Baby Boomer Wealth Transfer Will Mostly Benefit the Already Rich, Report Finds

The much-discussed "great wealth transfer" from the baby boomer generation to their heirs is unlikely to significantly uplift the economic standing of the average American. Instead, a new report from Visa Business and Economic Insights indicates that the bulk of this generational wealth will flow to younger individuals who are already well-off.

While previous estimates have placed the total wealth transfer as high as $124 trillion, the Visa report offers a more conservative figure. After subtracting liabilities such as mortgage debt, along with retirement spending, charitable giving, and taxes, the inheritable assets are projected to be around $36 trillion. Notably, the report excludes the wealth of the top 1% of U.S. households, deeming their spending patterns unrepresentative of the broader population.

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When people throw around $100 trillion, they don't think about all the deductions that have to come from it. You have to subtract liabilities, and boomers actually have a lot of mortgage debt.

Consequently, the average inheritance is estimated at $515,000. Of the $36 trillion expected to be transferred, only about $8 trillion is anticipated to be spent. This is because the majority of recipients are already affluent and are expected to save or invest the funds they receive. Visa economists predict this spending will provide a modest boost to average annual consumer spending growth, increasing it by approximately 0.1 percentage points to 2.1% over the next two decades.

Despite the limited impact on overall consumer spending, certain sectors are poised to benefit. Businesses in the transportation and travel industries, including airlines and cruise lines, are expected to see increased activity. Additionally, recipients may use their inheritances for home improvements, benefiting related businesses. Spending on automobiles and associated costs like insurance and maintenance is also projected to rise.

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A wealthy person who receives an inheritance from a wealthy parent probably already has a home, but might use the money to improve that home.