5 Successful Financial Habits of Baby Boomers

Baby boomers have amassed more than $76 trillion in wealth. Much of this is the simple byproduct of holding on to assets for a long period of time to let them grow. After all, most in the boomer generation have had many decades to let their wealth accumulate.

While younger generations can sometimes envy older Americans’ financial positions, a better approach would be to realize there’s something to be learned from their decisions.

Here are five successful habits of baby boomers that we all would be wise to consider.

1. They invest heavily in stocks and mutual funds

Baby boomers have the largest percentage of their wealth in stocks and mutual funds. According to Federal Reserve data, about 28% of their wealth is in this category, compared to 14% for millennials and just under 19% for Generation X.

While stock values can be volatile in the short term, they’re a great tool for building long-term wealth. The average historical rate of return for the S&P 500 is about 10% annually. So if you invested $250 per month in a brokerage account and earned an average annual rate of return of 10%, you’d have about $295,000 in 25 years.

Many experts recommend subtracting your age from 100 to determine the percentage of your portfolio that should be in stocks. For example, if you’re 40 and use the Rule of 100, you would have 60% of your portfolio in stocks. Some use a Rule of 110 (consider it if you don’t mind more risk), but the general idea is to reduce your exposure to market volatility as you get older.

2. They buy real estate

The second-largest portion of baby boomer wealth — equal to $18.65 trillion — comes from real estate ownership. Boomers have so much accumulated wealth, partially from real estate, that some experts expect a $53 trillion transfer of wealth over the next couple of decades as they leave homes and other assets to younger generations.

Last year was one of the worst years for housing affordability because of high house prices and rising mortgage rates, but many younger generations are still focused on owning real estate. The majority of assets for both Gen X and millennials, nearly 30% and 41%, respectively, is in real estate.

3. They’re more willing to cut back on non-essential spending

Another successful financial habit of baby boomers is that they’ve been far more willing to cut back on non-essential spending than other generations. According to an Empower survey, 80% of boomers said they reduced their non-essential spending because of inflation, compared to just 56% of Gen Z and 66% of millennials.

Experts often recommend the 50/30/20 rule, which says 50% of your after-tax income goes to needs, 30% to wants (non-essentials), and 20% goes to saving or paying off debt. Using a budgeting app can be a helpful way to find expenses you can cut out and keep track of where your money is going.

4. They’re more honest with their partners about finances

When you’ve merged your finances with a romantic partner, it’s important to be honest about your spending and any debts you may have. Boomers are the most honest, according to a recent survey, with just 19% saying they’ve lied or kept purchases from their partner, compared to 63% of Gen Z, 58% of millennials, and 44% of Gen X.

Research from the University of Tennessee found that finances are a constant point of disagreement, even among happy people in happy relationships. That means that withholding financial information from a partner is likely to cause more problems when they eventually find out.

5. They seek advice from professionals

Another stark difference between boomers and other generations is that they turn to professionals when seeking financial advice. More than half (52%) of boomers consulted a financial advisor last year. Meanwhile, less than one-third of Gen X, millennials, and Gen Z did the same.

Financial advisors can be a huge asset for people of all ages and incomes. They can help you set a budget, come up with a plan for your financial goals, and teach you about investing your money. Many of them are fiduciaries, which means they’re required to work in your best financial interest. You can find fee-only fiduciaries near you on the National Association of Personal Financial Advisors website.

You don’t have to exactly match what boomers are doing with their money to build wealth. But it’s worth considering what older generations have learned from decades of budgeting and investing and apply some of the same principles to benefit your finances.

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