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Navigating the Generational Wealth Landscape: Opportunities and Realities


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April 07, 2024

As we approach the threshold of history's most substantial generational wealth transfer, we foresee profound changes in asset allocation and valuation. This pivotal shift—crucial for both families and the economy—signals an era filled with opportunities and challenges, particularly for Gen X and Millennials. It is essential to focus not solely on the wealth we inherit but also on our strategies for the future.

Dissecting Wealth Distribution: A Visual Examination

An analysis of the U.S. wealth pie chart reveals diverse financial landscapes:

Visualizing $156 Trillion in U.S. Assets, by Generation - Visual Capitalist

Silent Generation: With their wealth concentrated in equities, mutual funds, and real estate, this generation faces the immediate concerns of healthcare and retirement living expenses.

Baby Boomers: Possessing a varied portfolio, Boomers are transitioning toward retirement with a strategic focus on estate planning and long-term care.

Generation X: At the crossroads of home ownership and business investment, Gen X targets wealth accumulation as they enter their prime earning years.

Millennials: Primarily invested in real estate, millennials are beginning to face the realities of wealth building in a fluctuating economy.

Gen Z: Considered part of the Millennial cohort by the Federal Reserve, Gen Z's financial trajectory is yet to be fully defined.

Population Dynamics: A Generational Snapshot (2022)
Resident Population in the United States in 2022 - Statista

The Greatest Generation: Born before 1928
Population: 0.67 million (0.20% of the total population)

The Silent Generation: Born 1928-1945
Population: 18.29 million (5.49% of the total population)
Total Wealth: $33.3 trillion
Wealth per Capita: Approximately $836,523

The Baby Boomer Generation: Born 1946-1964
Population: 68.59 million (20.58% of the total population)
Total Wealth: $78.1 trillion
Wealth per Capita: Approximately $1,138,650

Generation X: Born 1965-1980
Population: 65.37 million (19.61% of the total population)
Total Wealth: $46.0 trillion
Wealth per Capita: Approximately $633,318

The Millennial Generation (excluding Adult Gen Z): Born 1981-1996
Population: 72.24 million (21.67% of the total population)
Total Wealth: $13.3 trillion
Wealth per Capita: Approximately $184,109

Generation Z: Born 1997-2012
Population: 69.58 million (20.88% of the total population)

Generation Alpha: Born 2013-2022
Population: 38.55 million (11.57% of the total population)

Preparing for the Great Wealth Transfer

The 'Great Wealth Transfer' suggests an impending economic shift, yet for Gen X and Millennials, the narrative isn't straightforward:

"More than half of Millennials expect to receive an inheritance from their parents or other family members of about $350,000, according to a recent survey by Alliant Credit Union. However, 55% of Baby Boomers plan to leave behind an inheritance of less than $250,000." - Forbes

Expectations vs. Reality: Many Millennials expect significant inheritances, but these may be thwarted by their parents' rising healthcare costs, with a potential shortfall of at least $100,000.
Self-Reliance: The key takeaway? Don't bank on an inheritance; plan your retirement with prudence.

Ease of Transfers (Liquidity)

Equities & Mutual Funds: Most liquid; can typically be sold quickly on the stock market
Pensions: Not traditionally liquid; represent cash that can be received on a regular basis once the benefits begin
Private Business: Less liquid than stocks or pensions; the time to sell a business can vary
Real Estate: Illiquid; sales typically taking longer due to the complexity of transactions
Durable Goods: Illiquid; selling goods such as cars, appliances, or furniture often doesn't recoup significant value and may take time
Other Assets: Liquidity depends on type of asset; may include both liquid and illiquid assets, generally requires more time to convert into cash compared to equities or pensions

Entrepreneurship Through Acquisition

Acquiring Established Businesses: The Baby Boomer generation is approaching retirement in large numbers, creating an opportunity to purchase established businesses. Look for organizations that connect retiring business owners with potential buyers, such as SCORE or the National Federation of Independent Business (NFIB).
Franchise Opportunities: Franchise ownership provides a proven business model and brand recognition, which can be advantageous for new entrepreneurs. Investigate franchise opportunities with a lower initial investment or those focused on specific demographics/sectors.

The Impact of Long-Term Care Costs

Assisted Living: Averages are $4,807 per month.
Memory Care: Averages are $5,995 per month.
Independent Living: Approximately $3,000 per month.
In-Home Care: Around $30 per hour, with full-time care equating to about $5,720 a month based on national median rates.

For many adults, the annual retirement health care costs remain uncertain, but planning for these expenses is essential to protect retirement savings.

The Generational Approach to Long-Term Care Insurance

Younger Generations: Encouraged to consider long-term care insurance early to benefit from lower premiums.
Older Generations: Should review their retirement plans to include potential healthcare needs, exploring options like life insurance or annuities with long-term care riders.

Estate Planning: An Imperative Step for Everyone, Not Just the Wealthy

Wills and Trusts: Essential tools to manage your assets posthumously.
Medical Directives: Ensuring your healthcare wishes are honored.
Early Planning: The earlier you start, the more you can secure your legacy.

The Realities of Retirement

The Savings Gap: With rising living costs, saving for retirement is more critical than ever.
Healthcare Costs: Long-term care could erode what you've worked hard to build.

Facing the Future Together: Industry Growth from New Generational Trends

Tech and Green Energy: Fields that may offer opportunities for growth.
Healthcare: An ever-important sector given the aging population.

Review Your Plans: The Power Lies in Preparation

Estate Planning: It's time to review or establish your estate plan.
Long-Term Care Considerations: Assess your potential medical expenses in advanced age.

By embracing proactive planning, and with the help of a financial advisor you trust, you can navigate the complex terrain of generational wealth with confidence and clarity.


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About the author

Ricky Vega

Ricky Vega

Associate Private CFO®

Ricky grew up in Gwinnett County, Georgia and attended Mercer University where he graduated with a degree in Finance and a minor in Biology and Chemistry. Ricky has worked in Wealth Management since graduation and is an AI enthusiast. In his free time, Ricky is attending GA Tech's Scheller College of Business to pursue his MBA in Strategy and Innovation.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Background and qualification information is available at FINRA's BrokerCheck website.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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