Will millennials benefit from the largest wealth transfer in history?

Millennials have had bad economic luck for most of their adult lives. But this bad luck might be, for better or worse, about to change.

I’m on the cusp of being a millennial. The official definition seems to mean born in 1981 or later, and as I was technically alive during the Carter administration, I guess that means I’m more Gen X.

Though sometimes I think that what keeps me out of the millennial category is that I own a home. And I’ve always had a sneaking suspicion that if I’d been born only a few years later, my economic outcomes wouldn’t have been nearly as rosy.

The combination of wealth inequality and rising costs of housing and education mean that you cannot compare the life of a Baby Boomer with someone growing up thirty years later. I tried it, and the differences are stark.

So millennials (and presumably, Generation Z, who probably feel even more screwed) by and large don’t believe that home ownership, and wealth-building that goes along with it, is attainable for them.

But what if the demographic trends that have been keeping millennials down might also, eventually, be their savior? Some recent research has me wondering that.

Millennials’ endless bad luck

A recent article in Fortune magazine (paywalled unfortunately) talked over the plight of millennials and home ownership.

As if the prices of homes hadn’t risen so much relative to incomes, apparently millennials, who are in peak home-buying years now, have encountered an increasingly large contingent of competition.

And who is competing with them for those hard-to-afford homes? The baby boomers.

“‘In today’s housing market,’ Wolf tells Fortune, ‘there’s a big overlap between select baby boomers and select millennials.'” […] Essentially, the former group is looking for their retirement home and the latter is looking for their starter home.”

Whoops. And what’s worse:

“‘The key difference here is that the baby boomer will likely be able to tap home equity by selling their existing home, allowing them to perhaps make a more compelling offer on the home compared to the millennials…'”

Well that’s just garbage if you ask me. If it’s true, then millennials really are getting the short end of the economic stick.

Good (if macabre) luck on the horizon?

So much of the 20th century, and even the 21st century, seems to have been dominated by the baby boomers, their lives, their needs, their wealth, their intransigence, and inability to pass the baton to anyone else (such as in the case of home ownership).

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But, not to get dark, but the baby boomers aren’t going to live forever.

And when that happens, we could be witnessing one of the biggest mass wealth transfers in history.

Because, unless the Boomers all listen to Tom Selleck and take out reverse-mortgages, there’s a lot of wealth in that generation.

And where is that wealth likely to go? To their heirs, the millennials.

A graphic makes this clear. The economics writer Noah Smith, in response to a chart showing how millennial wealth is actually not too different from previous generations, says:

Also, the Millennials are going to see their wealth explode up off of this path in their 50s when their parents start dying and leaving them a bunch of real estate. But that is also not a great way of structuring wealth distribution in a society.

A New York Times article also shows the amount of wealth projected to be inherited by each generation, and for millennials, it’s off the charts.

One noted that it “seems bleak” to live in a country where “it’s just 85 year olds handing over all the money to 55-year olds.”

And it’s hard to argue with that. It seems terribly unfair that the only way that many people will stabilize their financial lives is by waiting for their parents to die.

And it’s doubly unfair that not everyone is going to get this wealth transfer equally. For example, I wouldn’t be surprised if the boomers spent all their money instead of handing it down. And not every boomer will even have money to be inherited.

In short, something is very wrong here. And whether that is because of one-time forces (demographics, mid-20th century prosperity, etc.) or if we really are going to be reaching a phase where few truly get ahead until they inherit money, it’s hard to say.

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But hey, this means that millennials might actually catch a break, if they can hold out long enough.

Don’t wait around

While home ownership for millennials is increasing, albeit slowly, many have simply opted-out, believing that the train has left the station, and that it’s too late.

I can understand this pessimism, though I don’t share it. I think home ownership is possible for millennials, and anyone else, but it probably won’t look like how our parents or grandparents did it. Think smaller, cheaper, less central, and less like a single-family home in the nice suburbs here.

But I also want to point out that you can become wealthy without owning a home.

Either way, there’s no benefit in giving up the dream of financial wellness. Don’t sit around and wait. You can do this.

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