Navigating the Great Wealth Transfer: A Generational Guide
“It is not what you do for your children, but what you have taught them to do for themselves that will make them successful human beings.”
Recently my parents asked me to sit down with them so they could share their wishes on what to do with their assets when they pass away. My father is 82 years old and my mother is 71. To be clear, my parents are in no way wealthy. But they have some family heirlooms, jewelry and other items that they would like to pass on to the next generation.
At that moment, I was glad that my parents took the time to sit down and walk me through their wishes. But it also made me realize that they didn’t need to wait till they were in their 70s and 80s to have this conversation with me.
My parents and I at dinner
I started to wonder, when is it appropriate to discuss money with family members? How can we approach sensitive subjects like wealth, estate planning, and inheritance? These questions often remain unanswered, leading to over 60% of families avoiding money conversations altogether.
However, avoiding these conversations create real obstacles to building multigenerational wealth, especially with the “Great Wealth Transfer” (GWT) now underway.
The largest wealth transfer in U.S. history is expected to take place over the next two decades. This transition, referred to as the Great Wealth Transfer, will see approximately $84 trillion in assets move from the Silent Generation and Baby Boomers to younger generations.
This monumental shift may lead to unforeseen consequences and new challenges for families, potentially impacting their ability to retain wealth. A lack of alignment among family members could result in missed opportunities and a decline in generational wealth.
But it doesn’t have to be this way.
Nurturing intergenerational wealth starts with understanding key strategies. This knowledge empowers each generation to play an active role in preserving and growing wealth.
Wealth-Building Strategies for Each Generation
Foundation Builders
Gen Z (born 1997 - 2012)
Starting strong financially can set the stage for future success. Gen Z may benefit from the following strategies:
Build Credit Wisely: Open a credit card, use it responsibly, and pay it off monthly to build a strong credit score. Avoid unnecessary debt, ideally borrowing only for “investments” in your future, like your education or starting a business.
Start Investing Early: Even small contributions to a Roth IRA or a retirement savings account can grow substantially over time. Learn about compound interest to see how early efforts may pay off.
Learn and Share: Boost knowledge on personal finance through books, podcasts, and courses. Talk finance with peers and family to normalize money conversations and create more opportunities for building financial literacy.
Pro Tip: Track spending to identify where money is going, and start budgeting to maximize savings contributions.
Wealth Accumulators
Millennials (born 1981 - 1996)
Millennials may be in their prime earning years, an ideal time to build wealth and focus on financial stability.
With an eye toward growth and asset protection, this generation can use these strategies to advance their financial goals:
Invest Consistently: Maximize retirement contributions and participate in employer matching programs.
Build a Safety Net: Maintain 3 to 6 months of living expenses in an emergency fund. Research insurance, and get sufficient coverage for health, disability, and life insurance.
Cultivate Financial Transparency: Talk openly with your family about debt, income, investments, and other financial matters. Greater transparency can promote healthier money mindsets and better financial habits.
Pro Tip: Automate savings and investments to stay on track effortlessly.
Legacy Planners
Gen X (born 1965 - 1980)
Gen X can start legacy planning while working to grow wealth as they support children and aging parents.
Looking to minimize risk and create brighter financial futures, Gen X can:
Debt Management: Pay down high-interest debt while maintaining emergency funds. Explore refinancing options if interest rates are favorable.
Prioritize Retirement Savings: Maximize contributions to accounts like 401(k)s and IRAs. Avoid tapping into retirement savings unless absolutely necessary.
Continue Multigenerational Conversations: Discuss financial and inheritance plans with your parents and children to minimize any misunderstandings. Instill financial literacy in the next generation.
Pro Tip: Consider planning for long-term care for yourself and your parents to reduce future caregiving challenges.
Legacy Protectors
Baby Boomers (born 1946 - 1964)
This generation may prioritize wealth preservation and transfer while sharing financial wisdom with the next generation.
Whether retired or approaching retirement, Boomers can put these strategies in play to both safeguard family wealth and set up a clear plan for wealth distribution:
Estate Planning: Regularly update your will and trusts to ensure assets align with your wishes. Strategic gifting to family members may also reduce future estate tax exposure.
Protect Retirement Assets: Review retirement accounts and required minimum distributions (RMDs) to maximize tax efficiency. Diversify investments to protect against market volatility.
Share Financial Knowledge: Host family meetings to discuss financial values and plans, fostering smarter money habits across generations.
Pro Tip: Meet with a financial planner annually to review your plans and adjust for any life changes.
Action Items
Initiating these family discussions about finances doesn't need to be complex; it can be as easy as understanding the right time and approach to start conversations about money.
For Baby Boomers, hosting a casual family dinner or gathering can be an ideal opportunity to bring up money and share a meaningful story about their financial journey or a valuable lesson learned.
For Gen X, life events can be opportune times to discuss financial plans. Open-ended questions like, “How do you feel about our family’s financial future?” can start the dialogue.
For Millennials, talking about shared financial goals, like saving for a family vacation or a home, can be good starting points. Asking questions and seeking advice shows respect for the wisdom of older generations.
For Gen Z, showing curiosity and asking older family members for advice can demonstrate respect and a desire to learn. Asking parents, grandparents, and others about what they’ve learned and what they wished they knew earlier can spark deep, eye-opening conversations.
As a financial planner, I’ve seen how collaboration across generations can build and preserve multigenerational wealth by fostering shared values, financial knowledge, and smart money habits. This shared responsibility and ongoing effort ensures that each generation contributes meaningfully to the family’s financial vision and creates a stronger, more aligned legacy.
Here’s to a better tomorrow!
~Alex
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