Unmasking the Unexpected: Examining What’s Really Behind the Boomer ‘Wealth Transfer’ Hype

The baby boomer generation is in for an unexpected surprise when its members retire: their wealth transfer to their heirs may not be as large as expected. This is due to a combination of factors, including rising medical expenses, declining Social Security benefits, increased debt, and an uncertain stock market. This trend, which experts refer to as “the great wealth transfer”, labels the expected transfer of intergenerational wealth that was predicted to occur over the next several decades. One of the reasons why the wealth transfer won’t be as large as predicted is medical costs. As baby boomers age, they’ll need to cover more medical costs. This will eat into their personal savings and ultimately reduce the amount they’ll be able to pass on to their children. Furthermore, rising health care costs have led to an influx of debt among retiring baby boomers. High medical bills, plus other bills like mortgages, credit cards, and prescriptions, can all add up and decrease the amount left to transfer. Another factor contributing to the diminished wealth transfer is the uncertain stock market. Stocks and mutual funds are often expected to generate a high return for the investor, but if the stock market crashes, this return won’t materialize—which could reduce the amount of money available for inheritance. Additionally, baby boomers are living longer and spending more in retirement than previous generations—all factors that will reduce the inheritance they are able to pass on. The last factor that will reduce the wealth transfer from baby boomers to their heirs is the decline of Social Security benefits. The Social Security Trust Fund is projected to be exhausted in 2035, resulting in a 30% reduction in benefits. This decline in Social Security, combined with the aforementioned factors, will dramatically reduce the amount of money the baby boomer generation is able to pass down, dramatically altering the expectations for intergenerational wealth transfer. In summary, while baby boomers were expected to pass down a large sum of money through the great wealth transfer, a variety of factors may actually reduce the amount of money they are able to pass down. This includes medical costs, an unpredictable stock market, a longer retirement, and a decline in Social Security benefits. Ultimately, this could result in an unexpected—and disappointing—result for baby boomers and their heirs.