3 Ways to Prepare for the Great Wealth Transfer

The opinions expressed by entrepreneurs contributors are their own.

Over the next two decades, up to $68 trillion will pass through the hands of the baby boomer generation (those born between 1946 and 1964) through their now adult children (those born between 1965 and 1980) and millennials (those born between 1981 and 1996). In other words, we have officially entered the greatest period of wealth transfer in history. But before we dive into the impacts this great transfer of wealth will have on the world as we know it, we must first understand exactly how this phenomenon happened in the first place.

In a post-WWII world, work and life experiences were ones of great prosperity. Their parents had already made sacrifices during the war years to give them a better life and had paid all the taxes necessary to keep school fees low, which meant that young adults entering the workforce for the first time baby boomers could graduate with little or no debt. . At the same time, housing was plentiful after the war, and strong labor protections meant that even high school graduates could afford to buy their first home on minimum hourly wages. These homes then continued to rise in value over time, and decades of economic growth followed for baby boomers. So much so that in 2020, records show that the baby boomer generation owned approximately 57% of all wealth and assets in the US economy. In comparison, held only 3% of the country's total wealth.

This clearly shows how drastically the Great Wealth Transfer will impact Millennials over the next 10-20 years if this younger generation suddenly jumps from just 3% to around 60% of the world's wealth in a near future. So now that the $68 trillion is starting to change hands, what does that mean for everyone else?

Read on to discover three key ways to prepare for the great wealth transfer and, ultimately, how you can improve your financial situation, whether or not you should receive a historic wealth transfer.

Related: This is a unique way for successful people to manage their investments

Research shows that when it comes to generational wealth, the vast majority of it is often lost by the time wealth reaches the third generation. Add to that the alarming statistic from a 2018 study conducted by the TIAA Institute - that only 11% of millennials had a "relatively high" level of financial literacy - and you can see how transferring trillions of dollars to this young generation could quickly become problematic if the majority of beneficiaries do not have a clear financial plan in place. As a solution, Australian bank NAB is promoting a "talk early and talk often" approach among families when it comes to generational wealth, insisting that clarity and common ground between all family members intergenerational are essential to ensure the long-term growth of inherited wealth. .

Yet when dealing with multiple assets over multiple generations, an open communication approach is sometimes easier said than done. For most families, the subject of death and the future distribution of wealth is an unpleasant and uncomfortable topic of discussion, which is why family financial planning is usually postponed or completely ignored. But despite the sensitive nature of the conversation, often the sheer size of the underta...