You have probably heard the phrase “the Great Wealth Transfer.” It refers to the money our generation is expected to pass on to children and grandchildren over the next 20 years. The numbers are genuinely staggering.
A new analysis from Visa Business and Economic Insights puts the total at $36 trillion flowing from baby boomers to their heirs over the next two decades. It is being called the largest passage of generational wealth in history.
Where Does That $36 Trillion Come From?
Boomers currently hold about $93 trillion in assets, according to Visa’s analysis. That sounds like an almost unimaginable number. But it does not all get passed along.
Visa subtracted mortgages and other liabilities, retirement spending, and taxes to arrive at the $36 trillion figure. That works out to roughly $515,000 per inheriting household on average, though, as we will get to in a moment, the split is far from even.
Most of the Money Goes to Heirs Who Are Already Comfortable
Here is where the story gets complicated. Visa estimates that nearly three-quarters of households receiving an inheritance will already be in the top tier of wealth when the money arrives.
Why? Because the wealthiest boomers have the most to leave behind. Boomers in the 90th to 99th percentiles hold about $44 trillion in wealth. The bottom 90 percent of boomer households hold just $16 trillion combined.
Lower-wealth boomers, naturally, need more of their savings for housing, health care, and daily life. There is simply less left over to pass on.
Jeremy Ney, a professor at Columbia University’s business school and writer of the American Inequality newsletter, put it bluntly. Wealthier Americans, he said, are likely to put inherited money into the stock market or real estate. “It doesn’t buy groceries or cars,” Ney said. “It just changes your accountant’s week.”
Why Heirs Are Older When They Inherit
There is another factor at play. People are living longer. That means many Gen Xers and millennials, born between 1965 and 1996, will not receive their inheritances until they are already in their 50s or 60s themselves.
Jonathan Parker, a professor of financial economics and co-director of the MIT Sloan Consumer Finance Initiative, noted that heirs have had far more time to build their own wealth by then than they would have if they had inherited in their 20s or 30s. He also pointed out that there are tax reasons to hold wealth until death rather than transferring it earlier.
Some Boomers Are Sharing While They Can Still See It
Not everyone is waiting. Visa found that more boomers are choosing to share their wealth now, while they are alive to enjoy the moment. That includes taking grandchildren on vacation without the parents along, and helping heirs with down payments on homes.
What About the Economy?
Of the $36 trillion being passed down, Visa estimates that only about $8 trillion will actually be spent into the economy after it is inherited. Wayne Best, Visa’s chief economist, acknowledged that it is a meaningful amount. “Eight trillion dollars is nothing to sneeze at,” he said.
That spending is expected to nudge annual consumer spending growth from 2 percent to 2.1 percent over the next 20 years. Much of it will go toward housing, new cars, travel, and retail purchases.
Visa’s analysis excluded the top 1 percent of wealthiest boomers entirely, since their money is more likely to flow to charitable foundations and private pursuits. As Best put it, “They don’t really spend like the rest of us.”
The bottom line: the Great Wealth Transfer is real, and the numbers are enormous. But most of that money will stay within households that are already doing well: invested, saved, and largely out of everyday circulation.