Baby Boomers between ages 60 and 78 control a massive $76 trillion in wealth. This makes them the wealthiest retiring generation in history but they aren't parting with their money as quickly as many predicted.
Economists are wondering why these retirees are holding onto their fortunes instead of spending them like earlier generations did.
Don't Miss:
- The average American couple has saved this much money for retirement — How do you compare?
- Miami is expected to take New York's place as the U.S. Financial Capital. Here's how you can invest in the city before that happens.
- Can you guess how many retire with a $5,000,000 nest egg? – How does it compare to the average?
A recent episode of The Economist podcast, "The Intelligence," explores this unexpected trend. Senior economics writer Colin Williams notes that the big mystery isn't why boomers are being thrifty but spending so little overall. This shift impacts everything from the housing market to how younger generations think about their financial future.
So, what's behind this conservative approach? A few factors seem to be at play.
First, COVID has left a lasting mark. Williams points out that many boomers adopted what he calls "hermit-like habits" during the pandemic and these tendencies have stuck around even after restrictions were lifted. It's almost as if they're building wealth by accident without trying to.
Second, boomers are living longer, which raises financial concerns. A report from Corebridge Financial found that while 54% of Americans expect to live to 100, only 27% believe their savings will last that long. Boomers are eyeing a long retirement and don't want to outlive their money.
Then, there's the question of legacy. Many boomers feel a sense of duty to leave something behind for their children and grandchildren. "There's a lot of competing demands for their money," says Williams. He adds that boomers are "pretty stingy" with their wealth, which will not change anytime soon.
Trending: Warren Buffett once said, "If you don't find a way to make money while you sleep, you will work until you die." These high-yield real estate notes that pay 7.5% – 9% make earning passive income easier than ever.
The economic ripples from this trend are wide-ranging, especially in the housing market. Boomers stay put and this "aging in place" contributes to the housing shortage. A Redfin study shows the U.S. is short by four to seven million homes and three-quarters of homeowners over 60 plan to stay in their homes. This only adds pressure for younger buyers.
For those in Gen Z or millennials lucky enough to buy a home, it's not exactly what their parents had. Boomers own 28% of large homes with three or more bedrooms, while only 0.3% of Gen Z families can say the same.
See Also: Can you guess how many Americans successfully retire with $1,000,000 saved? The percentage may shock you.
And what about the much-hyped Great Wealth Transfer? Cerulli Associates estimates that $53 trillion will pass down from boomers in the next decade. However, much of that wealth is concentrated in high-net-worth households. Plus, longer life spans and rising long-term care costs could eat into those inheritances, leaving less than younger generations hoped.
In the meantime, millennials and Gen Z are left to rethink their financial strategies, facing a future in which they may not receive the windfall they once anticipated.
Read Next:
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
