A $36T Great Wealth Transfer is coming — but not everyone will score a payday. How to make a modest inheritance count
monkeybusiness/Envato It’s long been known that Gen Xers and millennials are set to inherit trillions from baby boomers over the next two decades via the Great Wealth Transfer. The bad news, however, is that not everyone will receive an equal piece of the payout. After accounting for taxes, baby boomer retirement spending and other factors,…
It’s long been known that Gen Xers and millennials are set to inherit trillions from baby boomers over the next two decades via the Great Wealth Transfer. The bad news, however, is that not everyone will receive an equal piece of the payout.
After accounting for taxes, baby boomer retirement spending and other factors, a July Visa Business and Economic Insights report estimates that “$36 trillion will pass to younger generations over the next 20 years, equivalent to roughly $515,000 per inheriting household (1).”
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But there’s a caveat: “these transfers will be highly uneven.”
In fact, the report says that “nearly 75% of those benefiting from the wealth transfer already have a higher net worth.” In other words, it’s the rich passing down to the rich. Conversely, baby boomers who still carry mortgage, consumer and loan debt “have far less financial flexibility — and potentially less wealth to pass on.”
The good news, however, is that financial experts tell Moneywise that there are ways to make even a small inheritance pay off in the long term.
“While a smaller inheritance may not feel life-changing at first, it can still make a meaningful difference when it’s used intentionally,” Jessica Nino, a financial advisor with Edward Jones, told Moneywise. “Even a few thousand dollars invested thoughtfully and allowed to grow over many years can have a much larger impact than people might expect.”
Managing inheritance expectations
The idea that the Great Wealth Transfer will largely concentrate among the already affluent is not entirely surprising.
A 2024 Congressional Budget Office study found that, between 1989 and 2022, “family wealth was unevenly distributed, and that inequality increased (2).” Families in the top 10%, they reported, “held 60% of all wealth,” while everyone below them held 39%.
Breaking it down further, the American Society on Aging pointed to Federal Reserve data that shows that white households control more than 80% of the wealth in America, while only 3.3% is held by Black households (3). As such, they add, “the trillions of dollars now set to pass between generations will replicate, rather than dismantle existing hierarchies” and a racial wealth divide (4).
For those expecting an inheritance, Northwestern Mutual chief strategy officer Jeff Sippel spoke of the Great Wealth Transfer in a June report and explained that “fewer than 1 in 3 Americans plan to leave an inheritance behind, and the average inheritance is below $50,000″ (5).”
The same report also found that more than half of millennials and a third of Gen Xers still need financial support from their parents — echoing the Visa study’s finding that “more than half of individuals expecting to receive an inheritance say it is critical to their long-term financial security, including the ability to purchase a home (6).”
Still, there are bright spots on the horizon. First, the Visa report found that more than a quarter of boomers are already sharing their wealth with their kids and grandkids while they’re still alive, from helping them with housing down payments to treating them to vacations (7).
And second, strategies exist to maximize even a modest inheritance.
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How to make the most of a modest inheritance
Multiple financial experts told Moneywise how you can make a smaller inheritance — between $1,000 and $10,000 — count.
Nino suggested that, instead of focusing on the inheritance size, instead ask, “where could these dollars make the biggest difference in helping me reach my financial goals?”
Ameriprise Private Wealth Advisor Dan Ruediger suggested contributing part or all of an inheritance to a Roth IRA or Traditional IRA. Depending on the IRA, he noted the tax advantages alone “enhance your overall return in the year the contribution is made, while also helping to strengthen your long-term retirement savings plan.”
Spencer Betts, a CFP with Bickling Financial Services, added that paying down high-interest debt, starting or strengthening an emergency fund or making home repairs could also be a good start. Such investments, he said, “can improve cash flow, strengthen the household balance sheet and provide a relatively predictable financial benefit.”
He also noted that passing along the inheritance to children or “earmark(ing) the funds for a specific multigenerational purpose” is another option to help “continue the family’s legacy.”
For those who receive larger inheritances, the experts generally recommend considering investment and retirement account options to grow the nest egg. However, John Cooper, a CFP with Greenwood Capital, cautions to “not make any major purchases for at least 6 months. You’ll need time to thoroughly think through how to best use the funds.”
The experts also emphasize the importance of speaking with parents or grandparents to encourage proper estate planning, ensure wills and other documents are in place and find out what types of assets they may inherit. “Understanding what those assets are and how they transfer,” Nino said, “can make the process much smoother.”
Regardless of what you expect to receive, though, it’s important for Gen Xers and millennials to do their best to practice sound financial habits before any potential windfall arrives.
“People are living longer, healthcare and long-term-care expenses can be substantial, and family circumstances may change,” Betts explained, noting that an inheritance may arrive later, or smaller, than expected. “Any future inheritance should be viewed as a potential enhancement to an existing financial plan — not as the foundation of that plan.”
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Article Sources
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Visa (1), (6); Congressional Budget Office (2); U.S. Federal Reserve (3); Generations (4); Northwestern Mutual (5); Visa (7)
This article originally appeared on Moneywise.com under the title: A $36T Great Wealth Transfer is coming — but not everyone will score a payday. How to make a modest inheritance count
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