Featured Post from Retire with Equity

The Great Trillion Dollar Wealth Transfer

Boomers are sharing their wealth while they still have their health

Nov 28, 2024

6 min

Sue Pimento

Summary: Between now and 2026, over $1 Trillion of wealth will move from Canadian Baby Boomers to younger generations.  Dubbed the “Great Wealth Transfer,” this change is underscored by a cultural shift toward “giving while living,” where seniors are motivated to share their wealth during their lifetimes, driven by factors including personal satisfaction, rising costs for younger generations, and tax efficiency.  These shifts in wealth highlight the importance of open, informed  Intergenerational conversations and the need for trusted financial advice to manage this transfer effectively. However, it risks widening wealth gaps between the haves and have-nots. Better financial literacy, tax planning, and a better understanding of real estate’s role in estate planning and wealth management are essential for ensuring equity and sustainable financial legacies.


What it Means


• The Largest Transfer of Wealth Is Happening Now: Between now and 2026, over $1 Trillion of wealth will move across multiple generations from Canadian Baby Boomers to their GenX and Millennial heirs.


• A Culture Shift is Happening: Older Canadians are now, more than ever, “giving while living.”  They actively want to share their wealth with younger family members while still healthy.  In many families going forward, you won't hear that familiar phrase, "Hey Gram, Stop Spending My Inheritance!"


• We aren't fully prepared for this shift: Families need informed, intergenerational conversations among themselves and with trusted financial advisors. They also need to better understand how some of their more significant assets, such as real estate, can provide tax-efficient ways to unlock and share wealth with younger family members.


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Boomers are sharing their wealth while they still have their health.


Many Canadians have joined the growing trend of “giving while living.” This trend is not only changing societal norms but is also spreading like wildfire. The current economic climate, with out-of-reach housing prices coupled with Boomers wanting to witness the impact of their financial gifts, makes for a perfect storm. This storm, valued at 1 trillion dollars, could rebalance the distribution of wealth for many fortunate beneficiaries.


Let’s explore what is motivating the Baby Boom generation in Canada to leave a living inheritance to a younger generation:


1. Psychological Reasons:  Many seniors want to help their children or grandchildren with significant expenses such as education or home purchases. This provides a gratifying sense of pride. The logic is that they (children or grandchildren) will eventually get their money, so why not give it to them now when they need it the most?


2. Economic Reasons: Some parents or grandparents feel compelled to step in and help financially as they see their adult children and grandkids struggling.  It may be to help fund education or to pay off debt such as a student loan.  The burden of debt often delays other decisions, such as having children, traveling, or saving for a down payment on a first home or a bigger home to accommodate a larger family. And the price of homes today is well beyond the means of the younger generation, even without student debt. 


3. Personal Reasons: Older Canadians often find joy in seeing their financial contributions positively impact their loved ones during their lifetime. Sometimes, there are some less conspicuous motivators as well. Improving their children’s financial situation may entice them to have precious grandchildren, or providing financial assistance could allow the gift giver to have a say on how the money is spent—something they would have less control over if they were deceased.


4. Tax Savings: Distributing wealth while alive can reduce the size of an estate and minimize probate fees. And with the popularity of RESP's and TFSA's there are options to gift or contribute to these plans that may offer tax advantages. And some seniors aim to avoid conflicts by distributing assets directly, ensuring clarity and fairness.


5. Cultural Reasons: Traditional notions of inheritance and family values are evolving. Many Baby Boomers see their wealth as a tool to uplift and empower their families while they are alive and are able to counsel their families on preserving and spending the money wisely. This is an opportunity for seniors to create a legacy while alive. Sharing wealth can bring a sense of purpose, gratitude, and connection. For many, it’s an opportunity to strengthen family bonds and pass on values like generosity, financial literacy, and responsibility.


