Boomers Dying Out Could Lead to a Colossal Transfer of Wealth

• Millennials are expected to hold five times as much wealth as they do today by 2030, when they're estimated to inherit over $68 trillion from boomers.
• The massive wealth inherited by millennials will decrease inequality between the generations in the U.S. but will likely worsen it overall, experts told Newsweek.
• The change in fortune for millennials—a generation thwarted by a series of recessions, costly real estate, and heavy student debt—has the potential to significantly change the U.S. financial and political landscape.

Baby boomers, born during the revolutionary two decades that followed the end of the Second World War, are currently the richest generation on the planet, with the average Boomer being worth $1.2 million, according to Fortune.

But as boomers approach their twilight years, experts are posing one crucial question: what is going to happen to the wealth that boomers have accumulated after they're gone?

"A study shows that millennials will hold five times as much wealth as they have today and the group is anticipated to inherit over $68 trillion from their baby boomer elders by the year 2030," Morley Winograd, author of three books on the millennial generation, told Newsweek, quoting a 2019 research by Coldwell Banker.

"This will represent one of the greatest wealth transfers in modern times."

At the moment, millennials—already hit by two recessions during their lifetime—cannot compare, financially speaking, with boomers: the older generation has on average a net worth 12 times higher than millennials, who are on average worth $100,000.

This is mostly down to how the labor and financial landscape has changed over the past few decades. According to a recent report by New America, U.S. Millennials earn 20 percent less than boomers did at their age. This has exacerbated the gap between the two generations, which has nearly doubled in the past 20 years, according to a MagnifyMoney study.

American boomers alone are estimated to hold more than $53 trillion out of the total $431 trillion of privately held assets worldwide, according to Boston Consulting Group (BSG) data as of 2020. And the collective riches of the boomer generation is expected to grow in the coming years, as the world's financial wealth is expected to surge by $65 trillion between 2020 and 2025, as reported by Forbes, surpassing a total of $500 trillion.

With the expected transfer of wealth from boomers to millennials (a much smaller cohort than the previous one), the wealth inequality gap between the two generations will finally be corrected—though wealth inequality in general is likely to be exacerbated.

Just How Much Money Will Millennials Inherit?

While millennials may be relatively in poor economic shape now, a study by research and consulting firm Cerulli has estimated that by 2045 there will be $84.4 trillion in wealth transferred to younger generations, mainly in the form of inheritance. According to the report, millennials are expected to inherit $72.6 trillion out of the total wealth transferred in that 25-year period, while the rest is expected to go to charities.

This could be the largest transfer of wealth in the history of humankind, though some are skeptical that the phenomenon would be that significant. Many analysts have pointed to the number of boomers who are entering retirement in debt—a number which is considered to have grown with the increased concentration of wealth right at the top, among the ultra-high-net-worth individuals.

"The baby boomers are the first generation that was subjected to our 401k experiment where pensions disappeared," Katherine McKay, associate director at the Aspen Institute Financial Security Program (FSP) told Newsweek.

"We are now responsible for our own savings. And we know that a lot of people are going into retirement without the money to last the number of years that they're expected to live. So it's really just hard to say whether people are going to have all of those assets, or if they're going to need to draw down assets outside of retirement accounts once those run dry."

Jason Fichtner, vice president and chief economist at the Bipartisan Policy Center, told Newsweek that the amount of wealth that millennials will receive by the 2030s will depend partly on what action U.S. lawmakers will take to address a looming crisis of Medicare and the Social Security program.

Recent forecasts expect Social Security's trust funds to be depleted by 2033, more or less the same years when millennials are expected to inherit their parent's wealth. A lack of action from Congress to reform the U.S. pension system—by raising taxes or cutting social benefits, for example—would likely impact millennials more than any other generation in the next decades.

But Fichtner also doubts that the expected transfer of wealth from boomers to millennials is a good thing for the younger generation. "The equity distribution of wealth in this country is so skewed that millennials shouldn't be relying on money from their parents' retirement," he said.

"I think that's a really bad message to tell millennials because, again, it'll depend on family structure. Some families that are very well off will have money to leave for their kids; some who aren't well off won't even have money to take care of themselves and their own retirement and might be asking their kids to pay for them, for their housing and health care. So it's going to be an additional drain on today's millennial generation."

Experts agree this massive transfer of wealth will not be "distributive"—which means that money will likely be inherited by millennials who are already well-off, while those struggling are unlikely to suddenly see their net worth grow.

"We overall don't necessarily expect it to have any sort of distributive properties, in terms of creating a greater sense of equality," Cerulli's Chayce Horton told Newsweek. "If anything, we expect transfers to millennials and younger generations receiving a greater share of their assets from inheritances to be generally less equitable."

It will mostly be white, wealthier millennials benefiting from this massive transfer of wealth. And yet, the money inherited by this generation is still expected to bring a significant shake-up of the country. Will the money change millennials' values, or will they use this wealth to foster their ideals—which are very different from their elders' beliefs?

How Will Millennials Change the U.S. Financial and Political Landscape?

Winograd, who has written a book about how millennials are "remaking America," said that the wealth inherited by the younger generation might lead the U.S. political landscape to lean further towards the left, embracing millennials' generally liberal values.

"Some 56 percent of millennials voted Democratic in the 2022 midterm elections in U.S.," Winograd said, mentioning recent data linked to the November midterm.

"As they become more and more wealthy from both the money they will inherit from their boomer parents as well as entering the prime age of business leadership in the United States, they will be able to use their financial leverage, not just their power at the ballot box, to further move United States politics in a more liberal, Democratic direction."

Millennials will also be able to use their money to shape the financial market, investing in projects that foster their ideals and values.

"Millennials are already investing their money in companies committed to ESG (environmental social governance) practices, for example enterprises that think long-term about how what they do impacts the environment and society," Winograd said.

"As a result, ESG assets are set to reach over $50 trillion by 2025. According to Bloomberg, that's a third of total global assets under management. When they have even more money than they do now and are at a time in their lives where a greater proportion of their assets can be invested rather than spent, it is not inconceivable that ESG assets will make up a majority of global assets under management, doubling the dollar value of such investments over the next 20 years."

McKay said that previous studies from colleagues at the Aspen Institute has shown that millennials already try to invest into something else than the traditional stock market, attempting to avoid funding that same big companies which contribute to issues like climate change.

Overall, Winograd thinks that "as the older barons of Wall Street become more and more isolated from the beliefs and values of what will be America's largest adult generation, their world is likely to be disrupted by millennials' desire to use government's involvement in the economy to create a fairer and more equitable society."