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How Baby Boomers Became the ‘Wealthiest Generation That Ever Lived’

- Rangely García for Money
Rangely García for Money

Despite railing against the trappings of mainstream capitalist America in the ‘60s and ‘70s, baby boomers went on to trade their bohemian headbands for suits, ties — and blossoming investment portfolios.

Boomers, which were born between 1946 and 1964, have now become the “wealthiest generation that has ever lived,” according to a new global wealth report from the financial firm Allianz. And it doesn’t look like subsequent generations are going to be able to dethrone them anytime soon.

How boomers got so rich, Allianz’s analysis shows, has less to do with financial prudence and more to do with the luck of the draw.

“A unique historical situation — strong economic growth, affordable housing markets and booming equity markets — allowed them to build up a handsome fortune,” Allianz researchers wrote.

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How are boomers so wealthy?

In the simplest terms, boomers have benefited the most from the economic gains of the past several decades while suffering the least from the financial crises — especially boomers who live in the U.S.

As of the end of June, American boomers had accumulated a staggering $80 trillion of wealth, according to Federal Reserve data. That’s more than half of all household wealth in the nation, despite boomers only making up about 20% of the U.S. population.

By comparison, Gen Xers (folks born between 1965 and 1980) held about $40 trillion. Millennials, born between 1981 and 1996, had around $15 trillion.

The lion’s share of boomer wealth comes from a trove of stock and real estate assets. In fact, the value of boomers’ stock portfolio alone — clocking in at $23 trillion — far exceeds the total wealth of all millennials.

The Allianz analysis suggests that this windfall mostly boils down to timing. The firm simulated how the wealth of different generations grew at vastly different rates despite individuals making all the same prudent financial decisions.

The analysis assumed these major factors stayed the same: a 45% equity ratio, a 10% annual savings rate and a 40-year savings period, starting at age 20.

Sure, personal behaviors play a role, as well. Allianz noted that increasing one’s savings rate above that 10% baseline and/or allocating more of one’s portfolio into higher-risk investments could yield a higher return. But the biggest hits to generational wealth — factors like interest rates and economic cycles (especially the '90s stock market boom and the Great Recession bust) — are out of the general public's control.

So for Gen Xers, it wasn’t their apathy that left them financially shortchanged. And millennials? No amount of penny pinching with homemade lattes is going to close the generational wealth gap.

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