You may have heard of the “Great Transfer of Wealth.” That’s $72 trillion in assets that baby boomers are sitting on that will one day be passed on to millennials, solving the problems of many younger generations who are struggling financially. But over the past 40 years, there has been another, more “massive” transfer of wealth from the government to baby boomers, according to Bank of America Research.
The investment bank is not the only firm to reach this conclusion. Billionaire Ray Dalio, among others and former leader of the world’s largest hedge fund for many years, wrote on his LinkedIn page in August that “coordinated government action” had left households with flush balance sheets and the country Effectively bankrupt. . Dalio didn’t mention baby boomers or any generation by name, but Bank of America is doing a better job with him now.
The Bank of America team led by Ohsung Kwon wrote that baby boomers are undoubtedly the biggest beneficiaries of “massive wealth transfers,” echoing Dalio’s observation that government policies since the 1980s have seen trillions of Wealth flows from the public sector to the private sector. Is in the golden age of work. Bank of America notes that government debt has ballooned—from 31% of GDP to 120% over that period—while the 10-year Treasury yield has fallen from 12% to 4.6% today (actually 4.9% at press time). .
So how many trillions are there? According to calculations by Bank of America, the net worth of American households has soared from $17 trillion to $150 trillion during this period. Baby boomers and “traditionalists” together own two-thirds of total net worth ($146 trillion). Bank of America said this means government policies have resulted in $129 trillion in wealth being transferred into the pockets of baby boomers and older Americans (it did not specify the exact distribution of wealth between the two groups).
at the top of the ladder
More than a quarter of that wealth is in financial assets such as real estate. That’s not surprising considering that nearly all baby boomers are locked into low mortgage rates of 3%, while those poorer millennials are the only group to take on significant mortgage debt since 2021, with mortgage rates now at 8% % In the range. wealth It has been widely reported how Millennials have not enjoyed the success of Baby Boomers because they struggled to afford a home for years before facing an overpriced and ultra-competitive pandemic housing market.
Bank of America’s findings are further evidence that baby boomers are doing pretty well from a financial perspective.In addition to low interest rates and rising home prices pushing up asset values, 2020 Deutsche Bank Report Baby boomers spend less than millennials on education and don’t pay for the environmental damage caused by the carbon-emitting companies they invest in, the study found.
Although baby boomers still face considerable economic challenges, e.g. great inflation In the 1970s, U.S. banks found that, in the long run, they ultimately benefited from an economy that provided them with good conditions for building wealth.in a 2021 Memo to Customersbillionaire (and baby boomer) Howard Marks writes that this generation is so big that they still have enough political and financial power to advocate for a system that works for them, “Boomer consumption Already more than their fair share of the pie. This will saddle future generations with huge debts stemming from spending from which they do not benefit proportionately,” he wrote.
Of course, four of the past five presidents have been baby boomers, and Congress is largely made up of boomers, if not traditionalists like the recently deceased Dianne Feinstein, then some like Alexandria Ocasio-Co Cortez and millennial figures like Alexandria Ocasio-Cortez. Jon Ossoff Major exceptions. Sure, President Joe Biden is what Bank of America calls a traditionalist, but George W. Bush, Bill Clinton and even Barack Obama are technically baby boomers.
As Jill Filipovic, author of OK Boomer, Let’s Talk, says: tell salon In one interview, baby boomers climbed up the ladder and then “pulled the ladder behind them.” Millennials at the bottom of the pile (and 82% of Gen Z) believe they are dealing with financial hardship caused by their parents, according to a survey conducted by OnePoll on behalf of the National Debt Relief Organization.
at the bottom of the ladder
Faced with the high cost of a college education and the student debt that comes with it, many young people have entered a tricky post-recession job market looking for high-paying jobs after graduation. Many people are forced to take other jobs to make ends meet, but still do not see the fruits of their labor. Another report from Bank of America found that the extra income didn’t give them more spending power.
The picture of the real estate market is not optimistic either. While some Millennials have gained some ground and started house hunting, many have been pushed back to the last rung of the ladder when their bids were beaten by cash offers from Baby Boomers. This has resulted in many young people relying on their parents, who are more financially stable, to buy a home.No wonder most Millennials (and Gen Z) think the economy is damage their ability Financially independent as if they were left behind.
“Millennials, and now Generation Z, have grown up amid global financial turmoil,” said Suzanne Schmitt, director of financial health at New York Life. wealth. “Both groups have witnessed economic changes while growing up and may be more risk-averse in terms of financial habits than their predecessors.”
But there is a silver lining to another massive wealth transfer that has yet to be completed.This may make Millennials five times richer According to Coldwell Banker estimates, by 2030 this number will exceed that at the beginning of this century. Others are less optimistic.A survey from United Credit Union The study found that half of Millennials believe they inherited at least $350,000 from their parents, while half of Baby Boomers said they would give away less than $250,000. Savings are likely to decline further as Americans live longer and struggle to afford retirement in a time of inflation. Even with a large sum of money, many Millennials don’t feel equipped to handle it.
Well, this wealth transfer may not be as “great” as what baby boomers have already received, with Bank of America calling it downright “massive.” It probably won’t happen again anytime soon.
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