Generational Wealth Check: What Boomers Had at 45 vs. What You Have Now
Baby boomers were born between 1946 and 1964, a rich period in the American economy. As adults, the gap between income and major expenses often left more room to save, buy a home and build wealth by 45 than what’s possible for Gen Zers and millennials today.
That doesn’t mean the younger generations of today can’t make progress toward their financial goals. It just means they’ll have to go about it differently.
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Finances of Boomers by 45 vs. Younger Generations Today
Jordan Taylor, an independent financial advisor at Core Planning, said the biggest advantage baby boomers had by age 45 was "margin."
Taylor said housing is the clearest example of the financial advantage many boomers had by age 45. In the past, he said, the average home was more affordable compared with income. That meant many boomers who bought in their 20s or early 30s could have 15 to 20 years of ownership (and payments) behind them by the time they reached 45.
Today, Taylor said, homes cost more compared with income and many people are waiting until closer to age 40 to buy their first home. Unfortunately, that means 10 to 15 years less to build equity.
He also said that for the boomer generation, college expenses for their children were less expensive, while pensions were more common and reduced the pressure to manage retirement savings alone.
Overall, Taylor said debt was easier to manage because money had more buying power. “It’s harder to end up in a financial crisis when $1 buys you a lot more stuff,” he said.
Taylor also said younger generations face recurring costs boomers didn’t have in early adulthood, such as smartphones, internet, streaming services, software, delivery apps and subscriptions. He acknowledged that housing, transportation, healthcare and education play a larger role in the cost-of-living crisis, but maintained that these smaller monthly expenses still matter because they’re so common they can feel hard to avoid.
“Every recurring monthly expense should be treated like giving away a piece of your future wealth,” Taylor said.
What Younger Generations Can Do if They Feel Behind
Taylor said people in their 30s and 40s should stop using Boomers as their financial scoreboard because it’s a different ballgame.
Instead, he said the focus should be on creating a cash-flow margin, avoiding discretionary fixed costs, investing consistently and surviving long enough for compounding to matter. “It’s been said a million times, but steady, boring and ‘automatic progress’ is a winning strategy,” Taylor said.
He recommended getting as close as possible to investing 15% of income, including any employer match. If that isn’t realistic, he said to start wherever possible and automatically increase contributions by about 1% of income each year.
“Instead of spending the 1% eating out, let your 401(k) eat it instead,” he said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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