Jacob Dressler

That’s right.

Snot nosed twerps who spent their adolescent years on COVID unemployment eating tide pods are now becoming millionaires.

And it’s not just from performing suggestive dance moves on TikTok.

It’s from robbing the graves of their loveable elderly parents and grandparents.

I’m just kidding. I have no problem with millenials or Gen-Z.

But it is strange to witness these young kids, who initially resented the grind, bemoaned Boomer success, and burned out on fleeting experiements at full-time work, now able to enjoy the fruits of previous generations’ lifelong labor.

How Big Is The “Great Wealth Transfer”?

About $84 trillion dollars will pass by inheritance in the coming years.

In the past, every aging generation has eventually died and left the next generation their money, property, and businesses.

The youngest baby boomers are turning 60, while the oldest are approaching their 80s. The average age of death in the USA is 74.6 (people are starting to die.)

Cumulatively, all those baby boomers are worth a lot of money.

In 1989, the cumulative wealth of American families, when adjusted for inflation, stood at approximately $38 trillion. Fast forward to 2022, and this wealth had surged dramatically, surpassing $140 trillion, more than tripling over the span of these decades.

Looking ahead, projections indicate that a staggering $84 trillion is anticipated to transition from older generations to their millennial and Gen X descendants by 2045. Within the coming decade alone, an estimated $16 trillion is poised to change hands within these generational lines.

The New York Times reported that the upper stratas in America are passing down billions, with Gen-Z homebuyers spending tens of millions on their first properties.

But affluent and middle class families are also passing large sums to their heirs as well, potentially serving as a much needed lifeline Millenials need to fulfill their dreams of homeownership.

I’m not rich… how does this affect me?

Well, for starters, be ready to get pissed off at all the college interns showing up to your job in Ferraris.

I’m sure that won’t happen. But the phenomenon may affect your own heirs through hostile tax rules.

For example, Trump increased the federal estate tax to $13.6m, meaning that families who transferred wealth under $13.6m could do so tax free. This was good for a lot of people. If you were worth under $13.6m, there were no taxes due.

That law is “sunsetting” at the end of 2025 and could very well be reduced to $5.6m.

With all these incredibly wealthy people transferring money… and with a sizeable portion of affluent families also expected to die and transfer their wealth… I suspect that certain entities with selfish interests related to these matters might be tempted to muck about the probate courts and spoil the fun.

Which entities am I talking about?

If it wasn’t obvious:

I’m talking about the government and the IRS.

Tax legislatures may not be inclined to raise the estate tax threshold once they realize how much money they can make off the baby boomers, delivering a final blow to the working class that contributed significantly to building the nation’s economy.

So, we may not see a threshold increase for a while. But then again, stay tuned.

What can I learn from all this?

There are two economic theories behind how we build wealth.

One way is by life-cycle saving and the other is through bequests and inheritances.

Life cycle saving is exactly what it sounds like – saving and investing throughout the course your life.

What’s interesting is the ratio between the two wealth building mechanisms. Economists estimate that inherited wealth constitutes 20-35% of household wealth in America.

That number is significant, especially when it comes to millionaires and billionaires. Passing on substantial sums of money will widen the wealth gap and further chip away at the middle class.

According to the International Monetary Fund (IMF), excessive wealth inequality can lead to lower economic growth, political polarization, and eroding social cohesion.

A study by The Economic Policy Institute found that inequality slows U.S. economic growth. Income inequality suppresses growth in aggregate demand (spending by households, businesses, and governments) by shifting an ever larger share of income to rich households that save rather than spend. This rise in inequality has been overwhelmingly driven by the failure of pay for typical American workers to keep pace with economywide productivity growth. EPI estimates that rising inequality has slowed growth in aggregate demand by 2 to 4 percentage points of GDP annually in recent years.

The Bottom Line

Money hoarding and greed will likely be the fatal blows for this country. And don’t hold your breath waiting for tax breaks.

But you already knew all that.