As Boomers hoard trillions, younger Americans worry they won’t be able to retire comfortably
As Baby Boomers maintain an iron grip over their generational wealth, more younger Americans worry they’ll never be able to retire comfortably.
According to the National Institute on Retirement Security (NIRS), 79% of working-age Americans believe there’s a retirement crisis—up from 67% in 2020.
More than half (55%) are worried they won’t be able to achieve financial security once they reach retirement age.
Although the study doesn’t provide a generational breakdown, a pre-pandemic NIRS survey found that 72% of Millennials were concerned they wouldn’t be able to retire comfortably.
A recent Northwestern Mutual study echoes young generations' woes. It found that Millennials and Gen Zers believe they’ll need at least $1.56 million to retire comfortably.
This wouldn’t be a problem, except for the fact that these generations have only saved between $30,000 and $132,000, according to Edward Jones data.
Saving enough for retirement has become much harder since the pandemic due to a cost-of-living crisis affecting lower- and middle-income Americans.
According to Primerica, nearly half of America’s middle class is cutting back on their retirement savings due to rising expenses.
At the same time, Baby Boomers have sailed into the sunset with a staggering $76 trillion in wealth.
Experts had previously predicted that Millennials and Gen Zers would inherit the lion's share of that wealth, but that may not necessarily be the case.
“Horizontal wealth transfer”
The children of Baby Boomers aren’t the only ones set to inherit generational wealth.
According to a new UBS study, the surviving spouses are first in line for the inheritance. They’re set to receive $9 trillion in “horizontal wealth transfers” long before those funds reach their children.
And because women outlive men and are often younger than their husbands when they marry, most of that wealth will go to female partners.
America is home to more than 43 million people aged 75 and older, so the horizontal wealth transfer is already underway. Economists say it will pick up over the next two decades.
Millennials and Gen Zers shouldn’t fret too much, though.
Cerulli Associates, a Boston-based financial consultancy, estimates that more than 85% of Boomers’ wealth will eventually be passed on to surviving family members, with the remaining 15% going to charities and other causes.
Merrill Lynch estimates that $72 trillion in assets will be inherited through 2045, with Millennials set to receive $27 trillion of that total.
Meanwhile, Gen Zers and younger Americans are expected to collect over $11 trillion in financial assets from their parents and grandparents.
Investment managers are already prepping for the so-called great wealth transfer by expanding their offerings of alternative investments.
According to a 2022 Bank of America survey, 75% of Millennials and Gen Zers don’t believe it’s possible “to achieve above-average returns solely on traditional stocks and bonds.”
It remains to be seen whether younger generations will be as successful as Baby Boomers in growing and managing their retirement nest eggs.