The greatest wealth transfer in history is here, with familiar (rich) winners

An intergenerational transfer of wealth is in motion in America — and it will dwarf any of the past.

Of the 73 million baby boomers, the youngest are turning 60. The oldest boomers are nearing 80. Born in midcentury as U.S. birthrates surged in tandem with an enormous leap in prosperity after the Depression and World War II, boomers are now beginning to die in larger numbers, along with Americans older than 80.

Most will leave behind thousands of dollars, a home or not much at all. Others are leaving their heirs hundreds of thousands, or millions, or billions of dollars in various assets.

In 1989, total family wealth in the United States was about $38 trillion, adjusted for inflation. By 2022, that wealth had more than tripled, reaching $140 trillion. Of the $84 trillion projected to be passed down from older Americans to millennial and Generation X heirs through 2045, $16 trillion will be transferred within the next decade.

Heirs increasingly don’t need to wait for the passing of elders to directly benefit from family money, a result of the bursting popularity of “giving while living” — including property purchases, repeated tax-free cash transfers of estate money, and more — providing millions a head start.

It’s no longer “an oncoming phenomenon,” said Douglas Boneparth, a 38-year-old financial adviser whose New York firm caters to affluent millennials. “It’s present-day.”

And it’s already impacting the broader economy, greasing the wheels of social mobility for some and leaving obstacles for those left out as the cost of living, housing and raising families surge.

The wealthiest 10% of households will be giving and receiving a majority of the riches. Within that range, the top 1% — which holds about as much wealth as the bottom 90%, and is predominantly white — will dictate the broadest share of the money flow. The more diverse bottom 50% of households will account for only 8% of the transfers.

A key reason there are such large soon-to-be-inherited sums is the uneven way boomers superbly benefited from price growth in the financial and housing markets.

The average price of a U.S. house has risen about 500% since 1983, when most baby boomers were in their 20s and 30s, prime years for household formation. As U.S. corporations have grown into global behemoths, those deeply invested in the stock market have found even bigger returns: The stock market, as measured by the benchmark S&P 500 index, is up by more than 2,800% since the beginning of 1983, around the time index funds took off as a mainstream investment for corporate employees and many other middle-class professionals. (Those figures do not include dividends and are not adjusted for inflation, which they have far outstripped; consumer prices have risen about 200% over those 40 years.)

The boomers who benefited most from decades of price growth in real estate and financial assets were, in general, already rich, white or both — attributable, in part, to years of housing discrimination and a lack of access to financial tools and advice for people of color.

But the wealth transfer in its full scope, like any widespread financial phenomenon, will have many nuances: A patchwork of lower-wage earners may be able to move into a parent’s paid-off home in a hot housing market — or may receive a small windfall still meaningful enough to pay off debts.

And there will be millennials, Gen X-ers and young boomers in the upper middle class set to inherit lump sums — seemingly winners — who will wrestle with the substantial headaches of a “sandwich generation,” dealing with the expense of caring for aging parents and children at once.

There are few aspects of economic life that will go untouched by the knock-on effects of the handover: Housing, education, health care, financial markets, labor markets and politics will all inevitably be affected.

Trying to save more

Leland Presley, a 53-year-old baker at a Publix supermarket in Helena, Alabama, also has a prospective inheritance: the modest house he shares with his mother, Glenda, born in 1946, which was paid off before his father died seven years ago.

Still, he constantly asks himself, “Am I going to have enough money?”

He has no children, but he feels stretched making $20 an hour, having started out at Publix at $13 an hour in 2013. He is holding tight to his estimated $190,000 in retirement savings and living modestly, hoping to increase it.

Fiona Greig, the global head of investor research and policy for Vanguard, has been working on a report detailing the “self-financing gap” — the insufficiency in “pre-retirement incomes” threatening to leave tens of millions of workers unable to afford retiring in their 70s.

In her research, she’s found “all but the most wealthy” are on a trajectory to be financially unprepared to retire to some degree. The bottom 50% of households had an average annual income of about $28,000 in 2022, according to the Realtime Inequality tracker

Presley hopes to stay healthy enough to work until he’s 67 — and then draw on Social Security, “if Social Security still exists.”

“I do think about that all the time, and worry about that,” he said, “because old age is really expensive — I’ve seen that with my parents.” Even with Medicare coverage, Glenda Presley’s out-of-pocket costs for blood thinners can cost hundreds of dollars a month.

“So I just try to sacrifice what I can now,” Leland Presley said.

The changing face of wealth

At 43, Melinda Hightower, a managing director at UBS Wealth Management, is “borderline millennial.” As an industry insider, she’s helping prepare the financial sphere for what many call “the changing face of wealth,” while, as a Black woman, being part of that transition.

The Swiss bank’s decision to create a “multicultural client segment” in January 2022 with her at the helm is evidence of the trend.

Her grandfather, a World War II veteran, began working independently in real estate in Detroit shortly after the war, maneuvering around prejudices. By strategically buying, holding, selling and renting out various properties, he managed to build up a well-placed portfolio of assets.

And that wealth has endured, Hightower said. “My mom and siblings all own multiple properties and most work for themselves or have a business alongside their W-2 work.”

Over the lifetime of boomers, integration, immigration and entrepreneurial business efforts have made it so that more than 1 million U.S. high-net-worth investors are now Black, Asian, Hispanic or Latin in origin, according to UBS: at once, a major leap in a short amount of time and a relatively small increase compared with the entirety of overall white affluence.

But Hightower is also intimately aware of what she calls “two worlds.” Higher-than-average poverty rates and far-below-average household wealth still plague Black and Latin households as a group. In 2019, the typical Black family still had only about $23,000 of wealth.

“I’m all about celebrating progress,” she said. “But there’s still so much more work to do.”

The future of inequality

As the wealth transfer proceeds, scholars, theorists and market analysts think that in addition to shaping individual outcomes, it will draw inequality further into the focus of policy debates.

Joseph Brusuelas, the chief economist at RSM, a consulting firm, thinks changes will come — but only when high-income salaried workers, who still seem to be managing, can no longer comfortably afford families, housing, elder care and leisure.

Once white-collar workers left out of the wealth transfers feel the burn, “large companies will back” a bigger welfare state, Brusuelas concluded, “because they’ll want the government to subsidize it” rather than taking on the costs of providing more benefits themselves.

“It’ll have nothing to do with social justice, nothing to do with right or wrong, and everything to do with the bottom line,” he said.