Personal Finance

Did Baby Boomers Earn Their Success - Or Did They Just Get Lucky?

David Beren

Published: February 9, 2025 2:41 pm

It won’t come as any surprise to learn that the baby boomer generation is widely considered the wealthiest generation in history, so it begs the question of how they got there. The US has more than 160 trillion dollars worth of wealth, and more than half of it is owned by baby boomers born between 1946 and 1964. 

What’s most interesting is that between now and 2045, there is a flag around the idea that the baby boomer generation will be passing down more than $80 trillion in wealth to their heirs. Known as the “Great Wealth Transfer,” it has people wondering if baby boomers earned their success or just got lucky. 

Tailwind of Economic Conditions 

In the United States after World War II, there is no question that the greatest generation that gave birth to baby boomers entered a workforce on the rise. Between 1946 and 1973, the US GDP grew at an average rate of 3.8% annually, which created an abundance of job opportunities, according to economist Robert Gordon. 

Gordon notes this was a “one-time-only” opportunity as significant advancements helped boomers in technology and infrastructure. In addition, there is an emphasis on a strong labor market, specifically around unionization, when more than 28.3% of the American workforce had joined a union at its peak in 1954. 

In addition, while you saw high(er) inflation during the 1970s, the 1960s rate was only around 5.5%, which returned during the 1980s. Compare this number to the 7% we’re currently experiencing, and this point-and-a-half difference amounts to thousands of dollars in lost wealth every year paid to the banks. 

As far as economic conditions go, this was pure luck as boomers were born into a workforce that heavily emphasized job security, pension plans, and wage growth over time. 

Housing Market Trends

Compared to the environment millennials and younger generations are enduring now, the housing market trends for baby boomers were phenomenal. For example, consider that in 1963, the average price of a single-family suburban home was $17,000. By the time the century turned over in 2000, this number had increased to $200,000. 

Consequently, the Federal Reserve points out that home ownership has been one of the primary drivers of wealth for baby boomers. This government data bullet indicates that almost 40% of boomer wealth was created by purchasing and increasing home value. 

Lenders had looser borrowing standards when boomers bought their first homes, so down payment requirements and mortgage payments were smaller overall. Anyone who purchased during the high rates of the 1980s would later refinance when rates dropped the following decade, which only added to a home’s long-term affordability. 

There is little question that luck played a role in the idea that an increase in home value has boosted boomer net worth. However, those who have held onto their properties for decades showed some skill by having significant equity in a home they can use toward retirement. 

Investment Strategies

According to the Federal Reserve, one of the most important factors to consider when looking at baby boomer wealth is that the next most crucial aspect of boomer wealth is in their stock portfolios. 

According to financial firm Allianz, its analysis indicates that baby boomers got rich with stocks, but it had less to do with skill and more to do with a lot of luck. The company’s analysis indicates that baby boomers have enjoyed an annual return of 9.1% over their lifetime and “were able to amass a lifetime savings of over 850% of their disposable income.” 

Now, compare this number to Gen X, which Allianz indicates is only enjoying an average 6.7% annual return and has only saved 606% of their income. Unfortunately, this number worsens for millennials, who only see an average 6.5% return and a lifetime savings of just 403% of their current income levels. 

This means that baby boomers had access to one of the longest bull markets in history, which led to significant wealth accumulation. In addition, defined-benefit pensions were plentiful from employers, and 401(k) plans had substantial employer matching over decades, contributing to increased savings. 

Baby boomers also had the advantage of investing in US Treasury bonds in the 1980s, a trend that grabbed hold and has led to higher returns than today’s fixed-income investments can deliver. 

Financial planner Michael Kitces argues that the investment success baby boomers enjoyed for decades was less about skill and more about “time in the market.” Kitces argues that boomer wealth results from compounding returns over multiple decades. 

Generational Advantages Play A Role

Looking at the big picture of how baby boomers became wealthy indicates that they were influential. As a result, this group was able to shape economic policies and consumer trends that greatly benefited them. This includes well-funded government programs like Social Security and Medicare, as baby boomers were in their prime working years. 

Unlike today’s generations, like millennials, baby boomers were not saddled with over a trillion dollars in accumulated student debt. In 1970, the average annual tuition cost at a public four-year university was approximately $2,800, adjusted for inflation. This number tripled to more than $10,000 annually on average in 2025. As a result, current generations are taking on a significant financial burden, as they now have to work to pay off debt, which baby boomers left school without. 

Many baby boomers also entered the workforce during massive economic expansion and retired before the two most recent financial crises, the 2008 recession and the COVID-19 pandemic. Even if baby boomers saw their portfolios decline during these eras, they had already achieved substantial net worth, and the market eventually returned, restoring any lost wealth during either of these periods. 

Ultimately, generational advantages were very much based on luck, as economic conditions, government stability, and lower school tuition played a role. However, skill also played a role as baby boomers took full advantage of employer-sponsored health plans with lower premiums and full pensions. These helped boomers retire early and accrue more disposable income they could put into the market. 

Future Generation Troubles

Unfortunately, future generations are unlikely ever to experience the same skill and luck combination to build wealth as baby boomers. Between high tuition costs and debt, skyrocketing home prices and interest rates, and the decline in employer pensions, the things that helped baby boomers grow their wealth significantly aren’t available anymore. 

Instead of fully funded pensions, current generations, like millennials, must completely fund their retirements through 401(k) accounts and IRAs. This means significantly less disposable income, and while employer matching will help, it doesn’t lessen the burden of saving while also trying to live. 

According to a 2021 report by the St. Louis Federal Reserve, the millennial generation holds just 4.6% of US wealth, compared to the 53% of wealth baby boomers enjoyed at a similar age. This means that younger generations must rely heavily on learning financial literacy and establishing good saving habits to accumulate money to retire early. 

The hope is also that policy reforms related to affordable housing and student debt relief will come around, which could change the prospects of future wealth for millions of Americans.