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‘Great Wealth Transfer’ will impact jobs, economy and communities – are we ready?

Feb 23, 2024

As first seen on the Telegraph Herald.

By: Sarah J. Reicks, CFA, Vice President

From the Great Depression to the Great Recession and everything in between, generations in our society have lived through a lot. A new era is now upon us that’s been coined the “Great Wealth Transfer,” yet many are not prepared for it.

A report from research firm Cerulli Associates estimates that $84.4 trillion will transfer hands from aging family members to other family members and charities by 2045. This represents the largest wealth transfer in history and Iowa families, and our communities, need to prepare as it will impact local job markets and the amount of money Iowa families have to spend.

So who’s leaving their wealth behind? We are losing more of the greatest generation (born 1901-1927) and the silent generation (born between mid 1920s-1940s), and more of the baby boomers (born 1946-1964) are leaving the workforce. The assets they will pass on to younger generations include deposits at their financial institutions, real estate, business ventures, insurance products as well as investments like stocks, bonds and mutual funds. Their collective wealth is being transferred to young generations and charities through things like trusts, wills, and other estate planning tools.

Because of this generational shift, more people are thinking about the impact of their own aging and mortality, considering who is designated to make their health care decisions, reviewing their estate plans and updating their beneficiaries. As Americans explore their plans for transferring wealth it should spark needed conversation.

A report from Kiplinger Personal Finance underscores that communication is key when considering the transfer of wealth:

  • 52% of U.S. adults have not made a will.
  • 40% of parents haven’t talked to family about their estate planning needs.
  • 28% of those surveyed “know their own parents’ legacy wishes.”
  • The average American saves less than 50% of an inheritance.

However, barriers exist that can prevent proper wealth transfer planning. For example, 61% of adults are not comfortable sharing financial information with their children and 43% are inexperienced with multigenerational wealth strategies.

The Great Wealth Transfer also has the potential to significantly impact local job markets in Iowa. Depending on how inheritors manage their wealth, there could be positive effects such as increased entrepreneurship, consumer spending, and investment in local infrastructure, leading to job creation. On the flip side, the next generation may not live in the same community to fill jobs or contribute to the local economy through their purchases. The outcome hinges on decisions made by inheritors as to how they utilize their inherited wealth within the local economy.

Helping secure the next generation’s wealth and understand its impact on the local economy is an important topic for communities, families and businesses.

Together, our communities, families and local businesses can come together to help Iowans plan for the future and enhance their peace of mind through building trusted relationships, needed education, innovation in the workplace, and communication to the next generation.