5 Baby Boomer Financial Habits for Success

The wealth of baby boomers has exceeded $76 trillion. A large portion of this is just the inevitable result of holding onto assets long enough to allow them to appreciate in value. Ultimately, the majority of the baby boomer generation has had several decades to allow their wealth to amass.

Even though younger generations occasionally feel envious of older Americans’ financial circumstances, it would be wiser to acknowledge that there are lessons to be learned from their choices.

These are five effective practices of baby boomers that we would all be well to take into account.

1. They make significant stock and mutual fund investments

The majority of wealth held by baby boomers is concentrated in stocks and mutual funds. They have about 28% of their wealth in this category, compared to 14% for millennials and slightly less than 19% for Generation X, according to data from the Federal Reserve.

Despite their short-term volatility, stocks are an excellent means of accumulating wealth over the long run. For the S&P 500, the historical average rate of return has been roughly 10% per year. Therefore, in 25 years, you would have roughly $295,000 if you invested $250 a month in a brokerage account and received an average annual rate of return of 10%.

A lot of experts advise deducting your age from 100 to figure out what proportion of your portfolio ought to be in stocks. By using the Rule of 100, for instance, you would allocate 60% of your portfolio to stocks if you were 40 years old. In general, the idea is to lower your exposure to market volatility as you age. Some people use a Rule of 110, which you should consider if you don’t mind taking on additional risk.

2. They buy real estate

Owning real estate accounts for the second-largest portion of baby boomer wealth, or $18.65 trillion. Because baby boomers have amassed so much wealth—part of it derived from real estate—some experts project a $53 trillion wealth transfer to younger generations over the next few decades as they pass on their homes and other assets.

Even though high home prices and rising mortgage rates made 2018 one of the worst years for housing affordability, many younger generations are still focused on real estate ownership. Real estate makes up the bulk of assets for Gen Xers and millennials, about 30% and 41%, respectively.

3. They’re more inclined to reduce their spending on non-essential items

Compared to previous generations, baby boomers have also demonstrated success in managing their finances by being far more willing to reduce their spending on non-essential items. In contrast to just 56% of Gen Z and 66% of millennials, 80% of boomers stated they cut back on non-essential spending due to inflation, according to an Empower survey.

Experts frequently advocate the 50/30/20 rule, which states that 50% of your post-tax income should be allocated to necessities, 30% to wants (non-essentials), and 20% should be used for debt repayment or savings. Finding expenses you can eliminate and monitoring where your money is going can be facilitated by using a budgeting app.

4. They are more forthcoming about money with their partners

When you and your romantic partner have combined your finances, it’s essential to be open and honest about your spending and any outstanding debts. According to a recent survey, baby boomers are the most truthful generation; only 19% of them admitted to lying or keeping purchases from their partner, compared to 63% of Gen Z, 58% of millennials, and 44% of Gen X.

Even among happy people in happy relationships, financial issues are a frequent source of contention, according to research from the University of Tennessee. This implies that hiding financial information from a spouse will probably result in more issues down the road when they do discover it.

5. They consult experts for guidance

Boomers seek professional assistance when seeking financial advice, which is another notable distinction between them and other generations. Over 50% of baby boomers sought advice from a financial advisor in the previous year. Less than one-third of Gen Z, millennials, and Gen X followed suit, though.

For individuals of all ages and income levels, financial advisors can be a great resource. They can assist you in creating a budget, planning for your financial objectives, and learning how to invest your money. As fiduciaries, many of them are obligated to act in their best financial interest. The website of the National Association of Personal Financial Advisors allows you to locate fee-only fiduciaries in your area.

It’s not necessary to replicate the exact financial habits of baby boomers to accumulate wealth. But, it’s worthwhile to take into account the lessons that previous generations have acquired from decades of investing and budgeting and to use some of the same ideas to improve your financial situation.