Impact


• A Wider Wealth Gap: This transfer of wealth could have a significant impact by increasing the income disparities between the haves and have-nots. According to figures from the Canadian Professional Accountants Association, at the end of 2022, the wealthiest families in Canada (the top 20 percent) accounted for two-thirds of the country’s net worth, while the bottom 40 percent accounted for just 2.6 percent. In this latest economic cycle of soaring inflation and growing credit card debt, the net worth of Canada’s least wealthy households is suffering. And while we’ve seen recent increases in capital gains taxes, more changes from the federal government will likely be required to bridge this wealth divide.


• The Need for Honest Intergenerational Conversations. Let’s face it: having a transparent conversation with family members about death and money is awkward. But post-pandemic, we’re seeing more seniors looking closely at their financial and estate plans to see what they can do to pass on wealth to deserving and often younger family members. Getting to know the impact of one’s gifts has its practical advantages in addition to the karma generated. Whether it’s to help a family member buy their first home, pay down college debt or start a business, these gestures can be transformative for other family members and very satisfying for seniors. As the saying goes, "you can’t take it with you."


• The Need for Trusted Advisors. For many of these younger beneficiaries lucky to receive this generational transfer, having a clear financial plan that extends to informed tax strategies will be vital. The entire community, from financial planners to accountants, lawyers and mortgage brokers, have a lot of work ahead of them, according to the research. A recent Ipsos Reid study suggests Canadians are primarily unprepared to manage their inherited money. The Ipsos poll (conducted on behalf of RBC Insurance) reveals that 61 percent of Canadians don’t feel knowledgeable about (or haven’t even heard of) the probate process or the process to establish the validity of a will, and 57 percent don’t know that specific insurance policies can mitigate estate tax burden.


• Improved Financial Literary for All Ages. Conversations about money also need to extend to better discussions about how significant assets such as real estate holdings contribute to wealth. For instance, given a considerable proportion of many family estates are related to real estate and more seniors are looking to “Age in Place” at home, seniors and their adult children must understand various financial strategies, such as equity lending, that can give seniors the financial freedom to age in place while giving them the cashflow to help younger family members while reducing potential tax burdens.


Getting to know the impact of one’s gifts has its practical advantages in addition to the karma generated. Whether it’s to help a family member buy their first home, pay down college debt or start a business, these gestures can be transformative for other family members and very satisfying for seniors. As the saying goes, "you can’t take it with you."



The Bottom Line


One thing is certain. This is an infrequent event, which, over the next few years, will benefit many. Much is on the line for families, the financial industry, and our government. We should expect to see more discussions on tax reform and addressing wealth disparities to ensure social stability and economic growth. And it will require the financial industry to adapt in a number of ways.  For instance, how should we account for these demographic shifts and potentially longer lifespans in our guidelines and how we work with clients? I also hope we see more open and honest discussions about family legacy and financial literacy/education, which play a significant role in preparing the next generation to handle inherited wealth responsibly.


As I continue research for my upcoming book, I'm looking closer at demographic trends, gaps in financial literacy, to how our industry needs to work better with Seniors in a way that recognizes these emerging cultural and economic shifts. I'd like to know what you think.  Drop me a line in the comments, or reach out to me directly at our new website - www.retirewithequity.ca

  

Don't Retire...Re-Wire!


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Sue Pimento

Sue Pimento

Founder | CEO

Focused on financial literacy and retirement strategies. Authoring new book on home equity strategies to help seniors find financial freedom

