If you're considering the $80 trillion potential of the Great Wealth Transfer and pondering its impact on your personal finances, you're not alone. Governments are asking themselves the same question, according to UBS.
TL;DR
- Over $80 trillion in wealth transfer is expected in the next two decades, impacting personal finances and global economies.
- Governments may seek to mobilize this wealth to address national debt and fiscal imbalances.
- Women inheriting wealth are expected to invest differently, potentially lowering the cost of capital for long-term projects.
- The Trump administration proposed unique revenue-generating ideas like a "Gold Card" visa program to address U.S. debt.
The substantial amounts expected to be transferred through inheritance in the coming decades will significantly alter the financial circumstances of countless individuals. Furthermore, this wealth could potentially correct the fiscal paths of several leading global economies. UBS suggests these funds might be applied to address the financial imbalances in nations burdened by considerable unsustainable national debt.
Research indicates that within the next two to three decades, a significant amount, potentially up to $124 trillion will be passed down, will be transferred from older generations to younger ones. The baby boomer generation, defined as those born from 1946 to 1964, represents the most affluent generation ever. As these individuals pass away, substantial wealth will be directly inherited by Their Gen X, millennial, and Gen Z descendants, with some assets also going to surviving spouses.
UBS chief economist Paul Donovan anticipates governments will seek to join the ranks of beneficiaries. He stated: “Our UBS modeling indicates that during the coming two decades, more than $80 trillion in wealth is expected to transfer ownership.
“The change in wealth comes at a time when many governments around the world have high debt and deficits. It seems unrealistic to suppose that governments will just sit idly by as this wealth moves around. We would expect governments to attempt to mobilize that wealth to help fund their debt, but in doing so that denies private sector investment access to some of those funds.”
Indeed, a study from JPMorgan earlier this month found that women expecting to receive a spousal inheritance over the coming years—an anticipated $9 trillion—plan to invest it in the stock market. Part of the reason they’re comfortable investing the money is that they’re not reliant on it to achieve their financial goals, with three in four women saying they’re well on track to reach financial milestones without receiving any inheritance from family or spouses.
The very fact that women will have power over such sums has an impact on the real economy, added Donovan: “Women invest differently from men. On average, women tend to be much less emotional investors: They do more research, and when they do invest, they tend to stick to the investment over the longer term. That means that longer-term, more complicated real world investment projects may experience a lower cost of capital in the future, with women being the new owners of wealth.”
The national debt question
The U.S. Budget deficit, a significant concern for the global economy's largest player, has drawn considerable focus. Experts aren't as concerned with the sheer amount of national debt—which recently hit $38 trillion—as they are with the rapid increase in its associated borrowing expenses, given that spending shows no indication of abating.
Analysts are certain a critical point will arrive, at which time bond markets will cease purchasing U.S. Debt, deeming the current trajectory unsupportable, or the central bank will be compelled to implement quantitative easing, thereby devaluing the debt.
To balance their budgets, governments can employ various strategies, such as pursuing some of the assets involved in the Great Wealth Transfer. Economists have expressed both confusion and pleasant surprise regarding the proposals put forth by The Trump administration. One such idea, for instance, is Trump has touted a “Gold Card” plan,, a visa program that would require affluent immigrants to pay $5 million for a green card “plus a route to citizenship.”
“A million cards would be worth $5 trillion, and if you sell 10 million of the cards that’s a total of $50 trillion. Well, we have $35 trillion in debt, so that would be nice,” Trump said. He noted that he would have $15 trillion “left over” if he managed to sell 10 million cards, adding: “It may be earmarked for deficit reduction, but it actually could be more money than that.”
Foreign governments have not favored Trump's tariff proposals, but economists still approve of the “peculiar” approaches for boosting the U.S. Economy. Wharton professor Joao Gomes had previously informed Coins2Day that “You can also not deny that [Trump and his administration] bring strange forms of revenue that do change the debt picture.”.