Feb 7, 2025
In the course of the next 20 years, an astounding $84 trillion is expected to change hands as older Americans pass assets on to younger generations.
It's been dubbed the Great Wealth Transfer, and a lot of younger people are no doubt hoping to take part in it.
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But a recent survey finds that younger Americans may not be in line for the large inheritances they're expecting.
A good 45% of wealthy baby boomers (defined as those with more than $1 million in investable assets) want to keep their money to spend in their lifetime, compared to just 15% of wealthy millennials and 11% of wealthy Gen-Xers. And that could have broad economic impacts.
Why boomers are hanging onto their money
Despite making up only 21% of the U.S. population, baby boomers hold half of the nation's wealth, according to Visual Capitalist. Yet, it’s not a given that their money will be passed down to future generations.
A 2024 Northwestern Mutual survey found that only 22% of baby boomers intend to leave an inheritance to younger generations. And only 11% of boomers say that leaving a gift for their children or future generations is their single most important financial goal.
Baby boomers may be so unconcerned with passing on assets that 40% haven't even put together a will yet. And for 17%, the reason stems from being unsure whom they want to leave their assets to.
Just as the FIRE (financial independence, retire early) movement has gained traction in recent years, so too has the "die with zero" philosophy, which has people spending down their wealth in their lifetime rather than leaving money behind.
But another reason baby boomers may be less focused on leaving inheritances is that they're grappling with high costs of their own.
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Inflation has been steep in recent years, forcing many older Americans to raid their savings to a larger degree to keep up with their costs. And then there's health care and long-term care to consider.
In 2024, Fidelity estimated that the typical 65-year-old could expect to spend $165,000 on health care in retirement, not accounting for long-term care — an expense that 70% of adults who survive to age 65 are likely to need.
Meanwhile, Genworth puts the median annual cost of assisted living at $64,200. For a private nursing home room, that number rises to $116,800. So, boomers’ decision to spend down their assets may not stem from not wanting to share so much as being mindful of the many costs that tend to come with aging.
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Boomers' stance could have broad impacts
It's fair to say that a good number of baby boomers will end up passing on wealth to younger generations. But if that number shrinks as boomers reassess their priorities and costs, it could have a far-reaching impact on the financial stability of millennials and Gen-Zers.
Northwestern Mutual found that 32% of millennials and 38% of Gen-Zers expect to receive an inheritance. And 59% of millennials and 54% of Gen-Zers say that inheritance is either critical or highly critical to their financial security.
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Given a recent rise in housing prices, it's possible that a large percentage of younger Americans won't be able to afford to buy a home without an inheritance to use as a down payment. That could result in a broad widening of the wealth gap, since homeownership has long been a driver of net worth and financial stability.
Younger Americans might also struggle to retire comfortably without inheriting money to kick off their savings efforts.
The Federal Reserve found that as of 2022, the median retirement savings balance among Americans under 35 was roughly $19,000, while it was just $45,000 for those between the ages of 35 and 44.
A good number of millennials and Gen-Zers alike continue to be saddled with student loan debt, making it harder to save for retirement or to buy a home. These generations may be in for a rude awakening if they're depending on inheritances, that may not be coming, to get to a better place financially.
That’s why it’s so important for families to have open conversations about the transfer of wealth. But, a 2024 Edward Jones survey found that 35% of Americans do not plan to discuss the transfer of wealth with their families.
Failing to have those conversations could upend a lot of younger people’s financial plans, not to mention cause strife within families. So honest discussions about inheritances are really the best thing for everyone.
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Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
