Get ready for a massive shift in wealth! Over the next two decades, a whopping $84 trillion in assets is expected to change hands, according to Cerulli Associates. That’s right, trillions! This wealth transfer, primarily from baby boomers to younger generations like Gen X, millennials, and Gen Z, could significantly impact the markets.
The big question is, how will these younger inheritors invest their newfound wealth? Will they follow the traditional path of their parents, favoring stocks, bonds, cash, and real estate? Or will they forge their own path, seeking out new and innovative investment opportunities for higher returns? Interestingly, a recent Bank of America survey suggests a shift in preferences. A whopping 75% of millennial and Gen Z investors believe traditional investments alone won’t cut it.
Stay tuned to this blog to explore what this “Great Wealth Transfer” might mean for the future of the markets!
Source: Cerulli Associates, “The Cerulli Report: U.S. High-Net-Worth and Ultra-High-Net-Worth Markets 2021.”
Baby boomers are changing the way they share their wealth. Instead of leaving everything to their children in wills, many are choosing to give them money and assets now. This trend, called “giving while living,” is expected to greatly impact investments. Let us hear from experts about the new investment trends that may arise from this transfer of wealth.
Younger Investors Are Shaking Up the Investing World
Millennials and Gen Z are changing the game when it comes to investing. Compared to previous generations, they’re more interested in the traditional mix of stocks, bonds, and real estate. A study by the Bank of America Private Bank found that wealthy young investors (ages 21 to 42) are more likely to explore new options. These alternatives include private equity, which is funding for non-public companies, and private debt, which is lending directly to businesses, and even starting their own businesses. This trend is expected to continue as they inherit wealth. According to the study, these young investors are also passionate about making a positive impact on the world. They’re interested in sustainability and social equality, and they see alternative investments as a way to achieve those goals.
Source: 2022 Bank of America Private Bank Study of Wealthy Americans
Sustainable Investing: A Trend Fueled by Young Investors in Wealth Transfer
Interest in sustainable investing is surging, with a study by the Bank of America Private Bank revealing a more than two-fold increase since 2018. Currently, 26% of investors hold sustainable and impact investments in their portfolios.
Notably, this trend is even stronger among younger generations. A whopping three-quarters of investors under 43 years old own sustainable assets. This enthusiasm is likely driven by the belief that sustainable investing can deliver competitive returns alongside positive social and environmental impact. In fact, a majority (over two-thirds) of sustainable investors believe this approach is here to stay.
Young investors, in particular, see sustainable investing not just as a way to make a difference, but also as a smart strategy for identifying promising investment opportunities and managing risks.
Source: 2022 Bank of America Private Bank Study of Wealthy Americans
Real Estate: An Investment for All Ages
People of all ages consider real estate a valuable investment. A Bank of America survey showed it was the one investment category that both young and old preferred. While younger people, especially millennials, face challenges like rising interest rates and fewer houses available to buy, experts believe this is a temporary hurdle. An inheritance boom, known as the Great Wealth Transfer, is expected to help many millennials become homeowners. They may inherit property outright or receive funds to use for a down payment. This could allow them to buy their first home, upgrade to a larger one, or even purchase a second property.
Bottom Line
There’s a lot of talk about how younger investors are influencing the market with their interest in new asset classes. But even with this focus on variety, experts believe that core investing principles won’t be going anywhere. Financial advisor Carolyn Sanfilippo says younger investors will likely embrace a “proven formula” for building wealth, even if they prioritize sustainability and alternative investments at first. At the end of the day, building wealth often comes down to investing in stocks and bonds, and diversifying your portfolio to match your risk tolerance and long-term goals. This is true no matter your age.
Frequently Asked Question
Ques. Is my portfolio still well-diversified?
Ans. Ensure your inherited assets align with your existing stocks, bonds, and funds to maintain a balanced allocation suitable for your risk tolerance and time horizon. For expert guidance on asset allocation and diversification strategies, book a free consultation call with John Geantasio CPA LLC, specialists in wealth transfer and investment strategies.
Ques. 2. What are the tax implications?
Ans. Before making any decisions, it’s crucial to understand the tax implications of your inheritance. Consult with a tax professional to assess your options and optimize tax efficiency. Take the first step toward maximizing your inheritance by scheduling a complimentary consultation call with John Geantasio CPA LLC, renowned experts in tax planning and wealth management strategies
Ques. 3. Should I change my long-term plans?
Ans. With your newfound wealth, reassess your long-term financial goals and plans. Consider how the inheritance impacts your retirement timeline and future aspirations. For personalized advice tailored to your unique financial situation, schedule a free consultation call with John Geantasio CPA LLC. Their wealth transfer experts can help you align your plans with your newfound financial resources.
Ques 4. Can I do more for my favorite causes or my heirs?
Ans. Explore how your increased wealth can empower you to support charitable causes or provide for future generations. Whether it’s philanthropy or legacy planning, John Geantasio CPA LLC can assist you in developing effective strategies to make a lasting impact. Schedule a complimentary consultation call today to discover how their expertise in wealth transfer and charitable giving can help you achieve your goals.
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