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A majority of millennial millionaires (55%) say they are planning to sell stocks in 2022 because of potential tax changes, according to the recent CNBC Millionaire Survey.
Ninety percent of millennial millionaires say they anticipate taking some sort of action in regards to their finances in the year ahead as a result of potential tax changes, according to the survey, which polls investors with investible assets of $1 million or more, not including primary residences.
That differs widely from the older generational millionaires surveyed in the poll. In comparison, 54% of Gen X millionaires say they plan to make a change, while just 29% and 38% of baby boomers and those from the World War II generation said they plan to, respectively.
Millennials are also more likely than older millionaires to say they will change estate plans (35%), sell real estate (26%), or make large gifts or donations (23%) for tax reasons, according to the survey. Just about one-quarter (23%) also indicated they may sell additional forms of assets beyond stocks and real estate as part of tax planning.
While President Joe Biden’s Build Back Better Act contemplates significant changes to the tax code, the House version that passed in November pulled back on some of the tax moves with major implications for personal finances. Democrats then failed to pass the bill in the Senate before year-end. Tax changes to help cut the annual deficit or cover the costs for new programs could back on the table next year, but the legislative outlook remains uncertain into 2022.
Concentration of millennial wealth
Part of the difference in outlook among the generations likely comes down to how they achieved their millionaire status and the potential for that to be heavily invested in one area, said Blair duQuesnay, an investment advisor at Ritholtz Wealth Management.
“A lot of millennial millionaires have concentrated positions in company stock,” duQuesnay said. “That may be companies that they work for that have remained private so they’re probably just starting to have liquidity; the other route that’s common for millennials is cryptocurrency … there are also millennials who simply put it all on Tesla and had just held and held and held.”
Those that followed these strategies likely saw it pay off in 2021.
There was a record surge in market debuts this year in the U.S., with 416 IPOs raising around $156 billion and funding to private companies continues to flow and support higher valuations.
Eighty-three percent of millennial millionaires said they own cryptocurrencies, with more than half (53%) having at least 50% of their wealth in crypto.
Elon Musk faced his own challenges of having a deep investment in Tesla and the tax challenges, as a result, selling a total of $9.85 billion in Tesla stock in November.
“Maybe now they’re a bit older; maybe they’re realizing they want to do other things with those gains, so they’re contemplating changes,” duQuesnay said. “I really think it comes down not to necessarily the risk tolerance of millions of millennials, but simply as a feature of how they made their wealth.”
For older generations, it’s more likely that they already have a more balanced portfolio that wouldn’t necessitate any …….