As the world anticipates a massive $90 trillion “Great Wealth Transfer” from Baby Boomers to their Gen Z and Millennial heirs, a stark reality is emerging: many young people may not receive the financial windfall they expect.
While younger generations are counting on their inheritance to secure their financial futures, recent surveys reveal that the majority of Baby Boomers aren’t planning to leave much behind.
This news could have significant implications for those banking on this wealth to achieve financial security and a comfortable retirement.
The Great Wealth Transfer: Expectations vs. Reality
The concept of the “Great Wealth Transfer” has generated much anticipation among Millennials and Gen Zers.
With Baby Boomers holding more than half of America’s wealth, most of it tied up in real estate, younger generations are looking forward to inheriting significant assets.
However, a survey conducted by Northwestern Mutual, involving over 4,500 adults, paints a different picture.
The study found that only about one-fifth of Baby Boomers expect to leave anything substantial for their heirs.
Table: Key Findings from the Northwestern Mutual Survey
| Generation | Percentage Depending on Inheritance | Percentage of Boomers Expecting to Leave an Inheritance |
|---|---|---|
| Gen Z | 50% | 20% |
| Millennials | 60% | 20% |
| Baby Boomers | N/A | 20% |
These statistics underscore a significant gap between what younger generations expect and what Boomers plan to provide.
While over half of Gen Zers and nearly 60% of Millennials are counting on their inheritance to achieve financial stability, only a small fraction of Baby Boomers are preparing to leave behind a financial legacy.
Why Baby Boomers Are Opting Out of Leaving Inheritances
It’s not that Baby Boomers have forgotten their loved ones. In fact, the survey reveals that 60% of Boomers have already drafted wills.
However, these wills are more likely to include instructions for funeral arrangements than provisions for passing on wealth.
The growing trend among Boomers is to enjoy their wealth during their lifetime, with many opting to die with as little money left as possible.
This philosophy, known as “dying with zero,” has gained traction among those who believe in experiencing the fruits of their labor while they can.
For example, some Boomers are choosing to spend their money on memorable experiences for themselves and their loved ones, such as vacations and other life-enriching activities.
Elena Nuñez Cooper, a proponent of this mindset, told Fortune that she plans to pay for her friend’s honeymoon and contribute to charitable causes rather than leave behind a traditional inheritance.
Her reasoning is simple: “If you have money now, do good now—don’t wait until you’re dead.”
Others, like personal finance coach James Beckett, emphasize the importance of enjoying life to the fullest, even if it means spending down their wealth.
Beckett criticizes the idea of accumulating wealth without purpose, especially if it means missing out on life’s pleasures.
Rising Costs and the Impact on Inheritance
Another critical factor influencing Boomers’ decisions is the rising cost of living, particularly as they age. Northwestern Mutual’s report highlights that the amount of money needed to retire comfortably has increased significantly.
In 2020, the average respondent estimated that $951,000 would be sufficient for a comfortable retirement. Today, that figure has surged to $1.46 million, outpacing inflation and putting additional financial pressure on retirees.
With the cost of healthcare and long-term care also on the rise, many Boomers are prioritizing their own needs over leaving a financial legacy.
Nearly half of those surveyed have plans to address their future healthcare costs in retirement, indicating that a significant portion of the anticipated wealth transfer may end up in the coffers of hospitals and care homes rather than in the hands of their heirs.
Millennials and Gen Z: Dipping Into the Bank of Mom and Dad Now
While the prospect of a substantial inheritance may be fading, many Millennials and Gen Zers are already receiving financial support from their parents.
Research shows that more than a third of young people planning to buy a home expect to receive help with their down payment in the form of a cash gift from their parents or other family members.
This trend is more pronounced among Millennials, who are more likely than previous generations to have relied on the “Bank of Mom and Dad” to become homeowners.
Table: Financial Support from Parents for Home Purchases
| Generation | Percentage Expecting Parental Help for Home Down Payment |
|---|---|
| Gen Z | 33% |
| Millennials | 35% |
Moreover, financial support from parents doesn’t stop at home purchases. According to the Pew Research Center, about one-third of Millennials in their early thirties are still receiving financial assistance from their parents for everyday expenses, including rent, groceries, and even streaming subscriptions.
This ongoing support highlights the financial interdependence between generations, even as Boomers opt to spend down their assets.
Conclusion: What the Future Holds for the Great Wealth Transfer
The expectation of a massive wealth transfer has been a significant talking point for Gen Z and Millennials, but the reality is that many may not receive the financial windfall they are hoping for.
As Baby Boomers prioritize their own financial security and enjoy their wealth during their lifetimes, the traditional concept of inheritance is evolving.
For younger generations, this means reassessing their financial plans and finding alternative ways to achieve financial security. Whether through personal savings, investments, or other means, it’s clear that relying solely on an inheritance may not be a viable strategy.
In a world where financial independence is increasingly important, understanding the shifting dynamics of wealth transfer is crucial.
By staying informed and proactive, Millennials and Gen Zers can navigate these changes and build a secure financial future—regardless of what their parents choose to leave behind.
References
- Northwestern Mutual: 2024 Wealth Transfer Survey
- Pew Research Center: Millennials and Financial Support
- Fortune: Baby Boomers’ Financial Decisions
