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The $35 Trillion Wealth Transfer

The mother of all wealth transfers is coming. Baby Boomer heirs listen up: it’s not quite as soon as they are saying and not quite as much…

It’s true, the estimates of the Baby Boomer generation’s net worth is about $35 trillion and they are now preparing to pass down a record breaking amount of wealth to their heirs. The Boomer net worth represents an astonishing 27% of all U.S. wealth. As a percent of GDP, the net worth of this group is more than double what it was in prior generations.

But those Americans approaching retirement are also more likely to spend more of their money on themselves than pass it on. And, they have many more years to live. Here are some reasons this wealth transfer will have a difficult time of hitting the $35 trillion milestone:

First, many Baby Boomers have a “you only live once (YOLO)” mindset. Boomers have been uniquely focused on having personally and professionally productive retirements. They seem driven to try new experiences and stay active throughout their golden years. Preferring to pursue their passions and work doing what they love, many Boomers are pursuing flexible working arrangements rather than fully retiring. In turn, they may dip into their retirement savings while they are still working.

Second, as part of that YOLO mentality, Baby Boomers spend dramatically more than other prior generations on consumer goods – up to $400 billion annually. From home improvement to clothing and entertainment to leisure travel, the Boomers are spending. Combine these expenditures with the traditional extra cost of earned income loss and healthcare and there is a lot of money going out the door! After years of being weighed down with supporting children and grandchildren – school tuition, home down payments, cars, Boomers are turning to spending some of that cash on themselves.

According to a recent Gransnet survey of 1,000 grandparents ages 50-70, 1 in 6 plans to spend all their money before they die. Meanwhile, a Hearts and Wallets study of participants in their 50s and 60s found only 40 percent planned to leave inheritances, while 30 percent specifically expected to spend all their money.

Boomers are also more likely to gift their wealth to charitable causes, making the wealth transfer to heirs smaller than anticipated. And whatever they do to distribute these funds will likely be split up between multiple heirs and even the children of heirs.

As a group, many Boomers have relied on their ability to create wealth. After all, the wealth management industry was built for Boomers by Boomers. But surprisingly, according to the Williams Group study, 70 percent of wealthy families lose their wealth by the second generation and 90 percent do by the third.

With Boomer life expectancy stretching into the late eighties and the oldest of the Boomers just now hitting 71, the great wealth transfer is not yet upon us, but it is coming and will unfold over the next few decades. It will be breathtaking.


Mike Booker

Mike has enjoyed meeting with existing and prospective clients over the years, helping build Financial Synergies into the firm it is today. He counsels clients on many complex areas of financial planning and investing, helping them to achieve their long-term goals and simplify their lives. Mike has earned three top-shelf credentials: CERTIFIED FINANCIAL PLANNER™, Chartered Financial Consultant® and Certified Fund Specialist®.   Read Mike’s Profile HereRead More Articles by Mike

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