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Boomers Grow Richer – Even in Retirement

July 14, 2016

Instead of whittling away their retirement savings, wealthy Baby Boomers are continuing to get richer even after they retire, according to Bloomberg. But the rest of the population isn’t faring as well, claims Finra.

Older Baby Boomers were already the wealthiest generation, the Bloomberg claims. But because the S&P 500 index shot up 91%, including dividends, since 2011 when Baby Boomers began turning 65, they are also benefiting from a retirement savings best-case scenario, the newswire reports.

In part, that generation has been extremely cautious after suffering through the financial crisis. But the S&P 500’s return of 269% since March 2009 means many Boomers have much more money “than they know what do with,” the newswire writes.

And the biggest benefits are going to the wealthiest 20%. The poorest 40% of 65- to 70-year-olds are still spending more than they earned, according to a recently published study by Texas Tech University for the Journal of Financial Planning and cited by Bloomberg.

Baby Boomers in the middle of the wealth spectrum are drawing down assets at about 8% below their safe spending threshold, taking into account pensions, investments and Social Security benefits, according to the survey.

But the richest 20% are spending up to 53% less than what they could have, the survey found, according to Bloomberg. As the study notes, “unless retirees obtain more happiness from a charity or their heirs spending a dollar than if they spent the dollar themselves, there seems to be little rational explanation for the failure to spend down assets.”


However, the rest of the population is not fairing as well, according to a recent study by Finra of Americans’ financial capabilities.

The good news is that more people than previously have no difficulty covering monthly expenses; almost half the population (48%) in 2015 compared to just over a third (36%) in 2009, according to the survey of 27,000 American adults conducted as part of the Finra Investor Education Foundation’s National Financial Capability Study. And the percentage of people who have emergency funds has grown from 35% to 46%, the study found.

But 21% of Americans are burdened with unpaid medical debt, 29% of 18 to 34 year-olds have been late with a mortgage bill (compared to just 7% for those over 55), and 45% of respondents educated to high school diploma level said that they wouldn’t be able to come up with $2,000 within 30 days in the case of an emergency, according to the survey.

The rate of borrowing from high cost sources, such as pawn shops and payday loans is also high: 39% for African-Americans, 34% for Hispanics and 21% for whites, the survey found.

Financial literacy across the population, meanwhile, has actually fallen. Just 37% of survey respondents could answer four or more finance-related questions correctly in a five-question quiz, compared to 42% who did in 2009, the survey found.

By Alex Padalka
  • To read the Bloomberg article cited in this story, click here.