The largest wealth transfer in history is underway as the Baby Boomer generation transfers assets of $84 trillion into the hands of younger generations — typically, Millennials and Gen Zers.
As the Boomers do this via wills, trusts, property purchases and gifts, the question becomes: How will the Great Wealth Transfer reshape the future of financial and cultural activity? Let’s talk about three of the primary areas that will be affected — capital infusions, family conversations and paradigm shifts.
Capital infusions
The assets Millennials and Gen Zers are inheriting from their Boomer parents (or grandparents) act as a capital infusion. With newfound money in their pockets, the younger generations stand to spend and invest this money in ways that deviate from generations past. How so?
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Millennials and Gen Zers are showing the world that they are focused on values when it comes to spending and investing their money. They are conscientious consumers who tend to spend on goods and services that are socially responsible, according to an AFLAC survey.
For example, newer generations of consumers are opting for organic, locally sourced produce or fair-trade products over conventional produce and products. These spending habits will ultimately shape the economy and culture, because spending habits and culture are inherently interlinked.
Similarly, the next generation of investors is opting to deploy capital into the entrepreneurial ecosystem by investing in their own entrepreneurial endeavors and/or those of others. Inherited capital could provide the financial security needed to take a risk, roll the dice and pursue an entrepreneurial idea.
An infusion of capital could also support the increasingly vibrant start-up and innovation ecosystem. There’s no denying that we’re traversing into an increasingly dynamic economic and investment landscape, one that Millennials and Gen Zers are eager to shape — with values in mind.
Family conversations
Such a vast transfer of wealth requires rich, intergenerational conversations to align value and values. Open, thoughtful and vulnerable conversation is necessary for families to unpack the rights and responsibilities that come with inheriting massive resources.
Parents (or grandparents) might discuss how they acquired their assets, how their assets are structured, plus their wishes and fears related to what happens to those assets after they’re gone. Family conversations can revolve around when to best transfer financial wealth, either during the older generations’ lifetime or upon their demise. These discussion topics are dynamic, but dynamic doesn’t have to mean difficult. In fact, talking about wealth transfer is a great opportunity to strengthen family ties, ensuring a strong family legacy extends from one generation to the next.
These family conversations also provide an opportunity to blend traditional perspectives with fresh perspectives.
Paradigm shifts
This monumental transfer of financial wealth is contributing to our evolving society and a new wealth paradigm. The next generation is clearly focused on spending and investing in ways that deviate from prior generations. For example, Millennials are redefining wealth creation based on technological advancements and societal shifts. These tech-savvy inheritors are acquiring investment information, knowledge and acumen through digital means and using what they learn to make their financial decisions.
Cultural issues and values also influence their financial decisions. As more capital lands in the hands of future generations, these shifts will become more pronounced.
Whether you are the direct recipient in the Great Wealth Transfer, or not, this shifting of assets has the potential to impact you, your business and those around you. The largest wealth transfer in history is providing us with a unique opportunity to reshape the financial and cultural landscape.
Related Content
- How Do You Build Wealth? Seven Critical Steps
- Gen X Should Prepare Now for the Great Wealth Transfer
- Your Home Would Be a Terrible Inheritance for Your Kids
- Financial Planning Should Be Intergenerational
- What Is Wealth? Shifting Values Change What It Means to Many
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Planner: If You're Not Doing Roth Conversions, You Need to Read This
Roth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us? A Retirement Psychologist Makes the Case
A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Adviser: This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
-
I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS PaperworkMost people can gift large sums without paying tax or filing a return, especially by structuring gifts across two tax years or splitting gifts with a spouse.
-
'Boomer Candy' Investments Might Seem Sweet, But They Can Have a Sour AftertasteProducts such as index annuities, structured notes and buffered ETFs might seem appealing, but sometimes they can rob you of flexibility and trap your capital.
-
Quick Question: Are You Planning for a 20-Year Retirement or a 30-Year Retirement?You probably should be planning for a much longer retirement than you are. To avoid running out of retirement savings, you really need to make a plan.
-
Don't Get Caught by the Medicare Tax Torpedo: A Retirement Expert's Tips to Steer ClearBetter beware, because if you go even $1 over an important income threshold, your Medicare premiums could rise exponentially due to IRMAA surcharges.
-
I'm an Insurance Pro: Going Without Life Insurance Is Like Driving Without a Seat Belt Because You Don't Plan to CrashLife insurance is that boring-but-crucial thing you really need to get now so that your family doesn't have to launch a GoFundMe when you're gone.
