Silver Tsunami Of Aging Boomers To Trigger Transfer Of $17 Trillion In Home Equity Wealth

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.

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While most boomers do not rely solely on home equity for retirement funding, they recognize its value as a financial cushion. Only 9% of surveyed boomers plan to tap into their home equity or use a reverse mortgage. Their primary sources of retirement income are expected to be savings, pensions and Social Security.

The upcoming wealth transfer presents a significant opportunity for millennials. With the current housing market characterized by high mortgage rates and home prices, inheriting a property can provide a substantial advantage.

Freddie Mac is working to support homeowners by offering resources such as specialized mortgages, which can help homeowners with renovations or creating ADUs. ADUs can provide a source of income while allowing boomers to age in place, enhancing their financial security and independence.

Wondering if your investments can get you to a $5,000,000 nest egg? Speak to a financial advisor today. SmartAsset’s free tool matches you up with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.

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