Chances are you’ve heard buzz about the great wealth transfer that is actually occurring right now. The phrase denotes the gradual shift in demographics and finances of the baby boomer generation (born 1946-1964), to future generations, including Gen X (1965-1980) and millennials (born 1981-1996). As boomers retire, require long-term care, and eventually pass, their collected wealth, roughly $30 to $68 trillion (even estimates of $140 trillion) is being transferred to their children, grandchildren, and other beneficiaries. This great wealth transfer is predicted to affect the U.S. economy as a whole. The first article in this series will focus on baby boomers.
According to Fortune magazine, the average baby boomer’s net worth falls between $970,000 and $1.2 million. When this population group retires or passes, their collected wealth will most likely be transferred to their children or grandchildren. This gradual transfer of wealth will provide millennials and other generations the means to purchase homes, pay off student debt, and perhaps make high-end purchases. According to a report by WealthEngine and Coldwell Banker Global Luxury program, this transfer is expected to make millennials the richest generation in American history. However, many questions arise, including: Are millennials prepared to take on such wealth? As baby boomers, how can you prepare them? And realistically, should they even plan to inherit this wealth considering baby boomers are expected to live longer, travel more, and spend more during their retirement years? There are quite a few scenarios that need to be explored.
If you fall into the baby boomer category, financial experts recommend initiating or strengthening your estate plans including your will, power of attorney, healthcare directives, and philanthropic strategies by working with a financial advisor. Think about where you want your assets to be allocated by specifying beneficiaries and implementing measures to safeguard your legacy. Engage in transparent conversations with your children or other beneficiaries and work with a professional advisor and CFAAC to devise an optimal strategy to distribute your wealth, including the causes you want to support. Through careful planning you can enjoy retirement, provide for your loved ones, and allocate a portion of your assets (noncash as well as cash) to causes that matter to you. Contact CFAAC Director of Gift Planning John Rodenhausen at john@cfaac.org to learn more.
This is the first article in a four-part series about the Great Wealth Transfer.