Abstract
Nationally representative data are used to compare the magnitude, composition, and distribution of accumulated wealth of early boomers (born between 1946 and 1957) and pre-boomers (born between 1934 and 1945) at the same life cycle stage (ages 44–45, occurring in 1989 for pre-boomers and in 2001 for early boomers). Early boomers have accumulated greater mean wealth than pre-boomers at the same age, however median wealth did not change and net worth among lower-middle wealth groups declined. Multivariate analysis identified demographic change among those in the wealth distribution tails that indicates the increasing importance of education and race as predictors of wealth.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
Notes
Race proxies possible differences in risk tolerance, inherited wealth, and asset allocation. Race of respondent is assumed to be representative of the household.
Capital gains on principal residence is the current value less original purchase price and less improvements, on businesses is current value less tax basis—active and non-active businesses, on stocks and mutual funds is the current value less gain/losses.
Debt payments include the monthly obligation amount on all loan payments. Household annual income is the total income for the previous year.
Financial assets held in stocks include value of directly held stock, mutual funds (full value if described as stock mutual fund, 1/2 value of combination mutual funds), IRAs/Keoghs invested in stock (full value if mostly invested in stock, 1/2 value if split between stocks/bond or stocks/money market, 1/3 value if split between stocks/bonds/money market), other managed assets w/equity interest (annuities, trusts, MIAs: full value if mostly invested in stock, 1/2 value if split between stocks/MFs & bonds/CDs, or “mixed/diversified”, 1/3 value if other), thrift-type retirement accounts invested in stock (full value if mostly invested in stock, 1/2 value if split between stocks and interest earning assets). Income measure for 1989 is the total income for the previous year and income for 2001 is total normal income as reported by the respondent.
RII—repeated imputation inference http://www.federalreserve.gov/pubs/oss/oss2/scfindex.html
References
AccountingWeb (2004). New faces in bankruptcy court: The middle aged. Retrieved September 9:2004 from http://www.accountingweb.com.
American Association of Retired Persons (AARP) (1994). Aging baby boomers: How secure is their economic future? Washington, D.C.: AARP.
Ando, A., & Modigliani, F. (1963). The “life cycle” hypothesis of saving: Aggregate implications and tests. The American Economic Review, 53(1), 55–84.
Baek, E., & DeVaney, S. A. (2004). Assessing the baby boomers’ financial wellness using financial ratios as a subjective measure. Family and Consumer Sciences Research Journal, 32(4), 321–348.
Bernheim, B. D. (1993). Is the baby boom generation preparing adequately for retirement? Summary report. Princeton, N.J.: Merrill Lynch.
Bernheim, B. D. (1995). The Merrill Lynch Baby Boom retirement index, update ‘95. Princeton, N.J.: Merrill Lynch.
Bernheim, B. D. (1996). The Merrill Lynch Baby Boom retirement index, update ‘96. Princeton, N.J.: Merrill Lynch.
Bernheim, B. D. (1997). The adequacy of personal retirement saving: Issues and options. In: D. A. Wise (Eds) Facing the age wave. Publication no. 440. Stanford, CA: Hoover Institution Press, pp. 30–56.
Congressional Budget Office (2003). Baby boomers’ retirement prospects: An overview. Washington, DC: Congressional Budget Office.
Danzinger, S., & Gottschalk, P. (1995). America unequal. New York: Russell Sage Foundation.
Dugas, C. (2003). More workers can’t afford to retire. USA Today. Retrieved October 13:2004, from http://www.usatoda.com/money/perfi/retirement/2003-04-10-noretire_x.htm.
Easterlin, R. A., Schaeffer, C. M., & Macunovich, D. J. (1993). Will the baby boomers be less well off than their parents? Income, wealth, and family circumstances over the life cycle in the United States. Population and Development Review, 19(3), 497–522.
Finke, M. S., & Huston, S. J. (2003). The brighter side of financial risk: Financial risk tolerance and wealth. Journal of Family and Economic Issues, 3(24), 233–256.
Francese, P. (2001). Big spenders. American Demographics, 23(9), 29.
Gale, W. G. (1997). The aging of America: Will the Baby Boom be ready for retirement? Brookings Review, 15(3), 4–9.
Gist, J. R., & Wu, K. (2004). The inequality of financial wealth among boomers. Washington, D.C.: AARP Public Policy Institute.
Gist, J., Wu, K., & Verma, S. (2004). The distribution of financial wealth among boomers. Washington, D.C.: AARP Public Policy Institute.