Pension ReformInterest RatesHome EquityMortgagesReverse Mortgages

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Unfortunately, this can lead to financially irrational and highly risk-averse behaviors, such as eating cat food while having six figures in a TFSA. The Neuroscience of Spending Fear Add a little neuroscience, and the story deepens. As we age, changes in the brain, particularly in the prefrontal cortex, can affect how we assess risk and manage uncertainty. This can lead to: • Increased loss aversion: We more acutely feel the pain of spending or loss. • Decision paralysis: We delay or avoid withdrawals, even when reasonable. • Heightened anxiety about the future: We fear running out more than we enjoy spending in the present. This Fear of Running Out (FORO), which I’ve written about in a previous post, keeps many retirees in a defensive crouch, emotionally hoarding their savings rather than using them to enrich the years they worked so hard to reach. It’s no wonder money stress impacts us so deeply—our brains are wired that way. From an evolutionary perspective, our minds are designed to fear scarcity because running out of resources once posed a real danger. When we perceive that threat today, whether it’s a dip in our investments or rising grocery bills, our brain shifts into fight-or-flight mode and begins releasing cortisol—the stress hormone that heightens our anxiety. Then our amygdala, that little alarm system in our brain designed to protect us from danger, can’t differentiate between a financial crisis and a sabre-toothed tiger. So, it reacts similarly, nudging us toward quick, often irrational decisions. Sometimes that means freezing and doing nothing; other times, it leads to panicking and regretful choices.  Understanding how our brains function under financial stress allows us to step back, breathe, and make better, calmer decisions—ones that serve us, not scare us. Retirement can be wonderfully freeing—no more commutes, no more meetings—but let’s be honest: it also comes with a significant shift in financial responsibility. Without that steady paycheck, it’s completely normal to feel uneasy about how you'll manage your money, especially when unexpected expenses arise. Sure, there are mindset tools and mental prep strategies that can help ease that existential “What now?” feeling before retirement. But let’s be specific—here are the real, concrete financial stressors that keep many retirees awake at night: • Not Enough Income: One of the biggest fears? Your savings won’t stretch far enough to support the life you want—or handle surprises. • Healthcare Costs: As we age, medical expenses climb. It’s not just the big stuff, either. Even prescriptions and dental bills can blow a hole in your budget. • Market Ups and Downs: A stock market dip can uniquely affect retirees. Observing your investments fluctuate can cause genuine anxiety regarding your income, especially in today’s “trade war” environment. • Inflation: We all feel it. The gradual rise of higher prices erodes your purchasing power, making that carefully saved nest egg feel less secure. • Living Longer Than Planned: It's both a blessing and a challenge. If you're healthy and living well into your 90s (and many do), the big question becomes: will your money last as long as you do? Here’s the good news: when you acknowledge these risks and build a plan around them, you exchange fear for control. And with power comes clarity, confidence, and significantly less stress. That’s when you can truly enjoy retirement—on your terms. How to Flip the Script: Make Savings Feel Like Income So, how can retirees overcome this psychological hurdle? Here are 3 powerful strategies: 1. Create Artificial Income Streams Turn a portion of your savings into predictable, automatic income. This could mean: • Setting up regular monthly withdrawals from an RRIF • Purchasing an annuity • Utilizing a bucket strategy, in which one portion of savings is maintained in a cash-like account to replicate a paycheck When money shows up like a salary, you’re more likely to feel permission to spend it. 2. Use Home Equity as a Back-Up Income Source A secured line of credit (HELOC) or a reverse mortgage can serve as a “Plan B” or income buffer. Knowing that the funds are available can alleviate anxiety, whether you use them or not. 3. Involve Family in Income Planning Sometimes, the best way to reframe a spending decision is through conversation. Adult children or trusted advisors can help develop a spending strategy that feels both secure and reasonable. Families can be invaluable in helping you design: • Emergency funding plans for unexpected expenses like healthcare • Gifting strategies (Want to help the kids or grandkids? Do it while you’re alive to see the joy!) • Income simulations replacing a regular paycheck Open conversations can also help uncover mismatched expectations. For instance, some older adults worry that spending their savings will leave less of an inheritance for their children, which might cause disappointment. But in many cases, their children would much rather see their parents use that money to care for themselves and enjoy their retirement years. The great irony of retirement? The hardest part isn’t building wealth; it’s allowing yourself to enjoy it. So, let’s retire the notion that frugality is forever. Replace the guilt of spending with the confidence of an income strategy. And if you're facing your savings with trepidation, remember: cat food may be a pantry staple for your pet, but it’s no reward for 40 years of hard work. Retirement isn't merely a financial phase—it’s a shift in mindset. That shift begins when we stop hoarding and start living.

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