Americans over the age of 70 have a net worth of almost $35 trillion USD as of the end of the Q1 of 2020, accounting for 27 percent of all wealth in the United States, up from 20 percent in the 1990s.
As older Americans begin to pass on, the country will see the greatest transfer of wealth in history.
Older generations of Americans are estimated to pass down $70 trillion USD between 2018 and 2042, of which the bulk — $61 trillion USD — will go to their millennial and Generation X heirs, while the rest will be donated to philanthropic causes.
The average inheritance in 2019 was $212,854, a 45 percent increase from the inflation-adjusted average of $146,844 in 1998.
The wealth transfer is expected to unleash a torrent of economic activity, helping the older generation’s heirs buy homes, start businesses and make investments to secure their own nest eggs.
For millennials, the wealth transfer will be one of the biggest boons for what has become the unluckiest generation in ... well ... a millennia.
Millennials are the most educated, most diverse generation in history, yet the average millennial has experienced slower economic growth since entering the workforce than any other generation in U.S. history.
Just as millennials were entering the work force, the Great Recession and larger global financial crisis put these new job entrants at an immediate disadvantage, with the Great Recession causing an economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the ensuing global financial crisis.
The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s.
Millennials, suffering through high unemployment during the Great Recession, ended up less likely to work for high-paying employers and less likely to complete as much education as workers in places where the recession didn’t hit as hard.
Millennials had to settle for worse jobs early in their careers, depressing their lifetime earnings potential. The employer side changed, too. Big employers in the hardest-hit areas consolidated power over labor markets and, in turn, offered less to young workers who had few other options.
Fast forward a decade, and millennials were one of the hardest hit generations when it came to the economic disruption caused by the COVID-19 pandemic.
The millennial generation represented the largest portion of the U.S. economy when the nation shut down in March 2020, yet millennial employment dropped a whopping 16 percent in March and April 2020 alone.
Millennials find themselves on pace to become the first generation to end up poorer than their parents as they enter peak earning years in the face of a crippling pandemic.
Thus, millennials get a lot of attention regarding the coming wealth transfer in part because they hold such a staggeringly low share of total global wealth — less than five percent through the first half of 2020, according to the Federal Reserve.
AmChamUS has thus far supported relief measures by the federal government in the wake of the COVID-19 pandemic, and the current low interest rate environment, which in turn has highlighted wealth transfer planning opportunities, including Roth conversions, tax loss harvesting and the ability to repurpose required minimum distributions, not to mention proposed tax changes that are coming from the Joe Biden administration.
AmChamUS continues to work with legislatures at the federal and state levels to ensure policies positively reflect wealth transfer within the U.S., which in turn will spur both renewed economic and tax activity.