NEW YORK–An intergenerational transfer of wealth in the U.S. that “dwarfs any of the past” is underway, the result of which will be numerous implications for credit unions.
But as a new report makes clear, while many CUs will see members with inheritances to deposit and a need for financial planning, many others will be left out as the costs of living, housing and raising families surge, meaning they will face different challenges, the report explained.
“Of the 73 million baby boomers, the youngest are turning 60,” reported the New York Times. “The oldest boomers are nearing 80. Born in midcentury as U.S. birthrates surged in tandem with an enormous leap in prosperity after the Depression and World War II, boomers are now beginning to die in larger numbers, along with Americans over 80. Most will leave behind thousands of dollars, a home or not much at all. Others are leaving their heirs hundreds of thousands, or millions, or billions of dollars in various assets.”
$16 Trillion Transfer
The report noted that in 1989 total family wealth in the United States was about $38 trillion, adjusted for inflation. By 2022, that wealth had more than tripled, reaching $140 trillion, the Times report stated. Of the $84 trillion projected to be passed down from older Americans to millennial and Gen X heirs through 2045, $16 trillion will be transferred within the next decade.
“Heirs increasingly don’t need to wait for the passing of elders to directly benefit from family money, a result of the bursting popularity of “giving while living” — including property purchases, repeated tax-free cash transfers of estate money, and more — providing millions a head start,” the Times reported.
Big Money at the Top
“The wealthiest 10% of households will be giving and receiving a majority of the riches,” according to the Times report. “Within that range, the top 1%— which holds about as much wealth as the bottom 90%, and is predominantly white — will dictate the broadest share of the money flow. The more diverse bottom 50% of households will account for only 8% of the transfers.”
The key reason there are such large soon-to-be-inherited sums is the uneven way Boomers superbly benefited from price growth in the financial and housing markets. The report noted the average price of a U.S. house has risen about 500% since 1983, when most Baby Boomers were in their 20s and 30s, prime years for household formation.
“As U.S. corporations have grown into global behemoths, those deeply invested in the stock market have found even bigger returns: The stock market, as measured by the benchmark S&P 500 index, is up by more than 2,800% since the beginning of 1983, around the time index funds took off as a mainstream investment for corporate employees and many other middle-class professionals,” the report stated. “Those figures do not include dividends and are not adjusted for inflation, which they have far outstripped; consumer prices have risen about 200% over those 40 years.”