Posts

The Greatest Wealth Transfer

avatar of @ga38jem
25
@ga38jem
·
·
0 views
·
4 min read

I saw this headline in the past couple weeks a lot: “The Greatest Wealth Transfer In History Incoming”. This got me very interested in this topic and I wanted to learn more about that as it sounds very catchy and is probably something worth learning of. In general the whole topic of the wealth transfer talks about the generational wealth and how it is transferred over generations and what mechanisms there are. That is why in this article I want to talk about this Wealth Transfer and want to summarize what I was able to find out about this.

What Is Wealth Transfer?

Lets start with the question of what wealth transfer actually is. Generally speaking, it can be considered the transfer of goods and assets from generation to generation. Currently, the biggest chunk of money is hold by the older generation and with these people getting older the wealth is slowly being transferred downwards to the younger people. Because this process is happening more or less in a cycle manner people came up with a name for it and it is called the wealth transfer.

Currently, the wealthiest generations are the baby boomer who were born between 146 and 1964 and the transfer is supposed to happen to the generation of millennials which are born between 1981 and 1996. Now, I did not make these numbers but it is safe to say that not every person can be considered as one generation so take these years as a rough estimate. Also, I don’t think that this transfer will happen over night and not the 100% will go to the generation of the millennials but a big portion will. If we compare baby boomers against millennials in the different asset classes we definitely can see a big gap between the generations. Real Estate is hold for 12.5% in the millennials hands and around 43.2% in the baby boomers’. When it comes to stocks the difference is amazingly big! 54.6% of the stocks is owned by the baby boomers while only 2.5% is hold by the millennials. Private businesses are 46.4% for the baby boomers and around 8.8% is hold by the millennials.

Now, it is also important to talk about debt if we are talking about wealth, so there come more numbers for you: Millennials and Baby Boomers both have about 27% real estate debt while the Generation X holds about 41.5 % of that debt. When it comes to consumer debt millennials own a 40.5% of all the debt while the baby boomer only have 22.3%.

How Will It Happen?

With all of these facts laid down, a lot of this data makes sense. Baby boomers had a lot more time to acquire wealth and pay off their debt. Millennials are just entering the “adult life” and have to make the decisions to buy a house or invest their money. Therefore, all of the above data makes sense. The real question is, who and how will the younger generations will inherit this wealth? First of all, the easiest way is to inherit the money from your family. All of the work that your ancestors are doing is flowing directly to its younger generation. What I s interesting here is that this wealth is gone after three generations in the most cases. This is an interesting fact but can be explained by following saying: “ Good men create good times, which creates bad men that create bad times.” This means that during bad times, people have to work very hard to get out of their misery. These people are able to build something which gives their children and grand children a very nice time. These good times make the third generation spoiled and in the worst cases these people are burning the money which results in bad times again. This theory can be used not only for families but for the whole world generations but this would go a little too far in this article.

But what about the other ways of inheriting? Well, the second way can be considered businesses. There is also a statistic that shows that most of the businesses are failing after the third generation. This can be explained with the same method as before but also because most of the time the founder of the business was the heart and soul of this business and once this person is not there anymore the business will start to run poorly. This makes room for new businesses which then can thrive and earn their fair share on the business market.

This brings me to the last and third way. Businesses not only fail because the founder is not there anymore but also because their business model is getting out of date. Maybe they produce a technology that nobody need anymore or they are just too inefficient. When this happens new creative and interesting businesses thrive and create new technologies. Now, this can not be applied only to technologies but to other assets as well which brings me to the most recent asset in human civilization: Cryptocurrency. On this note, the crypto market has currently a market capitalization of about 1.7 trillion dollars. In comparison to that: The stock market has a market cap of 94 trillion dollars. If we look at the trend of the crypto market it is clear that this asset is on the rise and a powerful vehicle to transfer wealth.

Published by ga38jem on LeoFinance|Steemit On 19th January 2022

Posted Using LeoFinance Beta