The largest wealth transfer in history is underway as the Baby Boomer generation transfers assets of $84 trillion into the hands of younger generations — typically, Millennials and Gen Zers.
As the Boomers do this via wills, trusts, property purchases and gifts, the question becomes: How will the Great Wealth Transfer reshape the future of financial and cultural activity? Let’s talk about three of the primary areas that will be affected — capital infusions, family conversations and paradigm shifts.
Capital infusions
The assets Millennials and Gen Zers are inheriting from their Boomer parents (or grandparents) act as a capital infusion. With newfound money in their pockets, the younger generations stand to spend and invest this money in ways that deviate from generations past. How so?
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Millennials and Gen Zers are showing the world that they are focused on values when it comes to spending and investing their money. They are conscientious consumers who tend to spend on goods and services that are socially responsible, according to an AFLAC survey.
For example, newer generations of consumers are opting for organic, locally sourced produce or fair-trade products over conventional produce and products. These spending habits will ultimately shape the economy and culture, because spending habits and culture are inherently interlinked.
Similarly, the next generation of investors is opting to deploy capital into the entrepreneurial ecosystem by investing in their own entrepreneurial endeavors and/or those of others. Inherited capital could provide the financial security needed to take a risk, roll the dice and pursue an entrepreneurial idea.
An infusion of capital could also support the increasingly vibrant start-up and innovation ecosystem. There’s no denying that we’re traversing into an increasingly dynamic economic and investment landscape, one that Millennials and Gen Zers are eager to shape — with values in mind.
Family conversations
Such a vast transfer of wealth requires rich, intergenerational conversations to align value and values. Open, thoughtful and vulnerable conversation is necessary for families to unpack the rights and responsibilities that come with inheriting massive resources.
Parents (or grandparents) might discuss how they acquired their assets, how their assets are structured, plus their wishes and fears related to what happens to those assets after they’re gone. Family conversations can revolve around when to best transfer financial wealth, either during the older generations’ lifetime or upon their demise. These discussion topics are dynamic, but dynamic doesn’t have to mean difficult. In fact, talking about wealth transfer is a great opportunity to strengthen family ties, ensuring a strong family legacy extends from one generation to the next.
These family conversations also provide an opportunity to blend traditional perspectives with fresh perspectives.
Paradigm shifts
This monumental transfer of financial wealth is contributing to our evolving society and a new wealth paradigm. The next generation is clearly focused on spending and investing in ways that deviate from prior generations. For example, Millennials are redefining wealth creation based on technological advancements and societal shifts. These tech-savvy inheritors are acquiring investment information, knowledge and acumen through digital means and using what they learn to make their financial decisions.
Cultural issues and values also influence their financial decisions. As more capital lands in the hands of future generations, these shifts will become more pronounced.
Whether you are the direct recipient in the Great Wealth Transfer, or not, this shifting of assets has the potential to impact you, your business and those around you. The largest wealth transfer in history is providing us with a unique opportunity to reshape the financial and cultural landscape.
Related Content
-
The New Space Age Takes OffThe Kiplinger Letter From fast broadband to SOS texting, space has never been more embedded in peoples’ lives. The future is even more exciting for rockets, satellites and emerging space tech.
-
Ask the Editor: Four Reader Tax QuestionsAsk the Editor In our Ask the Editor series, Joy Taylor, The Kiplinger Tax Letter Editor, answers questions related to IRAs and other retirement accounts.
-
Could You Retire at 59½? Five ConsiderationsWhile some people think they should wait until they're 65 or older to retire, retiring at 59½ could be one of the best decisions for your quality of life.
-
Home Insurance: How to Cut Costs Without Losing CoverageNatural disasters are causing home insurance premiums to soar, but don't risk dropping your coverage completely when there are ways to keep costs down.
-
Markets Roller Coaster: Resist the Urge to Make Big ChangesYou could do more harm than good if you react emotionally to volatility. Instead, consider tax-loss harvesting, Roth conversions and how to plan for next time.
-
Why Homeowners Insurance Has Gotten So Very ExpensiveThe home insurance industry is seeing more frequent and bigger claims because of weather, wildfires and other natural disasters.
-
Going Through Probate? How to Find the Right AttorneyJust having the skills and experience to do the job isn't enough. The probate attorney you hire needs to have the right temperament for your particular case.
-
Widow's Penalty: Three Ways to Protect Your FinancesHigher Medicare premiums, smaller Social Security payments, bigger tax bills … Financial changes can hit hard when a spouse dies. How to counter the blow.
-
Four Ways Your Phone Can Help You Weather Market VolatilitySmartphone apps can help investors make healthy decisions and maintain a disciplined investment approach — even when emotions try to steer them off course.
-
Stick to the Plan: Don't Panic During Economic UncertaintyTake a breath and step back. Focus on a solid fiscal foundation to stabilize your investments during stock market volatility.
