Those in Generation X are poised to receive a large chunk of the wealth transfer over the coming years, finds an analysis released today by Hearts & Wallets.
“Portrait of U.S. Household Wealth 2024: Sizing the Growth Prospects for Older Households and Categories of Advice,” gathers data from the Federal Reserve Financial Accounts of the United States, U.S. Census Bureau population estimates, Survey of Consumer Finances (SCF), and the Hearts & Wallets Investor Quantitative Database.
It finds that within the next decade, the Silent Generation will decline by 7.4 million households, from 10.5 million to 3.1 million, as U.S. household growth among those over age 75 quickens. By 2033, 23 million households will be over the age of 75, an increase from 15.8 million today and 12.6 million in 2011. In just less than a decade, 12.8 million households will be over 80 years old, and 5.6 million will be age 85 or older.
As a result, most of the wealth transfer in the years ahead will be moved from the Silent Generation to Gen X, finds Hearts & Wallets.
“Silents and Gen X will be the most immediate opportunity in wealth transfer,” said Amber Katris, Hearts & Wallets subject matter expert. “With responsibility for funding retirements thrust onto individuals, wealth transfer has become a mass market problem that will be a major force throughout our society.”
Still, Millennials and Gen Zers can expect to see a sizable transfer in the decades following. According to the analysis, there are currently 21.2 million households between the ages of 65 to 74, up from 13.5 million in 2011, with these households powering the most assets out of any other age group, at $22.4 trillion.
While Millennials and Gen Zers are the largest household group, with 26.3 million households, their assets are just one-tenth of those by the have not yet grown as large as those of their older cohorts.
As markets rise, more households are falling into wealthier cohorts. Hearts & Wallets reports that in 2011, the top 2% of households started with a household income of $2 million. Today, the top 2% starts at $5 million.
With this growth, advisors will need to revise strategies with their older clients, while strategizing on how to gain exposure for lower-income groups, reports Hearts & Wallets. The research finds that customers say they only receive both advice and service in 45% of the relationships they have with their banks and brokerage and retirement firms.
Focusing on the 129 million U.S. households with less than $5 million and the $41 trillion they control, Hearts & Wallets believes the market for advice could expand for households and assets, as 46 million households and $11 trillion in investable assets are not covered by any combination of advice and service.
“Growing numbers of older households today means competitors should revisit earlier ‘retirement income’ ideas that were ahead of their time,” Laura Varas, Hearts & Wallets CEO and founder, said. “Wealth solutions will need to be improved for the increasing number of households with $5 million-plus. Definitions will need to be revisited for asset-based segments and minimum thresholds for products and services in light of asset appreciation. And firms will need to develop ways to help lower-asset households gain exposure to equity asset class.”
SEE ALSO:
- Gen Xers Nearing Retirement Report Median Savings of $50k
- Gen Xers Doubt Their Ability to Retire Securely
- Gen X More Concerned About Retirement Than Other Generations
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
