The markets may be down, but the largest intergenerational wealth transfer in history is still coming to town. We released our report "Millionaires and the Millennium" in October 1999, documenting an intergenerational wealth tranfer of at least $41 trillion over the next five decades, of which at least $6 trillion would go to charity. Three years and much market turbulence later, we are confident in saying that the $41 trillion figure is still a reasonable lower estimate and does not need to be revised downwards. View the press release

Our new report, "Why the $41 Trillion Wealth Transfer Estimate: A Review of Challenges and Questions," responds to many of the questions and challenges we have fielded over the past two years. Our principle conclusion remains that it is not whether $41 trillion will be transferred, but how much more than $41 trillion will be transferred.

Since it was your thoughtful and thought-provoking questions and comments which sparked this review, we would love to hear from you. Some of the main points are summarized below and the complete report can be downloaded from our website.

Comments: The $41 trillion wealth transfer estimate assumes only a 2% secular real rate of growth in the $32 trillion of personally held wealth in 1998 rather than the high rates of growth in personally held wealth attained in the late 1990s. Even if recessions are more common than expansions during the 55 years spanned by the simulation, the $41 trillion estimate, which assumes only a 2% secular trend in the growth of personally held wealth, is based on growth rates below historic secular trends.

Comments: Like the secular growth rates, the $32 trillion baseline estimate of personally owned wealth used in the original report is a conservative, low estimate. It compares with the estimates released in 2001 by Federal Reserve Flow of Funds Accounts implying that total household wealth amounted to at least $32 trillion in 1998. Although household wealth surpassed $32 trillion after 1998, reaching a peak of about $36 trillion in 1999, it returned in the second quarter of 2002 to its 1998 level of $32 trillion (1998 dollars). Therefore, were the wealth transfer estimates based on the current level of household wealth instead of the 1998 value, they would remain unchanged. Specifically, the low-growth scenario would still produce an estimate of $41 trillion.

Read the section of the report on the value of individual wealth

Download complete report

Comments: Most American families do begin to spend down their assets when they reach retirement and most non-wealthy families continue to spend down their assets thereafter. However, for most wealthy families, a brief period of spending down their assets at retirement age is followed by a growth of assets in their later years that exceeds their dissaving (drawing down of assets). The low-growth scenario assumes that both wealthy and non-wealthy Americans consume their assets during retirement faster than in reality, thus allowing for retired American parents to spend an even larger amount of "their children's inheritance" without reducing the $41 trillion estimate.

Comments: Not counting the effect of greater labor force participation among older workers, the net effect of an additional year of life for all Americans would be to decrease the $41 trillion estimate, but to decrease it by less than $0.3 trillion. For all retirees regardless of wealth, the final estates of those that remain in the labor force will have a larger value than the estates of those who do not work during retirement years. Thus, when coupled with increased labor force participation among older workers, an additional year of life for all Americans could actually increase the $41 trillion estimate by a small amount.

Comments: If the $41 trillion estimate does not take into account the reduction in wealth due to increased amounts of annuities, it will over-estimate the coming wealth transfer. We conclude that on balance the $41 trillion estimate is not compromised by the current level and trends in annuitization, or by the way the current simulation model takes them into account. If anything, the growth in defined-contribution pensions, the tendency to receive distributions from defined-contribution plans as assets, and the tendency to spend from such assets at a lower rate than had the pension been received as annuity income, combine to make it likely that more than $41 trillion will be transferred.

In addition, we consider the effect that a shift toward more lifetime giving would have on the transfer from estates.