BABY BOOMERS' WEALTH IS GOOD NEWS FOR SOCIAL SECURITY
COLUMBUS, Ohio - A new study of wealth in the United States concludes that baby boomers have already accumulated more wealth than their parents did at similar ages.
The study predicts that this gap will continue as baby boomers retire, and that they will actually continue accumulating wealth after retirement.
The results, if true, may ease concerns that the Social Security system will fail as the glut of baby boomers leaves the workforce.
"Based on these results, speculation about baby boomers shocking the Social Security system may be overstated," said Lisa Keister, author of the study and assistant professor of sociology at Ohio State.
"Of course, the sheer size of the baby boomer generation may worry policy-makers, but at least there is reason to believe that the boomers would be able to support themselves in retirement if necessary."
The results of the study appear in Keister's new book Wealth in America: Trends in Wealth Inequality (Cambridge, 2000).
Keister said she studied wealth - including stocks and bonds, bank accounts and homes - rather than income to give a more complete picture of Americans' financial situation.
She analyzed statistics from a variety of sources, including two national surveys that collected data on the wealth of Americans periodically between 1962 and 1995. One key to this study, however, was that she developed a simulation model based on 30 years of historical economic data that allowed her to predict wealth trends for baby boomers and their parents through 2026.
Keister said the model, which makes many assumptions about future economic trends, is designed only to make broad estimates about what may happen. As such, it is impossible to predict with accuracy exactly how much more wealth boomers will have in the future relative to their parents. But the model suggests that baby boomers may accumulate as much as twice the total wealth that their parents have.
"The results suggest that baby boomers had - and will have - considerably more wealth than their parents at all stages of the life course," Keister said.
"The notion of the American dream centers on the idea that children will be better off then their parents were at a similar age. It seems clear that the baby boomers have fulfilled that dream."
One particularly positive sign is that Keister's estimates show boomers' net worth continuing to increase even after a large number of them have reached and passed retirement age. This result suggests boomers may be somewhat frugal with their money because they are preparing to live long after retirement, and because they want to leave an inheritance for their children.
Even without projecting into the future, the boomers' financial success compared to their parents has been evident.
For example, a household head aged 35 to 44 in 1962 had a median net worth of $30,765, Keister found. But a similarly aged household head in 1989 - a member of the boomer generation - had a median net worth of $56,911. (All values were adjusted to 1990 dollars.)
Results suggest that older baby boomers - those born between 1945 and 1954 - did particularly well when compared with their parents. Those born between 1955 and 1964 also did better than their parents, but not by as large a margin.
The success of the boomers is somewhat surprising, Keister said, because many observers had expected this generation would be the first in American history to do worse than their parents financially. The theory was that the large demographic bulge of boomers would result in more people competing for scarce jobs and other resources.
Yet boomers have benefited from positive economic trends in the 1980s and 1990s, including soaring stock and housing values, Keister said. Other trends - including higher levels of education and increases in two-earner families - also created advantages for baby boomers.
However, not all boomers have done better than their parents, Keister said. At a particular disadvantage are those who have no high school degree, married couples with only one earner, single women and nonhomeowners.
In general, the results indicate that between 1962 and 1995, the rich got richer and the poor got poorer. Keister calculated that the richest 1 percent of Americans controlled 33.5 percent of the nation's net wealth in 1962 - and that climbed to 38.5 percent by 1995. The bottom 40 percent of Americans owned just 0.3 percent of the nation's wealth in 1962 and that dropped to 0.2 percent by 1995.
"The results demonstrate that wealth is very unequally distributed, and they suggest that inequality steadily increased over the three decades in this investigation," Keister said.