The Great Wealth Transfer: Baby Boomers To Pass On $53 Trillion To Their Children By 2045.

Baby boomers are set to pass on $53 trillion to their children by 2045 in what experts have called the ‘greatest wealth transfer in history.’

The generation – who are aged between 59 and 77 today – are famed for benefitting from great social mobility when house prices were low and labour conditions strong. And now they are transferring their money to their less economically fortunate children. The boom is largely attributed to rising property prices which have shot up by around 500 percent since 1983 – when baby boomers were in their 20s and 30s and just getting onto the property ladder.

Millennials may have been portrayed as frivolous spenders squandering their income on overpriced coffees and online barre classes in the face of pitiful long-term finances – but they are on course to become the “richest generation in history”, a study has shown. Those born between 1981 and 2000 are in line for a “seismic” windfall over the next 20 years, according to research by real estate agent Knight Frank, thanks to the property assets accumulated by the generations before them.

While the distribution of wealth may be shifting between world regions, an even bigger shift is happening between generations. In the UK, we expect £5.5 trillion of assets will be passed down between now and 2050* and $90tn** (£71tn) of assets to move between generations in the next two decades in the US, “making affluent millennials the richest generation in history”, Knight Frank said in its 18th annual wealth report. The research found that 75% of millennials expect their wealth to increase in 2024, against 53% in the baby boomer generation (those born between 1946 and 1964), 56% in gen X (1965 to 1980) and 69% in the younger gen Z.

While they wait for their inheritances, many millennials are still reeling from a series of economic shocks, with the 2008 crash followed by a series of financial headwinds brought about by the pandemic, Brexit and war in Ukraine. As a result of rising rents, they have spent much of their income on housing costs and faced significant challenges to afford their own homes or build up a pension pot. The conditions have fuelled an image that millennials – shorn of the target of saving their income to acquire property – have frittered their money away on pricey pastimes and avocado on toast.

In reality, their future financial firepower is likely to be a divisive lottery, predominantly determined by inheritance from previous generations, including property. The shift in wealth was likely to aid efforts in sustainable investments and behaviour. Millennials appear to have got the message when it comes to cutting consumption – 80% of male and 79% of female respondents say they are trying to shrink their carbon footprints. Wealth creation trends among those in Gen Z suggested that the 38% increase in female ultra-high net worth individuals – those with more than $30m in assets – over the past decade is set to keep on building.

Finura Financial Planner, Lydia Richmond, comments: “‘The issues highlighted in this article resonate deeply with many of the children and families of the Clients we work with who might express concerns about covering rent or saving for emergencies. A significant aspect of our role is sitting down with Clients of all ages to address their financial worries and develop a plan to achieve their goals. These conversations are often most effective when they include all members of a household, often with different generations working together to achieve the most tax-efficient outcome. While we can’t help Clients win the lottery, we can help manage current assets efficiently, maximising funds to reach goals sooner rather than later, offering peace of mind in the process.”

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Sources: Techlink

* Wealth transfer: how to prepare for the responsible heirs (abrdn.com)
** https://content.knightfrank.com/resources/knightfrank.com/wealthreport/the-wealth-report-2024.pdf