The Baby Boomer generation, a cohort often hailed with both admiration and controversy, has once more stirred the financial pot with their wealth secrets .
In this deep dive, we unravel how boomers amassed this wealth, explore their financial maneuvers, and consider how younger generations might navigate their own paths to prosperity.
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1. Boomers piled on $14 trillion of wealth
Since the close of 2019, boomers have added a staggering $14 trillion to their net worth, defying conventional retirement and wealth accumulation expectations.
At first glance, the notion of boomers accumulating such a monumental wealth surge might seem perplexing. After all, many are no longer part of the workforce, having gracefully transitioned into the realm of retirees. However, the numbers tell a compelling tale.
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2. Boomers hold 30% of the country's wealth
The aging boomer population, which constitutes 11% of the total population, has remarkably amassed a whopping 30% of the country's wealth.
This age demographic holds much of their wealth in their homes and retirement/investment accounts like 401ks, IRAs, brokerage accounts , etc.
3. The pandemic helped boomers build wealth
During the pandemic, the surge in home values and stock prices acted as a catalyst, favoring those with stakes in real estate and equity markets.
Since many boomers hold value in stocks and in their homes, they have increased their wealth significantly in the last couple of years without lifting a finger.
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4. Many boomers chose to stay in the workforce
Further, despite the conventional wisdom that pegs retirees as entirely disengaged from the labor force, a significant portion of individuals aged 70 and above is still clocking in.
The labor force participation rate for adults aged 65 and over, which touched a historic low of 10% in the mid-1980s, has nearly doubled. Even as the pandemic prompted early retirement , many in this age group opted to remain in the workforce.
5. Boomers' aggregate wealth has multiplied six-fold in 25 years
In 25 years, the aggregate wealth of those aged 70 and above has multiplied six-fold, reaching a staggering $43.3 billion. In contrast, the wealth of the under-55 demographic merely doubled during the same period.
The driving force behind this discrepancy is the pandemic-induced market surge and the strategic positioning of older Americans in the stock market. Since 2019, this demographic has collectively garnered around $5 trillion in equity gains.
As of the third quarter, nearly 38% of the nation's corporate equities and mutual fund shares were in the hands of individuals aged 70 and older, marking the highest share in data stretching back to 1989.
6. Not all boomers are thriving, some are living a harsh reality
The pandemic has heightened the rift between those who possessed assets like homes and stocks pre-pandemic and those who did not, widening the wealth inequality gap.
The Federal Reserve's data inadvertently masks the struggles of over 1 in 10 Americans over 65, grappling with poverty. The widening wealth gap is a poignant reminder that while some boomers are riding the crest of a financial wave, others are navigating stormy waters and looking for ways to get ahead financially.
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7. Other generations can still catch up and learn from boomers
For younger generations witnessing this wealth accumulation spectacle, lessons must be learned and strategies adopted. While it's tempting to attribute boomers' success solely to market timing and real estate, a nuanced approach is needed.
The changing nature of work, retirement, and the evolving economic landscape demands adaptability. Keep in mind these 5 principles that will help you catch up: Embrace Financial Literacy, Leverage Technology, Diversify Investments, Plan for Retirement Early, and Advocate for Economic Equality.
Bottom Line
The Baby Boomer wealth surge is a multifaceted story that extends beyond mere market gains. Perhaps the greatest financial lesson younger generations can take from the boomers is the importance of time in the market and smart investments .
Boomers invested young and stayed invested, which was a critical part of their success. As the old adage goes, time in the market is more important than timing the market, and boomers have shown us that investing early and staying the course pays off.
The advantage younger generations have is time, and they can use it to their advantage by investing as much as they can into their 401ks, IRAs, and the like and allowing the time they have ahead of them to work for them and their money.
Money tips that can work for everyone
No matter what your bank account balance is, there's always an opportunity to optimize and improve your finances. Here's a quick checklist of things you can look at today.
Focus on paying off your debt . Debt can hold you back from making progress with your overall financial well-being. Aside from cutting expenses, there are tools that can help you pay off debt faster like balance transfer credit cards and debt counseling.
Earning extra income can give you breathing room. If finances are tight, earning some extra money to supplement your income can make a huge difference. A new job is one option to consider, but if you're not ready to make a big change or already retired, a part-time side job could be a better choice.
Cut your expenses. It sounds painful and so not fun, but it doesn't have to be. Take a look at your biggest expenses because that's where you'll probably find the biggest savings. For example, auto insurance rates have been soaring so shopping around for a new insurance company can be the fastest way to cut your bill. Also, look for ways to cut your grocery bill (despite rising inflation).
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