In recent years, the media have coined the term The Great Wealth Transfer. This refers to the fact that Baby Boomers have significant money in savings that they could theoretically pass down to their heirs. Big numbers are bandied about. However, millennials shouldn’t rely on the hope of an inheritance to help them resolve their own financial strain.
Are There Trillions of Dollars for The Great Wealth Transfer?
The media has really hyped up the idea that Baby Boomers have a lot of money to pass along to their millennial heirs. Many reports indicate that the generation collectively has about $30 trillion to give to inheritance. However, the numbers are murky at best. Other articles have put that amount at anywhere from $4 trillion to $68 trillion.
The fact of the matter is that we don’t really know how much Baby Boomer will go to inheritance. Many baby boomers are in retirement now and are rapidly using up their savings to support their own medical and lifestyle costs. Some of them have decades left to live, decades during which they’ll be spending that money, not keeping it for their heirs. So, whether or not there are truly trillions of dollars for The Great Wealth Transfer is hard to say.
The Money Might Not Go To Millennials At All
Even if there really is that money right now, The Great Wealth Transfer might not go to millennials. As mentioned, the Baby Boomers might spend a lot of that themselves before they pass away.
Moreover, there’s another generation to consider: Gen X. If you are a millennial with Baby Boomer parents or grandparents, then you might also have Gen X family members as parents or aunts/uncles. Chances are that inheritance will go to that older generation before trickling down to millennials. There might not be any left to trickle down at all.
Even If Millennials Get Money, It Might Not Be Much
Yes, some millennials are going to receive inheritance from The Great Wealth Transfer. It always helps a little bit to get a nice windfall of money. However, millennials are struggling with a whole lot of debt. The Great Wealth Transfer isn’t likely to be enough to really make a dent. Consider this:
- Education costs have grown ridiculously high so most millennials have huge student loans.
- Many millennials are postponing buying homes due to costs, which means if they do decide on homeownership they’ll have mortgages to pay well into their later years.
- Those millennials who have bought homes often regret the choice. They may refinance, and they, too, will be paying on homes for a long time to come.
- Many millennials live in very expensive cities. The jobs are there, but it’s also a high cost of living, so daily costs are expensive. As a result, they’re not saving as much. Therefore, they don’t have their own retirement money set aside.
In other words, millennials owe a lot and aren’t saving much. It’s tempting to think that The Great Wealth Transfer could bail you out. However, you’re not likely to get enough of inheritance to make it something you can count on. The average inheritance doesn’t even cover one year of your own retirement costs.
Wealthy Millennials Will Likely Get The Most Money
Ironically, the millennials who need the money from The Great Wealth Transfer the most are the ones least likely to receive an inheritance. If you’re in the bottom half of US households in terms of wealth, then you’re probably only going to receive an average of $68,000. If you’re in the next 45%, you’ll get about $183,000. In contrast, the top 5% wealthiest US households will receive about $1.1 million inheritance per household. So, if you’re not wealthy now, then The Great Wealth Transfer probably isn’t going to help.
- Only 37% of Millennials Have Retirement Accounts
- Millennials vs. Baby Boomers When It Comes to Money
- Homebuyer Regrets: 5 Reasons Millennials Wish They Hadn’t Bought a Home