Baby boomers, the richest generation in history, are aging and preparing to pass down a record-breaking amount of assets.
Nearly 45 million U.S. households will hand down about $68.4 trillion over the course of the next quarter-decade, according to research and consulting firm Cerulli Associates, a phenomenon known as the “great wealth transfer.”
Of that $68 trillion, Generation X – those born between about 1965 and 1980 – stands to gain the largest share of that wealth at 57 percent.
Millennials are also expected to get a sizable chunk – the cohort surpassed baby boomers as the largest living generation during recent years, though the latter is still the richest. Baby boomers control at least 70 percent of all disposable income in the U.S.
This unprecedented shift in assets could have profound effects on the economy. Unlike their elders, millennials, specifically, have different economic priorities and experiences, which have shaped how they invest.
“Millennials are very community-oriented,” Mary Ellen Hancock, vice president and senior wealth strategist at PNC Wealth Management, told FOX Business, adding that there could be an increased amount donated to charities as a result of the wealth transfer.
Millennials, the majority of whom grew up during the Great Recession in the late 2000s, are also wary of the stock market, Hancock said, which means they could pull some of their inherited assets out and invest elsewhere.
However, for those that choose to stay invested in stocks, the makeup of their portfolios could differ from their predecessors’.
Hancock said companies or sectors that may have thrived while baby boomers controlled the majority of the wealth may not fare as well when millennials control the cash. Tobacco companies, for example, are an area where socially-conscious younger Americans may be more hesitant to invest. Green energy companies, on the other hand, could become more popular as climate change remains a top area of concern for the younger generation. Companies that dominate the online marketplace are also poised for a potential boost.
For those looking to pass down assets, pieces of the new tax law have changed the treatment of trusts, which could make it necessary to alter plans. Hancock said people may want to consider the type of trusts they utilize, especially now that state and local tax deductions have been capped at $10,000.