The total amount of wealth in the U.S. is around $156 trillion, roughly half of which comes from the Baby Boomers — that is, anyone born between 1946 and 1964. From now until 2045, Baby Boomers and the Silent Generation will pass down a total of $72.6 trillion in assets to their heirs in what’s known as the Great Wealth Transfer.
Over the course of history, the way people have built wealth has changed. For the Boomers, their primary investment vehicles lie in real estate, pensions, and equities and mutual funds. And while younger generations, like Millennials, also tend to invest in similar things, certain types of investment opportunities either no longer exist or are less lucrative than they used to be.
This isn’t too surprising. After all, housing prices were much more affordable when the Boomers were younger and looking into purchasing real estate. Older generations also tended to have a lot less student debt than they do now. These and other related economic factors have caused significant differences in how people used to build their wealth and how they do it now.
With that being said, here are some of the top ways Boomers accumulated wealth that no longer exist in the way they did before.
Real estate, especially commercial real estate, has long been considered a lucrative investment opportunity. But with rising housing prices and mortgage interest rates, it’s a lot less affordable for the average person to purchase property and turn it into an income-producing investment.
“It may sound odd, but we may find that in the end Boomers had an opportunity to build wealth through real estate that is not realistic now,” said Jay Zigmont, PhD, CFP®, Founder of Childfree Wealth. “While many people still plan on real estate being a cornerstone of their finances, housing prices are higher than ever when compared to incomes. The days of being able to buy a house on a single income and pay it off before retirement may be long gone.”
“Boomers often bought homes at a fraction of today’s prices and witnessed substantial appreciation over decades,” Kovar said. “While real estate can still be a good investment, the rapid appreciation seen in the past is not guaranteed, and in many markets, homes have become prohibitively expensive for first-time buyers.”
A pension plan is a type of defined benefit plan designed to provide eligible employees with retirement income once they leave the workforce. Unlike with a 401(k), the employer manages the investment risk with a pension plan rather than the employee. For a set period of time, the employer also contributes a specific amount to the plan. Once the employee retires, they then receive a predetermined amount for the rest of their life.
Pension plans are less common than they used to be. These plans make up around $16 trillion of Boomers’ total assets vs. just $2.5 trillion of Millennials’.
“Many Baby Boomers had access to defined benefit pension plans, which guaranteed a specific monthly income in retirement based on salary and years of service,” said Kovar. “These plans have largely been replaced by defined contribution plans, like 401(k)s, where the burden is on the individual to contribute and manage their retirement savings.”
Savings Accounts and CDs
While people still keep their money in savings accounts and certificates of deposit (CDs), these options don’t generate nearly as much money as they once did.
“In the late 1970s and early 1980s, interest rates were sky-high,” said Kovar. “Boomers could generate significant income from simple savings accounts or CDs, with interest rates often in the double digits. Today’s interest rates are much lower, making it harder to earn passive income this way.”
Life Insurance Policies
Life insurance is a type of contract between an individual — that is, the policy holder — and an insurance company.
There are many types of life insurance plans, but the way they work is relatively simple. The individual pays a monthly premium to their plan for a set amount of time, or until they pass away. Upon their passing, the company pays out a lump sum of money to the policy holder’s beneficiaries.
“Life insurance has long served as a means to protect loved ones in the event of one’s passing and to facilitate multigenerational wealth transfer,” said Hoang Anh Le, CPA, Financial Educator, Life Insurance Advisor and Founder at Luxury under Budget.
While life insurance is still a viable way to build wealth for the next generation, many younger people don’t take advantage of it. But life insurance has transformed in such a way that it could actually be worth looking into — even for younger generations.
“With the introduction of living benefits, policyholders now have the unique opportunity to leverage their death benefits while still alive. This transformative feature not only safeguards against unexpected health challenges but also empowers individuals to proactively manage their financial well-being and secure retirement,” said Hoang Anh Le.
While the stock market still exists, the way people use it to build wealth has changed significantly. It’s also become more volatile than it once was.
“Boomers had the opportunity to invest in the stock market during significant growth periods, especially in the 1980s and 1990s,” said Kovar. “While the stock market remains a viable wealth-building tool, it’s more unstable, and the same consistent upward trajectory of the past is not a given.”
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