Over the next few decades, the U.S. is set to experience one of the largest transfers of wealth in history—often referred to as the “Great Wealth Transfer.” This transfer involves the passing down of more than $68 trillion from Baby Boomers to younger generations, primarily Millennials and Gen Z.
But how exactly will this impact you? And more importantly, what steps can you take now to ensure you’re financially prepared for this shift? Let’s break it down.
What is the Great Wealth Transfer?
The Great Wealth Transfer refers to the trillions of dollars that will be handed down from Baby Boomers to their heirs over the coming decades. As Baby Boomers reach their golden years, a significant portion of their wealth, amassed through homeownership, investments, and retirement savings, will be passed on to the next generation. The transfer will take place through inheritances, gifts, and estate plans.
But here’s the catch. While this sounds like a windfall for younger generations, it’s not all guaranteed. The amount Millennials and Gen Z could receive varies greatly depending on factors like family wealth distribution, rising healthcare costs, and the overall economy.
Why Millennials and Gen Z may not inherit as much as they think
Many Millennials and Gen Zers are hopeful that this transfer will provide a financial cushion, but experts suggest tempering those expectations. Here’s why:
Longer lifespans
Baby Boomers are living longer than previous generations, and with increased longevity comes higher healthcare costs. As a result, a significant portion of this wealth may be spent on long-term care, leaving less for heirs.
Economic uncertainty
The rising cost of living, market volatility, and potential economic downturns could erode the value of inherited assets over time. If the economy takes a turn for the worse, the expected inheritance may not stretch as far as anticipated.
Changing priorities
Some Baby Boomers are choosing to give away their wealth during their lifetime, either by supporting charitable causes or helping their children with immediate financial needs like buying a home or paying off student debt.
How could you benefit from the Great Wealth Transfer?
While not everyone will receive a sizable inheritance, there are still ways to position yourself to benefit from this wealth shift:
Start planning early
If you anticipate receiving an inheritance, consider creating a financial plan that aligns with your long-term goals. Having a strategy in place can help you make informed decisions when the time comes.
Diversify your investments
While waiting for an inheritance may seem like a plan, it’s essential to diversify your current investments. Consider spreading your financial risks across various asset classes—like stocks, bonds, and real estate— so you’re not solely relying on future wealth transfers.
Talk to your parents about estate planning
Open conversations with your family about their estate plans. While it might seem uncomfortable, understanding their financial plans can help you better prepare for your future.
Consider a trust
If you’re a Baby Boomer or a parent thinking about passing wealth to your children, a trust could be a useful tool. It allows you to control how your wealth is distributed, offers tax advantages, and ensures that your assets go where you want them to.
The Bottom Line
The Great Wealth Transfer presents both opportunities and challenges for Millennials and Gen Z. While the potential for an inheritance is real, it’s not guaranteed. With rising healthcare costs, economic volatility, and shifting priorities, it’s essential to plan accordingly. Whether you’re on the giving or receiving end of this transfer, taking proactive steps now can help ensure you’re financially prepared for the future.
MoneyLion has your back
At MoneyLion, we’re here to help you make smart financial decisions that help protect your wealth and ensure a stable future. Whether you’re anticipating an inheritance or looking to build wealth from scratch, our tools and resources can help you make the most of what you’ve got.
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