Phyllis Shallman – COVID-19 and the Largest Wealth Transfer in History

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COVID-19 coincided with one of the most important events in modern times.

Millions of Baby Boomers were preparing for retirement and to pass their wealth to a new generation right as the virus and its fallout blindsided the world. Here are two ways that COVID-19 has transformed the largest wealth transfer in history and how this impacts you and your family.

The transfer has accelerated
COVID-19 seems to be more dangerous for people over the age of 65. Of the 231,197 mortalities recorded by the CDC, 183,324 have been 65+.¹ That’s nearly 80%!

Those numbers represent a staggering amount of tragedy on a personal level. But they also mean that the wealth transfer that’s been predicted for years is off to an early start. Money, resources, and assets that were supposed to last the 20 to 30 years of retirement for Baby Boomers are now being passed on to Gen-Xers and Millennials.

The transfer has been complicated
The simple fact of the matter is that 44% of Baby Boomers don’t have estate plans.² That means a potentially vast amount of wealth has wound up in the hands of grieving family members who have to make tough choices about how it’s distributed. There was never any doubt that the Great Wealth Transfer might get complicated. But the large number of transfers occurring earlier than expected and at the same time will mean that more families will need guidance and wisdom as they navigate these challenging times.

The transfer has been reduced
Perhaps the largest impact of COVID-19 will be a serious decrease in the size of the Great Wealth Transfer. Experts have estimated that around $68 trillion dollars would be transferred from retiring Baby Boomers to their children.³ But 2020 has been a year of economic upheaval. Shutdowns have transformed our economy and caused high unemployment among older workers. It’s not just employees: nearly 100,000 businesses have shuttered due to the lockdowns. That represents years of hard work suddenly evaporating.

People impacted by these events and who are also approaching retirement age have two choices. They can either work into their late 60s, 70s, and maybe 80s to generate a livable income, or settle for less from their retirement years. It seems reasonable to believe that: Fewer family businesses will pass down to younger generations The businesses will be worth less than anticipated Children of employees will have to financially support their aging parents Early retirees will have less to leave future generations

The future of the transfer
We still don’t fully understand the extent to which COVID-19 has impacted the Great Wealth Transfer. Only time will tell! But it’s clear that there’s a massive need to guide families through the challenges of estate planning in the midst of current events. There will also be a huge demand for opportunities and business models that allow Baby Boomers approaching retirement to build wealth and leave financial legacies. Let me know if either of those are of interest to you. We can discuss ways for you to start helping your family protect their financial future.

¹ “Weekly Updates by Select Demographic and Geographic Characteristics,” CDC, accessed Nov 25, 2020, https://www.cdc.gov/nchs/nvss/vsrr/covid_weekly/index.htm

² “Baby Boomers Aren’t Creating Estate Plans — What That Means for You,” Robert Kulas, Kulas Law Group, Apr 30, 2020, https://www.kulaslaw.com/baby-boomers-arent-creating-estate-plans-what-that-means-for-you/

³ “Here’s how to prepare your heirs for the $68 trillion ‘great wealth transfer,’” David Robinson, Feb 25, 2019, https://www.cnbc.com/2019/02/22/how-to-prepare-your-heirs-for-the-68-trillion-great-wealth-transfer.html

? “COVID-19 and retirement: Impact and policy responses,” Martin Neil Baily, Benjamin H. Harris, and Siddhi Doshi, Brookings, Jul 28, 2020, https://www.brookings.edu/research/covid-19-and-retirement-impact-and-policy-responses/

? “Yelp: Local Economic Impact Report,” Carl Bialik and Daniel Gole, Yelp, Sep 2020, https://www.yelpeconomicaverage.com/business-closures-update-sep-2020.html

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