In addition to heartwarming family lore and sentimental trinkets, older generations are set to pass down a staggering amount of financial value over the coming decades in the largest wealth transfer in history.
People born before 1964—baby boomers and the pre-WWII babies known as the silent generation—hold 64% of the nation’s $190 trillion of wealth, per the Federal Reserve. And they are expected to leave behind $84 trillion to their descendants in the coming two decades, according to Cerulli Associates.
Boomer asset inventory
Much of this will be in the form of stock and bond investments that have grown on the backs of markets that boomed as the boomers bloomed. After the Dow Jones Industrial Average grew almost thirtyfold since 1985, boomers have an average $242,200 stashed away in their 401(k)s, according to Fidelity.
They’re also big possessors of real estate, the value of which has swelled in the decades since they bought their starter home for roughly what a nice flat-screen TV costs today.
- Boomers own 37% of the homes in the US while making up a little more than 20% of the population, according to the Census Bureau.
- And they have the keys to 57% of vacation homes, and 58% of investment income-generating rental properties, per the National Association of Realtors.
Meanwhile, inheriting a house might be the only way many millennials can afford homeownership—45% of people born between 1981 and 1996 don’t own their dwelling.
Sometimes the inheritance is a rug store: Boomers own private companies collectively worth almost $8 trillion, including 41% of US small businesses, per government data. But many retiring entrepreneurs aren’t passing them down to their kids Succession-style, choosing to instead sell their mom-and-pop establishments to enterprising millennials.
A funeral isn’t a wealth transfer prerequisite. Some generous members of the older generations are already using their nest eggs to help their kids and grandkids handle house down payments, private school tuition, and student loans. Besides covering costs as they come up, there’s another benefit: Yearly gifts of $18,000 for an individual or $36,000 for a couple are exempt from taxes.
Big picture: Millennials are on track to become the richest generation in history as they inherit the wealth of their parents and grandparents—a phenomenon that’ll transform jobs, housing, and investment markets.—SK
This report was written by Sam Klebanov and was originally published by Morning Brew.