Gist, J.R., Wu, K.B., & Ford, C. (1999). Do baby boomers save and if so, what for?. Washington, D.C.: AARP Public Policy Institute.
Gittleman, M., & Wolff, E. (2004). Racial differences in patterns of wealth accumulation. Journal of Human Resources, 39(1), 193–227.
Gustman, A. L., & Steinmeier, T. L. (1998). Effects of pensions on savings: Analysis with data from the Health and Retirement Study. Working paper no. 6681. National Bureau of Economic Research. Retrieved on October 5:2004 from http://www.nber.org/papers/w6681.
Karoly, L. (1993). The trend in inequality among families, individuals, and workers in the United States: A twenty-five year perspective. In: S. Danzinger, & P. Gottschalk (Eds). Uneven tides: Rising inequality in America (pp. 19–97). New York: Russell Sage Foundation.
Keister, L. (2000). Wealth in America: Trends in wealth inequality. New York: Cambridge University Press.
Kennickell, A. (1999). Using income data to predict wealth. Federal Reserve Board. Retrieved on April 22:2005 from http://www.federalreserve.gov/pubs/oss/oss2/papers/wealth.income.7.web.pdf.
Kotlikoff, L., & Auerbach, A.J. (1994). U.S. Fiscal and savings crises and their impact for baby boomers. In: D.L. Salisbury N.S. Jones (Eds). Retirement in the 21st century: Ready or not? Washington, D.C.: Employee Benefit Research Institute, pp. 85–126.
Moore, J. F., & Mitchell, O. S. (1997). Projected retirement wealth and savings adequacy in the Health and Retirement study. Working paper no. 6240, National Bureau of Economic Research. Retrieved on October 10 from http://www.nber.org/papers/w6240.
Ryscavage, P. (1999). Income inequality in America. Armonk: New York: M.E. Sharpe.
Sabelhaus, J., & Manchester, J. (1993). Baby boomers and their parents: How does their economic well-being compare in middle age? Journal of Human Resources, 30(4), 791–806.
Svensson, P. (2003). Boomers are good at saving, but not good enough. Associated Press. Retrieved October 13:2004 from http://www.taxpolicycenter.org/news/boomers_save.cfm .
Toder, E., Thompson, L., Favreault, M., Johnson, R., Perese, K., Ratcliffe, C., et al. (2002). Modeling income in the near term: Revised projections of retirement income through 2020 for the 1931–1960 birth cohorts, final report. Washington, D.C.: Urban Institute.
Tracy, J., Schneider, H., & Shan, S. (1999). Are stocks overtaking real estate in household portfolios? Federal Reserve Bank of New York Current Issues in Economics and Finance, 5(5), 1–6.
Verma, S., Lichtenstein, J. (2003). In brief: Retirement plan coverage of baby boomers and retired workers: Analysis of 1998 SIPP data research report. Washington, D.C.: AARP Public Policy Institute.
Warshawsky, M. J., Ameriks, J. (2000). How prepared are Americans for retirement? In: O. S. Mitchell, P. B. Hammond, & A. M Rappaport (Eds) Forcasting retirement needs and retirement wealth. Philadelphia: University of Pennsylvania Press, pp. 33–67.
Warren, E. (2003). Consumer bankruptcy: Issues summary. Harvard Law School.
Wolff, E. (2002). Top heavy. New York: The Century Fund.
Yao, R., Hanna, S. D., & Lindamood, S. (2004). Changes in financial risk tolerance, 1983–2001. Financial Services Review, 13(4), 249–266.
Yuh, Y., & Montalto, C.P. (1998, August). SAS code for RII logit estimation. Retrieved February 2:2005 from http://hec.osu.edu/people/shanna/nrsas.htm.
Yuh, Y., Montalto, C. P., & Hanna, S. (1998). Are Americans prepared for retirement?. Financial Counseling and Planning, 9(1), 1–13.
Acknowledgment
The authors would like to thank the Certified Financial Planner Board of Standards and the American Council on Consumer Interests (ACCI) for recognizing an earlier version of this research for the ACCI 2005 Certified Financial Planner Board of Standards Financial Planning Research Award.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Finke, M., Huston, S. & Sharpe, D. Balance sheets of early boomers: are they different from pre-boomers?. J Fam Econ Iss 27, 542–561 (2006). https://doi.org/10.1007/s10834-006-9026-7
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10834-006-9026-7