains on profitable asset sales or income taxes on dividends and interest. 

How to handle the Great Wealth Transfer

The Great Wealth Transfer will likely have far-reaching impacts not just on families, but the broader economy. With so many unknowns flying around, it’s important to build new wealth and safeguard any that comes your way. Q.ai helps investors to do just that, whether you’re buying new assets or investing your inheritance.