169. Why Everyone is Talking About the Great Wealth Transfer...and What They're Leaving Out of the Conversation

Have you heard people talking about The Great Wealth Transfer and wondered what they were talking about? Do you feel like something’s missing from the conversation?

Dive into today’s episode for a quick summary of what’s happening and what no one’s talking about.

Links from today’s episode:

What is the “great wealth transfer,” and who’ll benefit from it? | Marketplace | December 2024

https://www.marketplace.org/2024/12/12/what-is-the-great-wealth-transfer-and-inheritance-millenials-gen-z/

The Great Inequality Transfer, Urban Institute, 2024

https://www.urban.org/sites/default/files/2024-10/The_Great_Inequality_Transfer.pdf

Why the Great Wealth Transfer Is Making History for Women and Wealth | Ellevest | January 2024

https://www.ellevest.com/magazine/investing/great-wealth-transfer 

ICYMI another episode you might enjoy:

Episode#155 How Gen Z Thinks about Investing

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Transcript

Welcome to Progressive Pockets! I go by GG, that’s short for Genet Gimja. This is a show about a source of power that I think we’re leaving on the table. Yes we vote, yes we call our representatives and ask them to make changes in our communities, but on this show, I’m talking about our wallets. Our money is powerful. Where we shop has an impact, where we invest, where we donate, where we bank.

Today’s episode is about the Great Wealth Transfer. Have you heard the buzz about it?

The Great Wealth Transfer is the huge intergenerational transfer of wealth from the Baby Boomers to younger generations, including Gen X, Millennials, and Gen Z. 

The projections are that around 84 trillion dollars will be transferred to the descendents of these Baby Boomers over the next few decades. 84 trillion dollars is so much money LOL. If you were to take the GDP of the United States, and add the GDP of China and Germany and Japan….you wouldn’t even be close. You’d also have to add the GDPs of India, the UK, France, Italy and Canada to get there. And actually, even then you wouldn’t get to 84 trillion dollars. You’d need to add Russia, and Mexico, and South Korea, and Spain. The GDP of these 15 wealthy countries adds up to 84 trillion dollars. That’s how much money will be transferring from the Baby Boomers to younger generations in the coming years. Younger generations being Gen X, Millennials, and Gen Z.

Quick refresh on the generations. There’s the Greatest Generation that’s the World War II generation, then the Silent Generation who was more about career advancement than activism, then the Baby Boomers who were all the babies born after the World Wars ended, then we have Gen X, Millennials, and then Gen Z. 

So our older generations here in America, the Silent Generation and the Baby Boomers are passing away and actually the Great Wealth Transfer has already started.

With it being such a huge amount of money, there is a lot of buzz about what the transfer will mean. So let’s talk about the buzz and then a couple of less talked about aspects of what will likely happen.

So what do we think will happen when these trillions of dollars are transferred?

• Initially, Gen X will inherit the money but eventually, in about 15 years, Millennials will be the biggest recipients.
• We know that younger people invest differently and that could have some huge implications. Check out episode 155 to learn more about how young people invest.
  • Younger people tend to invest with more than just the bottom line in mind. They are concerned about climate change for example, and their investing strategies reflect that.
• A lot of women will become recipients of this huge transfer of wealth in fact after this transfer, American women will control more money than they ever have, white women specifically, and what we know is that women tend to invest with greater values in mind and they tend to donate more.
• With the Great Wealth Transfer, there will probably be an Increase of the Racial Wealth Divide, especially between white and black families. When we look at the policies that made white families wealthy within the Silent Generation and the Baby Boomers, policies like Redlining and policies that favored wealth accumulation over wage growth, the impacts are going to be felt for generations and generations and one of the less talked about aspects of the Great Wealth Transfer is that this huge amount of wealth is going to be transferred from older white folks to younger white folks. 
• So when we think about these Americans that will experience the Great Wealth Transfer, we know that the new holders of the majority of wealth in our country will be younger white men and a larger percentage of white women.
• The markets are thinking a lot about what the implications could be. Not only do younger investors and women investors tend to invest differently, a lot of them are probably going to switch up who their financial advisors are, and that is going to hopefully shake up that industry.
• Of course, a lot of this depends on what tax policies are coming down the pipeline. But one thing I know about wealth is that greater wealth usually leads to greater hoarding, so the tax policies will probably reflect that desire to keep as much of that wealth as possible.

Most of the great wealth transfer will go to the top 2%. But there are ideas on how to prevent the great wealth transfer from just widening the gap, I’ll share some ideas that might help to prevent the racial wealth gap from widening.

• For example, implementing tax policies where the average tax burden increases with wealth and income could help reduce wealth disparities. That’s going to be a tough sell but it could happen here.

• Policies that promote homeownership among Black and Latino households are crucial. Homeownership is a key factor in building wealth, and addressing the racial homeownership gap can help reduce wealth disparities.

• Making estate planning information more accessible to Black families can help. I have heard heart breaking stories here in Washington DC about elderly black residents not being able to pass their homes on to their relatives because they aren’t aware of the tax implications of passing the home down to their adult children while they’re alive versus after they’ve passed on, for example. Information is power and there’s some gate keeping going on. So that could be another way to mitigate the effects of the great wealth transfer.

And of course we could get into the structural reasons that the racial wealth gap persists in America.

But the point is, the greatest transfer of wealth in American history is happening and it’s going to have a big impact. 

The Great Wealth Transfer matters because it will have big implications for economic stability, social equity, and intergenerational relationships. Policymakers, financial advisors, and really all of us will feel it, one way or another.

So to recap, here’s what we covered today:

• The Great Wealth Transfer has already started. It is the biggest transfer of wealth ever in American history and is expected to be around 84 trillion us american dollars. Whew!
• The money is coming from the silent generation and the baby boomers and it is being transferred to Gen X, Millennials, and Gen Z.
• Most of the money will remain in the top 2% of wealth holding Americans.
• As a result of the great wealth transfer, women will control more wealth in America than ever before. We know that women tend to be better investors, they tend to get higher returns, they also tend to invest with their values in mind, in addition to also donating more.
• With the great wealth transfer, we also know that younger people will control the majority of wealth in America: and we know that young people tend to invest more in line with their values, they tend to invest more in line with what they want for our planet and for their communities.
• We also know that the great wealth transfer will cause the racial wealth gap will widen, unless some serious policy intervention happens.

So it’s a mixed bag! Don’t let anyone tell you otherwise lol. I included a few links in the shownotes today if you’re interested. I just really wanted to cover this topic because for the longest time I just did not know what people were referring to when they mentioned the great wealth transfer, and I’m guessing you may have some of the same questions as me.

If you have more time today, here’s another episode to check out. That’s Episode#155 How Gen Z Thinks about Investing. That was a lot of fun to research. I hope you enjoy it.

If you know someone that might also be interested in the Great Wealth Transfer, go ahead and send them this episode. It’s interesting stuff, right?

Let’s end with a quote.

“When you see something that is not just, not fair, or not right, you have to do something. You have to say something. Make a little noise. It's time for us to get into good trouble, necessary trouble.” John Lewis

Let’s talk again soon!