The so-called “great wealth transfer” — the passing of assets from the baby boomer generation to their heirs — will mostly benefit younger Americans who are already affluent, according to a July report from Visa Business and Economic Insights.
And while the wealth transfer will be significant, the value of assets that are passed down could be much smaller than some previous estimates pegging it as high as $124 trillion, according to the report.
“When people throw around $100 trillion, they don’t think about all the deductions that have to come from it,” Visa chief economist Wayne Best told CBS News. “You have to subtract liabilities, and boomers actually have a lot of mortgage debt.”
Here’s how much actual wealth Visa’s economists expect boomers to transfer to their children and grandchildren.
Baby boomers are sitting on $93 trillion in assets, a sum that will shrink to $36 trillion in inheritable assets after subtracting liabilities, retirement spending, charitable giving and taxes.
The report also expressly excluded the wealth of the top 1% of U.S. households, or those worth at least $13 million, because their spending patterns are not reflective of the population at large.
That means that on average, inheriting households will receive $515,000.
Of the $36 trillion that will be transferred, only $8 trillion will be spent, according to the Visa report. That’s because most recipients are already wealthy and are expected to save or invest the remainder of what they receive from their families.
The anticipated $8 trillion boost to consumer spending will lift average annual consumer spending growth about 0.1 percentage points, to 2.1% per year, over the next 20 years, Visa estimates.
Already affluent recipients of boomer wealth are expected to spend their inheritances on making home improvements and traveling, providing a boon to businesses in those sectors.
“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,” Best said.
Other kinds of businesses, including airlines, cruise lines and some retail categories, are also poised to benefit from the wealth transfer, according to Best. Spending on automobiles and associated expenses like insurance, maintenance, repairs and gasoline is also expected to rise.
