Baby Boomers are the Second-Largest Generation in the United States
Millennials are the largest generation, but baby boomers still have the most substantial spending power of any generation.
Changes to their wealth and spending habits can have profound effects on the US economy – and they will continue to be an essential generation in this sense for the next couple of decades.
However, despite their importance and the term “baby boomer” being a popular one, many Americans still don’t know who exactly baby boomers are. This article will tell you everything you need to know about boomers, from where the term originates to the challenges they are facing.
Who Counts as a Boomer?
Simply put, anyone born between the end of World War Two (WWII) and the mid-1960s is a boomer. So, boomers range in age from 55 to 75. And there are almost 75 million boomers in the US, accounting for nearly a quarter of the population.
This generation became known as the baby boomers because birth rates around the world spiked (or more aptly, boomed) following the end of World War Two.
By the mid-1960s, boomers accounted for approximately 40 percent of the US population. Though this percentage has declined as millennials and other generations, have considerably increased the size of the overall population.
Why Are Baby Boomers So Important?
As already mentioned, boomers in the US are on the whole pretty affluent and play a major role in the national economy.
Here’s a rundown of why they are especially crucial to the US economy and the key challenges they are facing…
Market Size
With about 75 million American baby boomers, it’s easy to see why they are such an important market and key driver of the US economy in terms of consumer spending, at least.
The number of boomers will decrease over the coming years – and they will also become less and less economically crucial as other generations grow and increase their spending power – but for the time being, boomers are simply too large a market to ignore.
Spending Power
Despite no longer being the single largest generation, baby boomers still command the most spending power of any generation in the US, with their total spending power totaling over $2.5 trillion.
They are more affluent than millennials and other generations as they have accumulated wealth over their decades of labor, and are in fact, the longest living generation in history.
Specifically, about 80 percent of the United States’ personal net worth is held by boomers, mainly in the form of pretty illiquid assets, such as property, retirement plans such as a 401(k), and to a lesser extent, direct investment portfolios.
However, retirement plans are becoming more flexible and allowing quicker drawdowns, often as lump sums, and reverse mortgages enabling homeowners to get cash against the value of their property. It is now easier than ever for boomers to spend their wealth instead of bequeathing it to their children.
Retirement Challenges
Millions of American boomers are retiring every year, and while most have some type of private retirement plan in place, these plans are not always sufficient to lead a good standard of living in retirement. This insufficiency is due to a combination of factors – – including boomers are living considerably longer (up to 25 years more by some estimates) than their parents. Also, inflation erodes some of their savings.
All of this effectively means boomers have to make their retirement dollars go further, or unlock some of their wealth via reverse mortgages and other financial products.
Furthermore, some boomers are opting to continue to work past the retirement age to bolster their retirement plans, and only semi-retiring is also on the rise amongst new retirees.
A Quick Summary
- Boomers are the second-largest generation in the United States, only behind millennials.
- As they have the largest spending power of any generation, changes to their spending habits and broader consumer behavior can significantly impact the national economy.
- Anyone born between the end of World War Two and the mid-1960s is classified as a boomer. So millions of boomers are reaching retirement age every year, while tens of millions are already retired.
- Baby boomers hold about 80 percent of the country’s personal net worth, and more flexible retirement plans and financial products like reverse mortgages (also known as equity release plans) are making it easier than ever to convert wealth into spendable cash conveniently.
- However, many boomers face challenges in retirement, as they have to make their retirement dollars stretch much further than their parents did due to longer life expectancies and inflation.
- Some decide to work past retirement or only semi-retire to ensure they can maintain a pretty high standard of living throughout retirement.