Older Americans Have Accumulated A Record $35 Trillion, And Are Starting to Pass It Down
July 2, 2021
Older Americans have spent decades building their nest eggs, accumulating a massive stockpile of money. Americans over the age of 70 had a net worth of almost $35 trillion as of the end of the first quarter of 2020, according to data from the Federal Reserve. This accounts for 27% of all U.S. wealth, up from 20% in the 1990s. Today, the wealth held by Americans over the age of 70 is equal to 157% of U.S. GDP, more than double the proportion 30 years ago.
As these older Americans begin to pass on, the country will see the greatest transfer of wealth in history. Older generations are estimated to pass down $70 trillion between 2018 and 2042, according to research from Cerulli Associates. Of that $70 trillion, the bulk–$61 trillion–will go to their heirs, while the rest will be donated to philanthropic causes.
The great wealth transfer has, in many ways, already begun. The average inheritance in 2019 was $212,854, a 45% increase from the inflation-adjusted average of $146,844 in 1998, according to an analysis from Capital One.
Older Americans are increasingly not waiting until they pass to begin handing down their wealth. In 2016, the IRS reported that annual gifts totaled $75 billion, up from an inflation-adjusted $45 billion in 2010. This is likely a fraction of the total amount of gifting that occurs outside the tax system.
The wealth transfer is expected to unleash a torrent of economic activity, helping the older generation’s heirs buy homes, start businesses and make investments to secure their own nest eggs.