Boomers Made a Record Amount of Money. Now They're Giving It Away.
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What is the main topic discussed in this episode?
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How much wealth have older Americans accumulated and why does it matter?
Here's your money briefing for Tuesday, July 6th. I'm Charlie Turner for The Wall Street Journal, filling in for J.R. Whelan. Today's older Americans have made record amounts of money in their lifetimes, and now they're passing it down to their heirs. So what's being done with all that money?
You're seeing it in parents helping children buy houses. You're seeing it where money is going to philanthropy. And you're seeing it in new business formation.
Coming up, our reporter Ben Eisen talks about the massive wealth transfer that's underway in the U.S. and what it means for people's finances after the break.
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What scale of wealth transfer is expected over coming decades?
It's the greatest transfer of wealth in modern history, and it's just getting underway. Baby boomers and older Americans have spent decades accumulating an enormous amount of money, an estimated net worth of nearly $35 trillion, according to the Federal Reserve. That amounts to 27% of all U.S. wealth. Now the older generations have begun distributing that wealth to their heirs. Let's discuss what's being done with all this money with our reporter, Ben Eisen. Ben, thanks for joining us. Good to be here. There's a lot of money potentially changing hands here, and it's not just coming from big tycoons like Warren Buffett. Can you put this in perspective for us? How widespread a shift in inheritances are we talking about here?
Well, what we've seen over the last few decades is that a lot of factors have sort of collided to put just an extraordinary amount of wealth in the hands of people who are over 70, sort of the oldest generations of Americans. And that 27% of wealth that they have, that people over 70 have, is up from about 20% 30 years ago. So it's definitely grown.
How large is the average inheritance and how has it changed over time?
That $35 trillion really dwarfs the size of the economy And all told, you just have a lot of this money that eventually is going to be passed down and given away.
Well, how much money in total is actually going to the younger generations?
Well, the estimates over the next few decades suggest that about $70 trillion will be handed down. And this is sort of a broader measure that includes people that will be aging into that cohort of people that hand down money. And of that $70 trillion, according to Cerulli Associates, which does these projections, about $61 trillion of it will go to heirs and $9 trillion of it will go to philanthropy.
What's the average inheritance that heirs get, Ben? What kind of money are we talking about here?
Well, that's something that's really grown over time. So the average inheritance in 2019 was almost $213,000. And that's up about 45% from 1998, which means that on an inflation adjusted basis, you've really seen very large growth.
Are older Americans giving money during their lifetimes or only at death?
And are older Americans still waiting to pass along their money until after they've died?
What you're seeing increasingly is that people are doing it during their lifetimes, basically handing down gifts to their children, to their grandchildren while they're still alive. And, you know, when you talk to people who are doing this,
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–0:30
2
How much wealth have older Americans accumulated and why does it matter?
0:30–1:48
3
What scale of wealth transfer is expected over coming decades?
1:48–2:55
4
How large is the average inheritance and how has it changed over time?
2:55–3:57
5
Are older Americans giving money during their lifetimes or only at death?
3:57–5:32
6
What are common uses heirs make of inherited money?
5:32–6:53
7
How does inherited wealth affect economic behavior like investing and entrepreneurship?
6:53–7:50
8
What are current U.S. tax rules for gifts and estates and might they change?
7:50–8:25
Speakers
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