Boomers Control America’s Wealth: How Gen X and Millennials Can Catch Up

When social justice advocates say that all the wealth is concentrated at the top, they’re talking about age as much as socioeconomic class, whether they know it or not.

According to Federal Reserve data from the third quarter of 2023, baby boomers (and older Gen X) ages 55 and up control 72% of the nation’s wealth, with Gen Xers, millennials and younger adults divvying up the remaining scraps as they fall further and further behind.

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This represents a break from past decades when middle-aged people held more wealth than the 70-and-up crowd, but the oldest Americans have made enormous games in recent years and now command 30% of the total jackpot. Comparatively, those aged 40 to 55 represent 25% of American households but account for just 20% of the nation’s wealth, while those under 40 have less than 7%. Together, non-boomers make up more than 53% of the country’s households but control just 27% of the wealth.

So what can Gen X, millennials and younger adults do to catch up?

“The statistic that baby boomers control 72% of the nation’s wealth underscores a significant generational wealth gap,” said Nnaemeka Obi, chartered financial analyst, lecturer at the Global Distance Learning Institute and founder of the personal finance site Market Center. “However, Gen X and millennials have opportunities to bridge this divide through strategic financial planning and investment.”

Prioritize Financial Literacy

The first step is to learn about money, how to grow it and how not to lose it.

“It’s crucial for younger generations to prioritize financial literacy,” said Obi. “Understanding the basics of budgeting, investing and saving can provide a solid foundation for making informed financial decisions. Leveraging online resources, courses and financial advising can accelerate this learning process.”

The Young Can Flex What the Old Don’t Have — Time

The best way for millennials and young Gen Xers to gain ground on their parents is to start investing now to capture the years that make compounding the most potent force in fortune-building. 

“It may seem daunting for Gen X and millennials to catch up to the wealth realized by baby boomers,” said Chad Kennedy, MJ, partner at Lighthouse Financial. “In reality, these generations have one of the most powerful wealth-building tools on their side — time. It is easy to underestimate the power that disciplined investing and compounding returns will have over the course of decades.”

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Invest With the Long Game in Mind

While every Gen Xer, millennial and Gen Zer should begin investing whatever they can as soon as they can, they shouldn’t fall into the trap of pursuing fast gains.

“Embracing long-term investment strategies is key,” said Obi. “The power of compound interest cannot be overstated, especially for younger individuals. By investing in diversified portfolios, including stocks, bonds and real estate, and taking advantage of retirement accounts like 401(k)s and IRAs, Gen X and millennials can build wealth over time.”

Always Look for More Income

You need money to invest and build wealth, and since you can only cut so much spending, additional income is one of the surest paths to fruitful finances.

“It’s important to focus on career advancement and increasing income streams,” said Obi. “Pursuing higher education, certifications or entrepreneurial endeavors can lead to higher earning potential. Moreover, exploring passive income opportunities, such as rental properties or side businesses, can further enhance financial security.”

Plan Ahead So Emergencies Don’t Stunt Your Growth

A single crisis you aren’t prepared for can plunge you into debt and negate years of investment gains. The time to plan is now.

“It’s imperative to adopt a mindset of financial resilience,” said Obi. “This includes preparing for uncertainties by building an emergency fund and having adequate insurance coverage. Being financially agile and adaptable to changing economic landscapes will be crucial for Gen X and millennials to thrive.”

Many Can Expect Some Sort of Inheritance

Financial services industry data and market intelligence firm Cerulli Associates estimates boomers and members of the Greatest Generation will hand down $84 trillion by 2045, $72.6 trillion of which will go to their heirs.

It’s known as the Great Wealth Transfer, and according to Kiplinger, the trusts, wills, properties and gifts that deliver the collective inheritance will represent the largest transfer of wealth in human history.

Anyone expecting an inheritance should initiate what might be an uncomfortable, yet necessary conversation with their parents about their plans and strategies for handing down assets.

“Asset protection and sound financial planning are pivotal for generational wealth accumulation,” said Marty Burbank, an estate planning and elder law attorney and the founder of OC Elder Law in Orange County, California.

He encourages discussions about asset protection through estate planning. 

“This includes establishing trusts, wills and healthcare documents interlaced with personal values, which not only ensure asset distribution according to one’s wishes but also provide tax benefits and protect assets from unforeseen circumstances,” said Burbank.

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This article originally appeared on GOBankingRates.com: Boomers Control America’s Wealth: How Gen X and Millennials Can Catch Up

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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