FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
September 12, 2023

IN THIS ISSUE:

1. Boomers To Pass Up To $100 Trillion to Millennials

2. Over 70 Million US Baby Boomers Are Alive Today

3. Baby Boomers Own Nearly Half The Wealth In U.S.

4. How Did Baby Boomers Become So Wealthy?

5. How Wealth Will Be Passed Down – Think “Gifting”

Overview – Boomers To Pass $100 Trillion to Millennials

According to researchers in the government, the Federal Reserve and other sources, Baby Boomers (my generation) are set to pass down the largest inheritance in history to their children and grandchildren over the next 20 years. In fact, it has already begun.

The researchers have identified at least $84 trillion in tangible assets that Boomers will be passing down to their heirs and charities over the next 20 years – by far the largest in any previous two decades.

If we add in other assets they will be handing down which don’t include tangible assets such as cash, real estate, stocks, bonds, etc., the total could approach $100 trillion.

Of the tangible assets of $84 trillion to be handed down, researchers estimate that around $11-$12 trillion will go to charities and around $72-$73 trillion will go to their heirs and other individuals.

Let’s put that last figure, $73 trillion, in perspective. The US economy, the largest in the world by far, as measured by annual Gross Domestic Product, is currently just under $26 trillion according to the Commerce Department. So, the $73 trillion expected to be passed down from Boomers to their heirs over the next 20 years is nearly three times the total US economy!

Nothing remotely approaching this has ever happened before and will likely never happen again. How will this change the world? No one knows for sure, but that’s what we’ll talk about today.

Over 70 Million US Baby Boomers Are Alive Today

As noted above, Baby Boomers are expected to pass down at least $84 trillion in tangible assets to their heirs over the next 20 years. But before we talk about the possible implications, let’s look at who the Baby Boomers are.

The Baby Boom generation is identified with those Americans born in the years 1946 to 1964. Nearly 76 million Americans were born in those years. US birth rates surged in tandem with an enormous leap in prosperity after the Depression and World War II.

In 2020, the US Census Bureau estimated there were around 73 million Boomers still alive in that year. Most researchers say there are just over 70 million Boomers alive today.

The youngest are turning 60. The oldest Boomers are nearing 80. Many Baby Boomers have already retired, and the youngest will reach full retirement age by 2031. It is also estimated that over 5,000 Baby Boomers die each day.

Here’s another graphic showing the generational breakdown a little differently:

The Baby Boomers were the nation’s largest generation for many years; however, since 2020 the so-called “Millennials” have been the largest generation.

Baby Boomers Own Nearly Half The Wealth In U.S.

Yet while Millennials are the largest generation, Baby Boomers own most of the wealth in this country – almost half of it as a matter of fact, according to the Federal Reserve. Take a look:

Notice also that Millennials own fewer assets than Generation X and the Silent Generation.

Baby Boomers have an average net worth between $200,000 and $255,000, according to the Federal Reserve’s Survey of Consumer Finances.

With the average net worth at $200,000-$250,000 this means half of Boomers have total assets less than half that. Many may not have much to pass down to their heirs after their debts are settled. So, who is going to give the bulk of this $84 trillion which is due to be inherited?

Answer: The wealthiest 10% of households will be giving the majority of the riches. 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.

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. Of the $84 trillion projected to be passed down from older Americans to Millennial and Gen X heirs through 2045, $16 trillion is expected to be transferred within the next decade.

Increasingly, heirs 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.

It’s no longer “an oncoming phenomenon,” said Douglas Boneparth, a financial adviser whose New York firm caters to affluent millennials. “It’s present-day.”

And it’s already impacting the broader economy, greasing the wheels of social mobility for some and leaving obstacles for those left out as the cost of living, housing and raising families surges.

How Did Baby Boomers Become So Wealthy?

A key reason there are such large soon-to-be-inherited sums is the fact that many Boomers benefited handsomely from significant price growth in the financial and housing markets.

The average price of a US house has risen about 500% since 1983, when most Baby Boomers were in their 20s and 30s, prime years for household formation. If you think that’s a lot, and it is, let’s look at the US equity markets.

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 the investing public, including millions of corporations. (The price increases shown above 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.)

The Boomers who benefited most from decades of price growth in real estate and financial assets were, in general, already rich, white or both – attributable, in part, to years of housing discrimination and a lack of access to financial tools and advice for people of color.

There are few aspects of economic life that will go untouched by the knock-on effects of the massive wealth handover: Housing, education, health care, financial markets, labor markets and politics will all inevitably be affected.

How Wealth Will Be Passed Down – Think “Gifting”

The bulk of the wealth which will be passed down over the next 20 years will be in the form of a traditional inheritance to the heirs after the Boomer dies. How these assets are distributed and to whom are typically spelled-out in the deceased’s will.

Deceased Boomers’ wealth may be transferred in whole to the spouse estate tax free. However, inheritances to others, including children in some cases, may be subject to federal estate tax. Fortunately, there are large federal tax exclusions for inherited assets.

For 2023, the Internal Revenue Service (IRS) requires estates with combined gross assets and prior taxable gifts exceeding $12.92 million for 2023 to file a federal estate tax return and pay estate tax as required. For an estate worth $13 million with a 2023 exclusion limit of $12.92 million, estate taxes would be levied on $80,000 of the estate.

Most states do not have estate taxes or inheritance taxes, but some do. So, it is very important to know if your state requires one or the other or both. I trust my readers are already familiar with the tax laws in their state, so I won’t go to the effort to list them here.

More and more Americans are “gifting” assets tax free while they are still alive – by taking advantage of the IRS’s “gift tax exclusion.” The tax-free gift limit for 2023 is $17,000 per person, up from $16,000 in 2022.

As a result, you can give up to $17,000 to as many people as you want in 2023 without having to worry about paying the federal gift tax. If you're married, your spouse can also give $17,000 a year to the same people, for a total of $34,000 annually.

Debi and I have done this for our two kids over the years. Of course, you have to be confident the benefactor will handle the money wisely. We’ve been very fortunate in this regard.

Congratulations To The Baby Boomers

In closing, the greatest wealth transfer in the history of the world is now unfolding and will continue as Baby Boomers pass down a massive estimated $84 trillion to heirs and charities over the next at least 20 years.

For better or worse, most of this wealth will transfer from high net worth people to their well-to-do heirs who are already wealthy or will be in the not-too-distant future. So, this phenomenon will do nothing to address the growing wealth gap in this country.

Be that as it may, my congratulations go out to Baby Boomers (my generation) for being the most productive generation in history and for amassing the greatest amount of savings to be passed down to their heirs over at least the next couple of decades. WOW!!

Wishing you all the best,

Gary D. Halbert

SPECIAL ARTICLES

Baby Boomers Own Half of All U.S. Wealth

The Greatest Wealth Transfer In History - $84 Trillion

How Baby Boomers Will Pass On Trillions to Heirs & Charities

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Forecasts & Trends E-Letter is published by Halbert Wealth Management, Inc., a Registered Investment Adviser under the Investment Advisers Act of 1940. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of the named author and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific advice. Readers are urged to check with their financial counselors before making any decisions. This does not constitute an offer of sale of any securities. Halbert Wealth Management, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have their own money in markets or programs mentioned herein. Past results are not necessarily indicative of future results. All investments have a risk of loss. Be sure to read all offering materials and disclosures before making a decision to invest. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.