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The silver tsunami - the aging of the baby boomer generation - is poised to trigger one of history's largest intergenerational wealth transfers.
As the youngest boomers reach 60 this year, a significant portion of their wealth, particularly home equity, will be passed down to their children.
A Freddie Mac survey confirms the trend, finding that three out of four boomer homeowners intend to bequeath their homes or the proceeds from their sale to their children.
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This generational wealth transfer is expected to be substantial and potentially impact the financial landscape for younger generations. As of mid-2024, baby boomers hold about $17 trillion in home equity, representing roughly half of the total homeowners' equity in the nation, according to Realtor.com.
This substantial wealth accumulation is primarily attributed to the significant appreciation of real estate values over the past decade.
Baby boomers in their 60s and 70s are approaching retirement age. Despite facing economic challenges like the Great Recession and the COVID-19 pandemic, many boomers remain optimistic about their financial future. Their optimism extends to their retirement plans, with 68% of boomer homeowners surveyed expressing confidence in having a comfortable retirement.
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While their confidence is lower than in previous years (76% in 2016, 81% in 2021), it still indicates a positive outlook for many.
Downsizing is an increasingly popular option for boomers. Two-thirds of those planning to move intend to downsize to smaller, more manageable homes with lower operating costs.
Many boomers plan to pass their home equity on to their children. Nearly 75% of surveyed boomers intend to leave their home or the proceeds from its sale to their children. This substantial wealth transfer will significantly impact the finances of younger generations.
Women are more likely than men to consider living with their children in their later years. About 40% of women surveyed expressed openness to this arrangement, compared to 25% of men. For those who prefer independent living, living closer to their children or on their property, potentially in an accessory dwelling unit (ADU), is another option.