{"id":139217,"date":"2025-01-09T11:36:00","date_gmt":"2025-01-09T15:36:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=139217"},"modified":"2025-01-09T15:37:27","modified_gmt":"2025-01-09T19:37:27","slug":"boomer-wealth-transfer","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/boomer-wealth-transfer\/","title":{"rendered":"The Great Boomer Wealth Transfer May Set America Backward"},"content":{"rendered":"\n<p>How will the baby boomer wealth transfer affect the economy? What are the different ways wealth is being passed down?<\/p>\n\n\n\n<p>The largest <a href=\"https:\/\/www.shortform.com\/blog\/wealth-transfer\/\">transfer of wealth<\/a> in US history is underway, as Baby Boomers begin passing down $84 trillion in assets to younger generations. Rather than improving the economy, <a href=\"https:\/\/www.shortform.com\/blog\/the-great-wealth-transfer-is-coming\/\">the Great Wealth Transfer<\/a> is expected to widen inequality.<\/p>\n\n\n\n<p>Here&#8217;s a look at the problems the wealth transfer might cause and some fiscal changes that may be on the horizon.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-great-wealth-transfer-is-upon-us\"><strong>The Great Wealth Transfer Is Upon Us<\/strong><\/h2>\n\n\n\n<p>The <a href=\"https:\/\/www.shortform.com\/blog\/the-great-wealth-transfer\/\">Great Wealth Transfer<\/a> refers to the<strong> transfer of <\/strong><a href=\"https:\/\/www.cnbc.com\/2024\/10\/24\/great-wealth-transfer.html\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>$84 trillion in assets<\/strong><\/a><strong> from Baby Boomer parents to their Gen X, Millennial, and Gen Z children and grandchildren by 2045<\/strong>. About one-fifth of this Boomer wealth transfer\u2014<a href=\"https:\/\/www.nytimes.com\/2023\/05\/14\/business\/economy\/wealth-generations.html\" target=\"_blank\" rel=\"noreferrer noopener\">$16 trillion<\/a>\u2014will move in the next decade. This unprecedented transfer reflects the expansion of US household wealth from $38 trillion in 1989 to $140 trillion today.<\/p>\n\n\n\n<p>Boomers accumulated this wealth through decades of extraordinary growth in the housing and stock markets, whose returns have far outpaced inflation since the early 1980s. They now control half of US wealth, with their largest holdings in stocks, real estate, and pension funds. <\/p>\n\n\n\n<p>Nearly one-third of Americans either <a href=\"https:\/\/www.forbes.com\/sites\/josephcoughlin\/2024\/06\/26\/the-great-wealth-transfer-is-happening-but-not-in-the-way-you-think\/\" target=\"_blank\" rel=\"noreferrer noopener\">have gotten or expect to receive an inheritance<\/a>, with almost half anticipating it within the next decade.<\/p>\n\n\n\n<p>(Shortform note: In <em><a href=\"https:\/\/www.shortform.com\/app\/book\/capital-in-the-twenty-first-century\/preview\">Capital in the Twenty-First Century<\/a><\/em>, Thomas Piketty warns that The Great Wealth Transfer could be a return to a historical era\u2014like the Gilded Age in the United States, the Victorian Era in Britain, or the Belle \u00c9poque in France\u2014in which getting a good education, working hard, saving, and investing wisely all count for far less than having the good fortune to be born to wealthy parents.)<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-why-inequality-will-worsen\"><strong>Why Inequality Will <\/strong>Worsen<\/h3>\n\n\n\n<p>Current wealth distribution reflects historical inequities and foreshadows deeper divides ahead. The wealthiest 1% of Americans, who are predominantly white\u2014<a href=\"https:\/\/www.nytimes.com\/2023\/05\/14\/business\/economy\/wealth-generations.html\" target=\"_blank\" rel=\"noreferrer noopener\">hold as much wealth as the bottom 90% combined<\/a>. This concentration of wealth stems partly from<strong> <\/strong>historical <a href=\"https:\/\/www.shortform.com\/blog\/housing-discrimination\/\">housing discrimination<\/a> and unequal access to financial tools and advice, which prevented many people of color from benefiting from decades of growth in real estate and financial markets.<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Expectation Versus Reality<\/strong><br><br>Those outside of the top 1% may be disappointed in their inheritances for additional reasons: The actual amount handed down to beneficiaries may be less than anticipated.<br>There are several reasons for this discrepancy:<br><br><strong>Health care costs:<\/strong> Increased health care costs in later life can significantly deplete savings.<br><strong>Increased life expectancy:<\/strong> Boomers are the first generation to depend not on pensions, but instead on investments (like 401ks) to fund their retirements. Many are entering retirement <a href=\"https:\/\/www.newsweek.com\/boomers-millennials-transfer-wealth-future-1795099\" target=\"_blank\" rel=\"noreferrer noopener\">without enough savings<\/a> to last the years they\u2019re expected to live, and they may not have anything left to pass along at the end of their lives.\u00a0<br><strong>Lifestyle and retirement spending:<\/strong> Boomers are known for valuing experiences, which may lead to higher spending in retirement, thus reducing the amount left for inheritance.<br><strong>Philanthropy and <a href=\"https:\/\/www.shortform.com\/blog\/contributing-to-charity\/\">charitable giving<\/a>:<\/strong> There\u2019s an increasing trend among boomers to allocate a portion of their wealth to philanthropic causes.