The last days of December lend themselves to reflection on the year that is almost over and consideration of what we expect from the year to come. Sometimes, we may look even farther ahead in hopes of predicting and preparing for future challenges and opportunities. For example, in the coming decades, baby boomers (comprised of over 76 million individuals born between 1946 and 1964) are expected to pass along trillions of dollars to the next generations. This event, referred to as “The Great Wealth Transfer,” should reach an estimated $72 trillion by 2045. With the oldest baby boomers already 77 years old (a year older than what the CDC lists as the average American lifespan), this significant demographic shift will have a monumental impact on the landscape of philanthropy.
Nonprofits are predicted to be major recipients of these transferred assets, and this philanthropic windfall can have a huge impact on your organization. As nonprofit leaders, preparing for the following anticipated changes is pivotal to supporting your organization’s mission and success.
We are entering the “golden age of philanthropy.”
Cerulli Associates estimates donors will give $11.9 trillion to nonprofits between now and 2045. Because planned giving takes time to cultivate, the earlier you can start making connections, the better positioned your organization will be in managing this influx of gifts. Forming relationships now and taking the time to ensure your organization is ready to receive gifts will set you up for success in the coming years.
Younger donors with newfound wealth are going to be the philanthropic powerhouses.
There are over 600,000 millennial millionaires today, and by 2030, millennials will have five times the wealth they have today. The good news about this wealthy younger generation is that they are eager to make a difference, want to engage with charities, and tend to be incredibly generous—84% give to charity and 70% volunteer.
The next generations want a stronger connection with your organization.
Millennials are more inclined to donate their money when they feel invested in an organization. In fact, 90% of millennials reported that they would only give to a nonprofit when they connect with the organization’s mission. However, your organization must first gain their trust through transparency and communication about the nature of how you work and how you spend donated money. Once that trust is established, millennials are likely to be vocal about their passion for your organization (in person and online), which can result in a significant boost to your donor base.
Philanthropic legacy plans will be important to multiple generations during this wealth transition period.
Many baby boomers are entering a time when they want to cement their charitable legacy by finding ways to continue supporting your organization into the future, even beyond their own lifetimes. While there are many ways to leave a legacy, donor-advised funds (DAFs) have emerged as a popular method of giving that can include the whole family and appeal to multiple generations—especially as they offer the ability to name multiple advisors or pass funds at death to heirs or to named charities. DAFs also offer tax advantages—the donation qualifies for an immediate tax deduction (beneficial during high-income years), and a gift of appreciated stock or other appreciated assets can minimize or bypass the capital gains tax.
By grasping the magnitude of the coming historic wealth transfer and how it is likely to impact philanthropy, your organization can prepare for the generational shift in donors and their changing giving patterns. Adapting to these developments will yield valuable results.
