How baby boomers got so rich and why younger generations may never catch up

US dollar

Baby boomers today hold more than $85 trillion in assets, making them the richest generation the United States has ever seen. What began in the early 1980s as a cohort with relatively modest wealth turned into a historic accumulation of housing equity, stock-market gains and retirement savings. New research from New York University economist Edward Wolff, covering the four decades from 1983 to 2022, shows how sharply their fortunes diverged from those of younger generations. Boomers, he notes, “started out among the poorest groups” in 1983. Four decades later, they own more than half the nation’s corporate equities and mutual fund shares despite being only about one-fifth of the population, the Washington Post reported.

Economists say this dramatic climb was not primarily about superior financial decisions; rather, it reflected the unusually favourable conditions boomers encountered throughout their working lives. Their experience is increasingly viewed as historically singular, and unlikely to repeat for Generation X, millennials or Gen Z.

The advantage of entering adulthood in a booming economy

Boomers entered the labour market at a moment when the US economy was expanding rapidly. Productivity was climbing, real wages were improving and the middle class was strong. They were in their peak earning years during the long bull markets of the 1980s and 1990s and then benefited again from the recovery after the Great Recession. The cost of both education and healthcare was substantially lower, and many enjoyed tax environments that rewarded capital gains and long-term investing.

Younger cohorts, by contrast, faced a run of economic shocks early in adulthood: the dot-com bust, the 2008 financial crisis, the uneven recovery that followed, and the disruptions of the covid era. For many millennials, the financial instability of their twenties and early thirties coincided with high student debt, expensive childcare and stagnating real wages. Columbia University professor Jeremy Ney points out that by age 30 the average millennial carried nearly twice as much debt as the average boomer did at the same age.

The shift from pensions to 401(k)s

Retirement systems also changed dramatically over the decades. Older boomers were the last generation to have widespread access to traditional defined-benefit pensions, offering stable retirement income backed by employers. As private-sector pensions declined, boomers were among the first to benefit from 401(k)s and tax-advantaged retirement accounts that encouraged stock investing.

By 2023 data, roughly half of boomer wealth sits in financial assets — stocks, bonds, mutual funds and retirement accounts. Their early and sustained exposure to rising markets magnified their gains in a way younger cohorts have struggled to replicate. Millennials and Gen Z, shaped by volatility and downturns, tend to be more cautious investors. As Ney notes, many young adults “do not buy the dip” because they entered the market during periods of persistent uncertainty.

Housing: The biggest wealth divider

No factor separates boomers from their successors more than housing. Boomers bought homes earlier, when prices were dramatically lower and mortgages were more affordable. They then benefited from decades of appreciation and multiple windows of exceptionally low interest rates, including after the 2008 crisis and again during the pandemic. Today, about one-third of boomer wealth comes from equity in their primary residences.

The difference in timing is stark. When the oldest boomers were 30, the median US home price was $42,800 — roughly $242,000 in today’s dollars. The median home price now is nearly $411,000, with far higher figures in coastal regions. First-time buyers today have reached a record average age of 40, up from the late twenties in the 1980s, and homeownership rates for younger adults lag far behind those of boomers at comparable ages. Higher mortgage rates since 2022 have only widened the gap.

Why catching up is so difficult

Younger generations are contending with structural headwinds: slower wage growth, higher education and childcare costs, rising rents, later entry into homeownership and greater financial precarity. The historic conditions that propelled boomer wealth — long economic expansions, affordable housing, stable pensions and soaring markets — are not expected to return in the same form. For many, the chance of surpassing their parents’ standard of living is no longer a given. Ney puts it bluntly: “In 1940 there was a 90 percent chance you would earn more than your parents. For someone born today, it’s a coin flip.”