<br><br>Moreover, even for those who do receive what they anticipate, economic conditions might mean it doesn\u2019t bring them the financial stability they hope for: Inflationary effects and a generally <a href=\"https:\/\/fortune.com\/2023\/04\/18\/100000-salary-old-goal-millennials-middle-class-inflation\/\" target=\"_blank\" rel=\"noreferrer noopener\">higher cost of living<\/a> for younger generations will mean that inherited money won\u2019t go as far as it might have in the past.\u00a0<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>This disparity will intensify through the great wealth transfer: While the wealthiest 10% of households will receive most of the <a href=\"https:\/\/www.shortform.com\/blog\/inherited-wealth\/\">inherited wealth<\/a>,<strong> the more diverse bottom 50% of Americans will get just 8% of transfers<\/strong>\u2014reinforcing decades of systemic barriers to wealth-building in communities of color.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-wealth-transfer-challenges\"><strong>Wealth Transfer Challenges<\/strong><\/h3>\n\n\n\n<p>The Great Wealth Transfer may take decades to unfold, but both older and younger generations are already navigating new patterns of <a href=\"https:\/\/www.shortform.com\/blog\/giving-and-receiving\/\">giving and receiving<\/a> wealth.<\/p>\n\n\n\n<p>1.<strong>\u00a0 <\/strong><a href=\"https:\/\/www.forbes.com\/sites\/josephcoughlin\/2024\/06\/26\/the-great-wealth-transfer-is-happening-but-not-in-the-way-you-think\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Inheritance style<\/strong><\/a>. Rather than waiting until death, many parents are transferring their wealth while they\u2019re still alive to guide its use, helping their children fund college tuition, weddings, and home purchases. They\u2019re also <a href=\"https:\/\/finance.yahoo.com\/news\/great-wealth-transfer-millennials-stuck-193029903.html\" target=\"_blank\" rel=\"noreferrer noopener\">passing down collections of furniture, antiques, and formal household items<\/a>\u2014possessions that often don\u2019t fit younger generations\u2019 smaller homes or lifestyle preferences. <a href=\"https:\/\/www.sps.nyu.edu\/homepage\/communications\/press-releases\/2023\/2023-family-travel-association-annual-family-travel-survey-highlights.html\" target=\"_blank\" rel=\"noreferrer noopener\">Multigenerational family travel<\/a> has grown as another popular form of wealth sharing, with 50% of surveyed parents and grandparents taking such trips in the past three years.\u00a0<\/p>\n\n\n\n<p>2.<strong> <\/strong><a href=\"https:\/\/www.forbes.com\/sites\/josephcoughlin\/2024\/06\/26\/the-great-wealth-transfer-is-happening-but-not-in-the-way-you-think\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Expectations gaps<\/strong><\/a>. Families often avoid discussions about money and inheritance plans, leading to misaligned expectations about future wealth transfers. <\/p>\n\n\n\n<p>3. <a href=\"https:\/\/www.nytimes.com\/2023\/05\/14\/business\/economy\/wealth-generations.html\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Sandwich generation squeeze<\/strong><\/a>. Some upper-middle-class adults who anticipate substantial inheritances from their parents are facing an immediate financial bind: While waiting for their future windfall, they\u2019re struggling to manage the costly dual responsibilities of caring for both aging parents and young children.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-changes-ahead\"><strong>Changes Ahead<\/strong><\/h3>\n\n\n\n<p>Experts warn that <strong>looming fiscal changes <\/strong><a href=\"https:\/\/www.craincurrency.com\/family-office-management\/what-you-may-not-know-about-great-wealth-transfer\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>could significantly reduce how much wealth passes to the next generation<\/strong><\/a>. Congress faces a major fiscal cliff at the end of 2025 that will require trillions in new tax revenue to resolve. With Social Security and Medicare facing potential bankruptcy in the mid-2030s, lawmakers from both parties are likely to target wealth in all forms\u2014estates, investments, and income\u2014as revenue sources, since current estate taxes generate less than 1% of federal revenue. <\/p>\n","protected":false},"excerpt":{"rendered":"<p>How will the baby boomer wealth transfer affect the economy? What are the different ways wealth is being passed down? The largest transfer of wealth in US history is underway, as Baby Boomers begin passing down $84 trillion in assets to younger generations. Rather than improving the economy, the Great Wealth Transfer is expected to widen inequality. Here&#8217;s a look at the problems the wealth transfer might cause and some fiscal changes that may be on the horizon.<\/p>\n","protected":false},"author":8,"featured_media":139218,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[81,31,24],"tags":[727],"class_list":["post-139217","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-money","category-society","tag-articles","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Great Boomer Wealth Transfer May Set America Backward - Shortform Books<\/title>\n<meta name=\"description\" content=\"As Baby Boomers pass on their wealth, some worry that it may cause more issues than benefits. 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