Is it a great wealth transfer or retirement savings crisis? Expert says it can be both.

• Despite the impending transfer of an estimated $84 trillion from older to younger generations, many Americans express concern about achieving financial security in their golden years.
• The retirement savings crisis has been discussed alongside the wealth transfer due to wealth inequality.

Retirees, like other consumers, may feel as though they belong to distinct economic groups in the United States.

While research shows an $84 trillion wealth transfer from older to younger generations through 2045, experts warn of a retirement savings crisis for those who have not saved enough for their golden years.

Cerulli's senior analyst, Chayce Horton, claims that both dynamics are in action.

Horton stated that the wealth transfer will occur on a limited scale.

He stated that a substantial amount of wealth has been generated, and this wealth is currently held by a smaller and older group of individuals compared to the past.

Who stands to benefit from the great wealth transfer

High-net-worth and ultra-high-net-worth households will account for 42% of the total volume of transfers, which is estimated to be $35.8 trillion, according to Cerulli in 2022. These households represent only 1.5% of all households.

Households with a net worth of $5 million or more are considered high-net-worth, while those with a net worth of $10 million or more are classified as ultra-high-net-worth.

Social Security's funds are at risk of insolvency, so it's important to keep an eye on this development. Warren Buffett's wealth was primarily accumulated after the age of 65. There is a potential change coming to the advice given about 401(k) rollovers.

Younger generations may not inherit assets as quickly, but they have an advantage in education and purchasing a home, according to Horton.

Who may struggle in retirement

The cost of covering retirement has increased due to inflation, making health and long-term care expenses more expensive. According to Fidelity's 2023 estimate, a 65-year-old single individual would need approximately $157,700 to cover health-care costs in retirement, while an average 65-year-old retired couple would require about $315,000.

Horton stated that the costs have significantly increased, causing many people to die without leaving anything behind.

Low retirement balances and high costs have led some to claim a retirement savings crisis is imminent.

In a recent survey by the National Institute on Retirement Security, 79% of Americans said there is a retirement crisis, an increase from 67% in 2020. Additionally, more than half (55%) of respondents expressed concern about their financial security in retirement.

In the first quarter, the average overall 401(k) balance was $125,900, and the record total savings rate was 14.2% including employee and employer contributions, according to Fidelity Investments.

Approximately half of Americans lack access to workplace retirement savings accounts, despite the existence of certain numbers.

Professor Teresa Ghilarducci of The New School for Social Research suggested that mandatory savings plans that require participation from all individuals may be the solution to force everyone to save, in a Thursday interview on CNBC's "Squawk Box."

"According to Ghilarducci, author of "Work, Retire, Repeat: The Uncertainty of Retirement in the New Economy," the most significant financial force in our markets is the power of compound interest."

The only way for individuals to have sufficient savings at the end of their working lives to supplement their Social Security is by enrolling in a pension plan early on.

According to Ed Murphy, president and CEO of financial services provider Empower, data indicates that a forced savings approach is effective. Specifically, for individuals earning between $35,000 and $50,000 who lack a workplace retirement savings plan, they are unlikely to save anything.

He stated that up to 90% of cohort members will save through workplace savings via payroll deduction.

""The most effective way to get people to save is through the workplace, as Murphy stated," said Murphy."