The Great Wealth Transfer Could Prove Extremely Disappointing For Millennials

Millennials have faced an incredibly bleak economic outlook for the majority of their adult lives. Between the Great Recession in 2008-2009 to historic levels of student loan debt to stagnant wages, millennials have been dubbed by some as being the unluckiest generation. Not only have those born between 1981 and 1996 experienced slower economic growth since entering the workforce than any other generation in U.S. history, but they also have less wealth to show for their work. A 2023 study in the American Journal of Sociology found the average millennial has 30% less wealth at age 35 than baby boomers did at the same age.

On the flip side of this, the baby-boom generation, or those born between 1946 and 1964, have largely been considered the wealthiest generation in our country's history. According to the Federal Reserve, the 73 million Americans who are over the age of 65 hold $78.55 trillion in wealth (as of Q1 of 2024). This means ~22% of the U.S. population holds roughly half of the country's wealth ($151.69 trillion). This has, for many decades, left economists with the assumption that a great transfer of wealth would eventually happen as baby boomers die and leave their assets to their Generation X and millennial children.

This wealth transfer would serve as a huge financial turnaround for the younger generations who have begun to develop money-phobia about the future after being mired in financial complications. However, the truth of this great wealth transfer is far less helpful than many might be hoping for.

While the baby-boom generation, on the surface, has massive wealth, it's important to realize just how much of this wealth is held by a very small amount of people. Some of the world's most famous billionaires (Bill Gates, Warren Buffet, etc.) are all in the baby-boom cohort, meaning their extreme wealth isn't only heavily influencing the average asset numbers for all baby boomers, but also that their wealth won't be trickling down to the greater population.

According to the Federal Reserve's Survey of Consumer Finances data, the median net worth of boomers between ages 65 and 74 was just $409,900. While this was still higher than every other generation, it was decidedly closer to other generations' net worths than many might expect. For instance, the next closest generation in terms of median net worth was the Gen X cusp age group between 55 and 64 with $364,500 (full Gen Xers, between 45 and 54 years old, meanwhile, had $247,200).

All this is to say, the majority of baby boomers out there aren't carrying the kind of life-changing wealth that some might expect or hope for in the future. Instead, economic circumstances have made it so that the rich will continue to get richer while everyone else will continue to struggle. As Isabel Sawhill, a senior fellow at the Brookings Institution, told Business Insider in 2023, "There is a lot more wealth out there, and there are a lot of people in the age groups likely to die soon." However, she added, "It's getting inherited by people who don't need it very much."

Even though the net worth of most baby boomers may not be as high as many were led to believe (although estimates maintain that this generation will still pass down between $70 to $90 trillion in wealth over the next 20 years), it doesn't discount the idea that a wave of inheritance is on the way. However, the amount of that inheritance won't be nearly as "great" as many people would need to feel economically secure today. In fact, it might not be much at all.

Consider, a 2019 Federal Reserve study found that the wealthiest 1% of Americans who reported receiving an inheritance over the previous three years received an average of $719,000, whereas those in the bottom 50% of the wealth scale reported receiving an average of just $9,700. To add to this, the likelihood of receiving an inheritance only increases the wealthier you already are. In any regular five-year period, the chance of receiving an inheritance is 7.4%; but the likelihood for the top 5% of earners is 11.2% (remember to understand how taxes work on inheritance). This means that, unfortunately, for many millennials who aren't already wealthy, the chances of becoming wealthy from the great wealth transfer are slim.

This pooling of wealth among the ultra-wealthy shows no signs of slowing down either. Every billionaire under the age of 30 on the Forbes real-time billionaires list inherited their wealth rather than earned it. Plus, the 2023 UBS Billionaire Ambitions Report stated that it expects to see even more of this kind of inheritance-based wealth (over entrepreneurship) for the next 20 years.