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The Great Wealth Transfer

Grandparents painting with grandchildren.

We’re often asked about the most powerful trends shaping the financial markets in 2024 and beyond. Is it the rise of artificial intelligence? Is the Fed, interest rates, and inflation? Clients want to know what is happening today that will affect our tomorrow.

The answer is $70 trillion. That’s the amount of money Baby Boomers are preparing to pass to their children by 2045.¹

It’s called the Great Wealth Transfer, and it will have far-reaching effects on the economy, the job market, and estate strategies in the coming years.

 

“If any of you lacks wisdom, let him ask God, who gives generously to all without reproach, and it will be given to him.” James 1:5

 

How Did Boomers Get So Much Money?

Several trends came together to benefit Baby Boomers, who were born between 1946 and 1964. Following World War II, the boomer generation lived through a period of tremendous economic growth and was able to accumulate much wealth. Home prices were affordable, and boomers benefited from a 40-year rally in stock and housing prices.²

As the money starts to change hands from one generation to the next, the job market could shift if beneficiaries choose to pursue more entrepreneurial ideas. If beneficiaries decide to travel or pursue other interests, those decisions may also change the job market. The economy could tilt further if beneficiaries use the newfound money to purchase homes or if they focus on investments.

 

“Once you have determined the ‘who’ you must determine the ‘when’ and ‘how.’ Will your estate be in a lump sum or spread out over years?” wrote Mick Owens in his popular book, Diamond of Life: The Five P’s of Success and Significance.

 

Guiding the Process

As we work with clients, we focus on family values and what goals and dreams everyone has for the future. We want to make certain all voices are heard, and we understand that there may be some disagreements along the way.

Understanding Boomers. We encourage having an open discussion about your wealth transfer strategy. Consider giving family members a general idea about the assets that will be transferred, how they will be tilted, and how they will be distributed. Knowing what to expect can be a great first step in the overall process.

Understanding Millennials. Different generations can have different values, so having an open discussion can help set expectations for everyone. An inheritance may give someone the opportunity to move from a high-stress position to something less lucrative but more meaningful.

Inheriting Financial Knowledge. You’re never too young to learn the basics of budgeting, managing credit cards, and building a credit score. By building financial knowledge into an intergenerational wealth transfer plan, everyone can better understand the road map and what comes next.

Millennials are more comfortable using online resources than prior generations, which is one of the reasons why we encourage family meetings so relationships can get built over time. Beneficiaries must have a realistic understanding of what assets are worth and, perhaps more importantly, how they can be used. 

¹ CNBC.com, October 22, 2023

² Forbes.com, August 9, 2023. Stocks are represented by the S&P 500 Composite Index, an unmanaged index that is considered representative of the overall U.S. stock market. Past performance does not guarantee future results. Individuals cannot invest directly in an index. In 1957, the S&P 500 was expanded to its current 500 companies,

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