Millennial inheritance to be reduced by debt, taxes, and personal spending

The anticipated large-scale transfer of wealth from the Baby Boomer generation will be significantly reduced before reaching heirs, according to a report by Visa Business and Economic Insights. Of the estimated $93 trillion Baby Boomers hold, only about $36 trillion is expected to be passed down to Gen X and millennial inheritors over the next two decades, averaging roughly $515,000 per household.

The substantial reduction in inheritable wealth is attributed to several factors, including approximately $4 trillion in debt, such as mortgages and credit card balances, substantial donations to charities, and the costs associated with retirement. The report notes that many older homeowners still carry mortgage debt, with figures showing 41% of those aged 65-79 and 31% of those 80 and older still paying off loans.

Furthermore, of the $36 trillion that does make it to the next generation, an estimated $28 trillion is likely to be put back into savings and investments, including property. This leaves approximately $8 trillion available for direct spending by inheritors.

This spendable portion is projected to be allocated across key areas such as housing purchases or down payments, vehicles, travel, and retail goods. Millennials, in particular, who tend to prioritize spending on leisure and travel, are expected to use their inheritance for similar purposes. The ultimate impact of this wealth transfer on future consumer and economic trends will depend on these spending and reinvestment patterns.