Yayoo! Finance: Wealth Transfer to Gen Z and Millennials Overstated

Millennials and Gen Zs that feel they are falling behind likely won't get much help from inheritances from parents says wealth manager Cerulli Associates.  The reason is the high cost of health care and that relatively few aging Baby Boomers and Silents have a large amount of wealth to begin with.  

But the overwhelming cost of health care for older people means most people in those later generations won’t inherit much, even if their elders seem well-off today.

The bulk of the trillions will go from one group of already wealthy people to another. Cerulli estimated that 68% of the wealth transferred between 2020 and 2045 — which includes boomers as well as older generations — will come from U.S. households with at least $1 million in investable assets. And only 6.9% of households have that kind of wealth to begin with, Cerulli added.

As I have blogged before, Gen Z and Millennials are in a difficult positron in building wealth.  Higher interest rates look to be the norm going forward.  High interest rates don't benefit most young investors.  

Most young people are net debtors rather than net creditors.  That is, the amount that they owe is greater than the amount they have in investments including holdings in 401(k)s.  The result is that it takes even longer for young people to reach the point where they have positive net wealth other than home equity.

Prospects for Gen Z and Millennials realizing further gains in home appreciation also appear slim.  Home affordability is at a multi-decade low meaning it is going to be tougher to find buyers.  Plus, home price growth over the last year has just about kept up with inflation.  While the nominal value of homes may have increased, so have prices for everything else.  Thus in real terms, homes are just as expensive today as they were last year.  

Finally, Gen Z and the Millennials will at some point be bearing the bill for the large amount of public sector debt that has been issued over the past twenty five years.  Eventually taxes will have to be raised.  When Uncle Sam's take goes up, Millennials and Gen Zs will have less to put away for their own savings and might very well find themselves subject to higher taxes on wealth passed down from their parent's generation.