It turns out that all young adults may inherit is nothing more than their parents’ habit of falling asleep while watching TV or walking six feet in front of their children on family vacations. Quirks are easy, but inheriting money seems to be a different and much more difficult story.
Rumors of a “great wealth transfer” have been around for some time, as many Americans expect an inheritance from their older relatives. The silent generation and baby boomers hold a larger share of the nation’s wealth than their younger counterparts, so the more financially insecure generations will have to wait for a major wealth transfer. 90 trillion US dollars Stroke of luck.
So much money changing hands could create an unprecedented change in household wealth and the nation as a whole. But as with many dreams, not everything is as it seemsFor one thing, younger adults could expect a bigger check than the baby boomers can cash. The big wealth transfer could be more of a wave than a ripple, says Northwest Reciprocity in the ITS Harris poll Opinion poll of more than 4,500 adults in the United States.
The insurance company found a “significant gap” between what Generation Z and Millennials expect and what their relatives actually report. While 32% of Millennials and 38% of Generation Z expect to inherit, only 22% of Generation X and Baby Boomers say they expect to inherit.
Part of what is happening is that people have a longer life expectancy, which is chipping away at their nest egg and sometimes survive it. “The older generation is living longer. When they pass on wealth when they die, they will be in their 80s, 90s or older. By that time, their children may already be in the midst of their own retirement phase,” said Justin Neal, CEO, partner and private wealth advisor at Sozo Private Wealth & Insurance Services, Northwestern Mutual, Assets.
By that time, “the next generation may be fairly financially stable and at an age where inheritance will have less of an impact than subsequent generations who are still struggling with college costs, home down payments and job uncertainty,” he added.
But currently, many people are putting an inheritance into their bank account to get out of a difficult situation or to feel financially secure for the future. Half of respondents from all generations consider their potential windfall to be “extremely important” or “important” for their “long-term financial security.”
The ever-changing predictions about the great wealth transfer are not just a story of older generations living longer, but also of rich people managing their money differently. It’s not just about passing on money after death now. “Many families want to use their wealth and influence to improve the lives of their children before they die,” Neal said. It’s also a tax issue.
“Many wealthy families have children who are also quite wealthy, either through personal efforts or gifts they received during their lifetime,” Neal explained, adding that he coaches these wealth creators not to increase the tax burden by “points[ing] to transfer their assets to heirs who already have strong balance sheets.”
Interestingly, younger generations really want to give to their children (or potential children). Of those expecting an inheritance, 81% of Millennials and 75% of Gen Z say leaving something behind is their “most important” or “very important” financial wish. This compares to just 65% of Gen Xers and 46% of Baby Boomers.
Millennials have high hopesfor a minute
Millennials may be the most disappointed that the Great Wealth Transfer did not go into effect. That’s because they are particularly dependent on the gift. 59% say inheritance is “extremely important” and “critical” to their security. And Generation Z expects it to have the greatest impact on their retirement savings. This generation expects the gift to cover the majority of their retirement savings, at 10%.
A separate report The study of proprietary data from more than 52,500 people conducted by estate planning firm Trust & Will found that a third of millennials do not know if their parents have estate plans. And 13% are reportedly aware that their parents do not have a trust or will. The generation known for his bad luck have had a long and recession-hit journey to wealth creation and still find that certain milestones like owning a home are a bigger hurdle than expected.
If the Great Wealth Transfer is indeed as monumental as some reports claim, then some privileged millennials are in for a drastic Cinderella story. The wealth transfer will Millennials “the richest generation in history,” according to Knight Franks Asset report 2024But considering changing life expectancies and other life factors, this dream may not be fully realized.