There’s a massive wealth transfer underway as Baby boomers are set to pass more than $68 trillion on to their children. However, recent reports show a growing disconnect between how much the next generation expects to receive in the “great wealth transfer” and how much their aging parents plan on leaving them. The reality is not as rosy as some millennials and Generation Z may think.
Despite the high expectations, the numbers tell a different story. 68% of millennials and Gen Zers have received or expect to receive an inheritance of nearly $320,000, on average. Additionally, 52% of millennials think they’ll get even more – at least $350,000. However, the majority of baby boomers who plan to leave behind an inheritance said they will pass on less than $250,000. This disconnect in expectations is fueled by a lack of communication between parents and their adult children about financial topics.
Millennials and Gen Zers are facing financial challenges that their parents did not encounter at the same age. Not only are their wages lower after adjusting for inflation, but they are also burdened with larger student loan balances. Add to that soaring food and housing costs, and it becomes clear that today’s young adults are struggling to make it on their own.
Isabel Barrow, director of financial planning at Edelman Financial Engines, emphasizes the importance of open communication within families about financial matters. With so much at stake, it is crucial to discuss what will happen with the money being passed down. Mapping out a strategy for inheritance and discussing it as a family can help avoid misunderstandings and ensure that everyone is on the same page.
Parents are not just passing down money, they are passing down values around building wealth. Firms and advisors are now finding ways to open up the conversation about inheritance to establish common family values and expectations around philanthropy. However, there is still a gap between intentions and actions – 90% of parents intend to leave an inheritance to their children, but only 52% have a plan in place.
Over the next decade, the intergenerational transfer of wealth could make millennials “the richest generation in history.” This transfer comes at a crucial time when young adults are facing financial challenges that previous generations did not have to deal with. It is essential to have open and transparent discussions about inheritance to ensure that the next generation is prepared to handle the wealth that will be passed down to them.
The reality of the wealth transfer may not be as generous as some millennials and Gen Zers expect. It is crucial for families to have open communication about financial matters and to plan for the future to ensure that the wealth transfer is successful and that the next generation can continue to build on the financial foundation that has been laid out for them.
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