In recent years, we’ve seen a dramatic shift in how wealth is passed down through generations—a phenomenon known as the Great Wealth Transfer.
Traditionally, the transfer of wealth from one generation to the next happened more gradually, typically involving smaller inheritances or family savings. But today, the scale of this transfer has grown significantly. As highlighted in a recent Bankrate article:
“The largest transfer of wealth in history is about to unfold over the next 20 years, with $84 trillion set to move from Baby Boomers to Gen X and millennials. If managed wisely, this shift could dramatically enhance financial security for future generations.”
As Baby Boomers retire, sell their businesses, or downsize their homes, more substantial assets are being passed to younger generations. This trend is creating a powerful ripple effect that will continue to shape the financial landscape over the coming decades. The graph below, using data from Merrill and Cerulli Associates, illustrates the immense scale of wealth that will be transferred by 2045:
Impact on the Housing Market
One of the most immediate effects of the Great Wealth Transfer is its influence on the housing market. For many aspiring homeowners, especially in high-demand areas, affordability has been a significant concern. However, the increase in generational wealth is expected to alleviate some of these challenges by providing future buyers with greater financial resources. As assets are passed down, younger generations may find themselves better positioned to afford homes. A recent Merrill article highlights this potential:
“While millennials currently face steep barriers to purchasing their first home in many markets, ‘that’s a for-now story, not a forever story.’ The Great Wealth Transfer should enable more of them to become homeowners—or trade up or acquire a second home—either through inherited property or funds for a down payment.”
Impact on the Economy
The impact of the Great Wealth Transfer extends beyond housing. It also presents a significant opportunity for fueling economic growth, particularly among entrepreneurial individuals. Inherited wealth can provide the necessary capital to start a new business, helping the next generation of innovators and entrepreneurs bring their ideas to life.
Bottom Line
While today’s housing market remains challenging, the ongoing Great Wealth Transfer is set to unlock new opportunities. As wealth is passed down and put to productive use, it’s expected to ease some of the barriers to homeownership and spark new entrepreneurial ventures.