{"id":72854,"date":"2022-07-18T12:34:00","date_gmt":"2022-07-18T16:34:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=72854"},"modified":"2022-07-22T14:27:38","modified_gmt":"2022-07-22T18:27:38","slug":"the-great-wealth-transfer-is-coming","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/the-great-wealth-transfer-is-coming\/","title":{"rendered":"The Great Wealth Transfer Is Coming\u2014Here’s Why"},"content":{"rendered":"\n

What is the Great Wealth Transfer<\/a>? Should you worry about it?<\/p>\n\n\n\n

Inherited wealth<\/a> will come to account for a much greater share of overall <\/em>wealth than that earned through work and savings. This is because of the Great Wealth Transfer<\/a>, where baby boomers transfer their wealth to the younger generations.<\/p>\n\n\n\n

Learn more about why the Great Wealth Transfer is coming.<\/p>\n\n\n\n\n\n\n\n

The Baby Boomer Inheritance Windfall<\/strong><\/h2>\n\n\n\n

In Capital in the Twenty-First Century<\/em>, Thomas Piketty projects that increased mortality rates\u2014as the large and aging baby boomer cohort begins to die off\u2014will contribute significantly to the growth of inherited wealth. The baby boomers, he writes, were the largest generation at the time of their birth\u2014larger than any cohort that preceded them.<\/p>\n\n\n\n

The Great Wealth Transfer is coming, but why? Because of their long lifespans relative to previous generations, they had more time to accumulate large stocks of capital\u2014and, as long as the rate of return on capital is greater than the rate of economic growth (r>g<\/a>), these stocks of wealth will continue to beget still greater <\/em>wealth relative to economic growth as a whole. As the baby boomers begin to die off en masse, those growing capital stocks will be bequeathed to their heirs\u2014representing a massive windfall of inherited wealth.<\/p>\n\n\n\n

What this portends, Piketty warns, is 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<\/strong>.<\/p>\n\n\n\n

In Defense of Inheritance<\/strong><\/h3>\n\n\n\n

Some economists dispute Piketty\u2019s notion of a looming inheritance windfall. One paper found that from 1989 to 2007, the share of households reporting a wealth transfer through inheritance fell by 2.5 percentage points<\/a>. Moreover, these researchers found that wealth transfers as a proportion of current net worth during this period dropped precipitously, from 29 to 19%. In contrast to Piketty, the authors of this paper found that inheritances and other wealth transfers tended to reduce wealth inequality by redistributing household wealth.<\/p>\n\n\n\n

On a more fundamental level, other economists contend that there is nothing wrong or objectionable about inheritance even if it does result in significant inequality. In Capitalism and Freedom<\/em><\/a>, Milton Friedman<\/a> writes that it is impossible to determine how much anyone\u2019s wealth is \u201cearned\u201d or \u201cunearned,\u201d<\/a> however we choose to define the terms. But even if a system could somehow be devised that only redistributed \u201cunearned\u201d wealth (like from an inheritance) and left \u201cearned\u201d wealth alone, it would still be harmful to economic freedom.<\/p>\n\n\n\n

This is because there is no moral difference between earned wealth and inherited wealth<\/a>. Even if you inherit a vast fortune from your family, Friedman writes that it is still ultimately a product of human endeavor\u2014at some point, someone did create that wealth. Moreover, Friedman argues that economic freedom demands that individuals can do as they please with their property, so long as it does not impose a cost on someone else. Thus, choosing to pass property along to one\u2019s heirs is a legitimate act within a capitalist system.<\/p>\n","protected":false},"excerpt":{"rendered":"

What is the Great Wealth Transfer? Should you worry about it? Inherited wealth will come to account for a much greater share of overall wealth than that earned through work and savings. This is because of the Great Wealth Transfer, where baby boomers transfer their wealth to the younger generations. Learn more about why the Great Wealth Transfer is coming.<\/p>\n","protected":false},"author":14,"featured_media":18187,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[81,31],"tags":[689],"class_list":["post-72854","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economics","category-money","tag-capital-in-the-twenty-first-century","","tg-column-two"],"yoast_head":"\nThe Great Wealth Transfer Is Coming\u2014Here's Why - Shortform Books<\/title>\n<meta name=\"description\" content=\"The Great Wealth Transfer means baby boomers are passing down trillions of dollars to millennials. 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