Are Baby Boomers Richer Than Their Parents? Intergenerational Patterns of Wealth Ownership in the United States

This study compares wealth ownership and mobility patterns among baby boomers and their parents to explore whether the baby boomers have fared as well during their working years and whether they will be as secure in retirement as their parents. Cohort comparisons using survey data indicate that baby boomers had accumulated more wealth as young adults than their parents had at a similar age. Estimates from a simulation model reveal that baby boomers had more wealth than their actual same-sex parents at every stage of the life course. The simulation model also reveals that baby boomers were considerably more likely than their actual same-sex parents to experience upward wealth mobility at each point in the life course. These results suggest that speculations that baby boomers may be the first generation to do worse than their parents are misleading. Key Words: baby boomers, intergenerational processes, social mobility, social stratification, wealth mobility, wealth ownership The baby boom generation has put pressure on social and economic resources at every stage of their lives. This cohort strained educational resources in the 1950s and 1960s as they filled classrooms to capacity, caused crowding in colleges and universities in their late teens and early 20s, and contributed to slow wage growth in the 1970s and 1980s when they entered the labor force (Sabelhaus & Manchester, 1995). In the 1990s, the changing age structure of the population, the financial condition of the social security system, and post-World War II declines in household saving have raised questions about whether this generation will have adequate resources to finance retirement (Levy & Michel, 1991; Longman, 1987). When baby boomers retire between 2010 and 2030, the percentage of the population aged 65 and over will increase from about 12% to about 20%70 (Manchester, 1993). There is evidence that the parents of this cohort have sufficient financial resources for retirement, but researchers suggest that the baby boomers may be less fortunate (Brown, 1997; Levy & Michel, 1991; Longman, 1987). Although academics and policy analysts alike have speculated about the resources baby boomers have for retirement, the wealth of this generation has received relatively little attention. Yet wealth is a critical component of well-being, particularly during retirement (Keister & Moller, 2000). Wealth is the value of the things people own. It is usually measured as net worth: total assets (such as stocks, savings accounts, and real estate) minus total debt (such as mortgages and credit card debt). Wealth provides economic security and can be used indirectly to gain advantages such as political influence, social prestige, flexibility, leisure, and improved advantages for one's children. During retirement, assets provide a reserve that can be drawn on as a source of regular income or to fund emergencies. In recent decades, retirees have increasingly turned to their assets to finance expenditures (Grad, 1992). Yet because wealth is extremely unequally distributed, not all retirees are able to draw on assets to the same degree. Indeed, in the mid-1990s, the top 1% of wealth owners owned 38% of net worth (Wolff, 1995). How this will affect the retirement of the baby boomers has yet to be determined. Our aim is to examine whether baby boomers have accumulated as much wealth during their working years as their parents did and subsequently whether they will be as secure in retirement as their parents. We follow Easterlin, MacDonald, and Macunovich (1990a, 1990b) and Manchester (1993) in defining baby boomers as those born between 1945 and 1965, because the first post-- Depression increase in births occurred in 1945, and births had fallen below 4 million by 1966. We focus on the wealth accumulation and mobility of two distinct cohorts of baby boomers and compare them to their parents at the same point in the life cycle. We draw on research on life course processes, gender, and social mobility to develop a set of expectations regarding the well-being of these cohorts (both within and across the cohorts). …