The so-called “great wealth transfer”—the transfer of assets from baby boomers to their heirs—will mostly benefit younger Americans who are already wealthy, according to a July report from Visa Business and Economic Insights.
And while the wealth transfer would be significant, the value of the assets transferred could be much less than some previous estimates that put it as high as $124 trillion, according to the report.
“When people spend close to $100 trillion, they don’t think about all the deductions that come with it,” Visa chief economist Wayne Best told CBS News. “You have to subtract the liabilities, and boomers actually have a lot of mortgage debt.”
That’s how much real wealth Visa economists think Boomers will pass on to their children and grandchildren.
Average inheritance size
Baby boomers have $93 trillion in assets, a figure that would drop to $36 trillion in inherited assets after liabilities, retirement expenses, charitable giving and taxes are subtracted.
The report also explicitly excluded the wealth of the richest 1% of U.S. households, or those with at least $13 million in wealth, because their spending patterns do not reflect the spending patterns of the population as a whole.
This means that on average, heir families will receive $515,000.
Of the $36 trillion that will be transferred, only $8 trillion will be spent, according to Visa’s report. This is because most recipients are already wealthy and are expected to save or invest the remainder of what they receive from their families.
Visa estimates that the expected $8 trillion increase in consumer spending will increase average annual consumer spending growth by about 0.1 percentage point, to 2.1% per year, over the next 20 years.
Transport and tourism sectors will benefit
Already wealthy recipients of boomer wealth are expected to spend their inheritance on home improvements and travel, benefiting businesses in those sectors.
“A wealthy person who receives an inheritance from a wealthy parent likely already owns a home, but could use the money to improve it,” Best said.
Other types of businesses, including airlines, cruise lines and some retail categories, could also benefit from the wealth transfer, Best said. Car costs and related expenses such as insurance, maintenance, repairs and gasoline are also expected to rise.
Edited by Amy Picchi