Boomer Inheritances a Boon to Millennials (Mostly)

If you inherit within the next 10-20 years, you’re part of what economists are calling The Great Wealth Transfer. By the year 2030, all baby boomers—everyone born between 1946 and 1964—will be at least 65 years old, which means The Great Wealth Transfer is already well underway. These 73+ million baby boomers are aging into retirement, transferring up about $60 trillion of wealth to the next generations through inheritances of cash, real estate, and other assets. This will have huge impacts on the real estate market over the next 10 to 25 years.

Baby boomer parents possess a massive amount of wealth. Most boomers enjoyed little or no inheritance from their parents, but they were beneficiaries of a great economy and decades of growth, which offered plenty of safe and well-paying jobs. Baby Boomers also benefited from a historic rise in the stock market and substantial gains in real estate. The values of their homes, for example, have risen exponentially over the years.

For the oldest boomers, their heirs could be Generation X, but the majority will be millennials. A recent study shows that millennials will inherit tens of trillions from their Baby Boomer parents by the year 2030 and will hold five times as much wealth as they have today. That’s good news for members of a generation who shoulder far more student debt than previous generations and face lower paying first jobs.

Today baby boomers hold around $6 trillion worth of real estate equity. Many choose to stay and age at home, but eventually this generation will pass on or need full-time care which means moving into a senior living facility. Over the next couple decades this is likely to create an increase in the supply of single-family homes, and an increase in demand for senior housing. Good news for millennials.

From now through 2026, Fannie Mae’s housing insights predict the number of single-family homes for sale to be between 10.5 and 11.9 million. This steady increase in supply should help balance out the drastically low supply in the marketplace today. More good news.

But there are some caveats. Continued technological advancements, like artificial intelligence, robotics, plus intense global competition, and the relocation of jobs to other countries may adversely impact boomer job security. This could lessen the amount of money that will be handed over to their children. Also, thanks to modern medicine, people on average are living longer, so the devastatingly high costs associated with late-in-life health issues could easily wipe out a boomer’s accumulated wealth fairly quickly. Taxes—which vary from state to state—also could take a big bite out inheritances.

Much is made today about the growing wealth gap between boomers and millennials, but The Great Wealth Transfer represents a significant step to help bridge the gap moving forward. Inheriting a “nest egg” sum of money, or a piece of real estate can be a crucial stepping stone to getting ahead and creating long term financial stability, especially in a challenging economy and housing market.