The Great Wealth Transfer: Beginning of a New Era

Generational wealth transfer refers to the transfer of wealth from one generation to the next, pretty basic. This transfer can take many forms, such as the inheritance of money or property from parents to children, or the transfer of ownership of a family business from one generation to the next. More than just property and money, generational wealth transfer can also involve the transfer of intangibles, like knowledge, skills, and values, from one generation to the next.

Defined like this, wealth transfers happen every 25 years or so, as aging parents pass away and leave their estates, finances, and knowledge to their children and grandchildren. The Great Wealth Transfer is unique because it involves two of the largest current demographics in North America: Baby Boomers and Millennials.

Boomers: A baby boomer, or “Boomer”, is a person who was born within the twenty-ish years after World War II, specifically between the years 1946 and 1964. The term “baby boomer” is used to describe the massive increase in the number of births that occurred during this period, which was a result of the post-war economic prosperity and the cultural changes that took place in many Western countries.

Baby boomers are often associated with the tumultuous counterculture of the 1960s and their involvement in social and political movements such as the civil rights and anti-war movements. Many baby boomers played a significant role in shaping today’s economy and were the first generation to come of age during the computer and technology revolution 

Today, Boomers are people in their mid-to-late 60s and early 70s. As this generation ages, it is expected to have a significant impact on the economy, as many baby boomers are retiring and transferring wealth to the next generation.

Millennials: A millennial is a person who was born between the early 1980s and the mid-to-late 1990s. The term “millennial” is often used to describe the generation that came of age during the early 21st century.

Millennials are sometimes referred to as “Generation Y,” as they follow after the “Generation X” cohort. They are known for being the first generation to grow up with widespread access to the internet and social media and are often described as being tech-savvy and connected.

Millennials are also known for their focus on work-life balance and their desire to make a positive impact on the world. Many millennials prioritize values such as social justice, environmental sustainability, and personal fulfillment in their career and life choices.

As millennials have come of age, they have faced challenges such as high levels of student debt and a challenging job market. They have also been the subject of much discussion and debate. However, they have brought about significant cultural and societal changes, and are poised to play a significant role in shaping the future.

The average American Boomer’s net worth is $1.2 million, while the median net worth sits at around $206,700. Although the average is probably pulled up by outliers, the numbers still show a significant amount of wealth ready to be passed down. 

A lot of this net worth is thanks to rising housing prices which have jumped significantly since 1967, a staggering 817.49%. That means a home valued at $100,000 around 60 years ago would be worth $974,192.04 today.

And baby boomers aren’t selling as soon as quickly as previous generations. In 2011, baby boomers held 49% of real estate wealth. In 2021, they still held 44%.

When they do sell, they will often sell a lot higher than their purchase price since housing has exploded in value after boomers bought their homes. Those large estates and any leftover savings will make up the Great Wealth Transfer: $30 trillion.

There are approximately 80,114,825 Millennials in Canada and the United States combined. Conservative estimates of how much wealth will be transferred to younger generations sit around $30 trillion. Time for fun with math!

$30,000,000,000,000 divided by 80,114,825 = $374,462.53 per Millennial. But will all that cash be dumped into the laps of Gen Y folks? Probably not.

It is very common these days for aging Baby Boomers to spread their wealth around while they’re still alive and healthy enough to see the fruit of their charity. A strategy called Giving While You’re Living is becoming increasingly popular.

People choose to give while living for many reasons. For some, it’s a way to support causes that they’re passionate about and to make a positive impact on the world while they are still alive to see the results. Others may choose to give while they’re living in order to take advantage of the potential tax benefits of charitable donations or set an example for their children.

Giving while you’re living can come in many forms, including making cash donations to charitable organizations, donating property or assets, or volunteering time and resources to support a cause. Some people choose to make charitable giving a regular part of their budget, while others may make one-time gifts or set up a charitable trust or foundation to support their giving efforts.

This strategy of wealth transfer can be a rewarding and fulfilling way to make a difference in the world and leave a lasting legacy.

What is likely to happen if a millennial’s parents or grandparents leave them a large amount of cheddar? How will millennials spend it?

There are two options that seem highly probable:

1. Pay off Debt

Millennials carry the most total debt of any generation alive today. The average millennial has $100,906 in debt. That’s made up of credit cards, vehicle loans, personal debt, and, you guessed it, student debt. Almost 40% of millennial’s debt load is wrapped up in paying off the loans that got them degrees.

Suddenly being released from over $100K in debt would be incredibly liberating. It might just take inheritances to achieve that sort of financial freedom the millennials can only dream of.

 2. Continue Spending Habits

Statistics show that millennials are more likely to prioritize experiences over tangible stuff, meaning they may be more likely to spend money on activities and events, such as travel, concerts, and sporting events, instead of material possessions.

Millennials tend to prioritize sustainability and social responsibility when making purchasing decisions. They may be more likely to buy products that are environmentally friendly or that are produced by companies with strong social and ethical values.

Technology is very important to millennials; they grew up with the first phones, laptops, and tablets. As a result, they may be more likely to spend money on electronics and digital services such as streaming subscriptions and online gaming.

It is difficult to predict with certainty what the future will hold for millennials, as it will depend on a wide range of factors including economic conditions, technological advances, and global events. However, there are some trends and factors that may shape the future of Gen Y.

One key factor that will likely have an impact on the future of millennials is the state of the economy. Many millennials entered the workforce during the Great Recession of the late 2000s, and as a result, they may have faced challenges in finding employment and building wealth. If economic conditions continue to improve, this could lead to greater opportunities and financial stability for millennials.

Finally, the future for millennials may also be shaped by global events and technological innovation. Climate change, political instability, AI, and virtual reality will all affect the job market, the availability of resources, and the overall quality of life for millennials.

Whatever happens, it will be up to individual millennials to navigate the challenges that pop up and make the most of the opportunities that come their way. The Great Wealth Transfer will certainly be a unique moment in history.