6 Reasons Baby Boomers Failed to Strike It Rich

 In Retirement

Rich

Everyone wants to be rich, but so few people every actually cross that threshold. Actually, it helps that the line marking the point between “well off” and “rich” keeps moving farther and farther away.

Inflation, devaluation, market turmoil and other factors help keep many Baby Boomers this side of that line, as mentioned by Jennie L. Phipps.

However, some situations might be different. There might be many other reasons Baby Boomers failed to strike it rich.

Let’s take a look at the six most common reasons that Baby Boomers struggle to make it to the finish line with anything resembling a surplus of wealth.
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You Didn’t Pay Attention to Pay and Can’t Get Rich

Sure, many Baby Boomers became business owners and are able to control their own wages. However, that’s not the case for all of us.In fact, most of us punch the clock for an employer. The problem here is that wages have not risen with inflation.

That means your dollar doesn’t go as far as it once did, while your bills keep growing. Most Boomers have done more than put in their time – they worked far more than 40 hours per week during their youth and middle age.

In fact, most Boomers are still working more than 40 hours per week, even though they’re at or approaching retirement age. Again, this is a sign that the money you earn just isn’t enough. You’re not making enough per hour (or per year if you’re salaried) to make ends meet AND save for retirement.

Even if you’re earning $100,000 per year, your bring home pay is actually pretty low. From 1979 through 2014, wages only increased about 8%, while inflation shot through the roof. Today, they’re actually declining, meaning you’re earning even less.

You’re Not Saving Enough Money to Get Rich

Savings is a touchy thing. Most of us feel that we’re putting all we can into our retirement accounts and nest eggs, but are we really?

The answer to that is a resounding “no”. Not even close. In fact, we’re saving less today than at any point in history. Why is that? Well, part of it is the declining value of our pay. If you earn less, you obviously save less.You’ve still got bills to pay, right? However, that’s only part of the equation.

Another part of the equation is that we simply spend too much on things that we really don’t need. Yeah, it’s great having 200 cable TV channels, but how many can you really watch at any one time?

And, seriously, there really never is anything on, so why do you keep shelling out $100+ per month for nothing? That money could be better used to bolster your retirement savings.

You’re Stuck in Debt

You’ll never, ever, ever get rich if you’re mired in debt. Let’s get that out in the open right now. As long as there’s someone with a financial hold on you, they control your money, not you.

Oh, sure, you have minimum monthly payments, but if you’re paying that for the next 40 years, who do you think is really in control of your financial life?

Hint: it’s not you.

Baby Boomers are among the most indebted people in the US (rivaling Millennials and their incredible debt load, although perhaps not surpassing them). In 1980, only 11% of disposable income went to household expenses. Today, it’s much higher.

In fact, the debt service ratio (indicating the percent of disposable personal income going to pay household debt) has risen by 27%. That’s a glaring neon sign telling you that we’re going the wrong way, fast.

There are ways to combat this, of course, including slashing your debt. One of the best ways is to downsize your home, or ditch homeownership entirely.

After all, a smaller house provides a smaller mortgage, and not owning a home at all allows you to take advantage of affordable rental rates while you plan to get rich.

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Boomers Failed to Make Smart Investment Decisions

Baby Boomers are the single largest segment of the investment market, and they have borne the brunt of poor decisions here. The average American of retirement age today has built a net worth of about $230,000.

That’s FAR from being rich. In fact, it’s enormously far from even being considered well off, particularly when you realize at least half of that money is tied up in retirement accounts that are never going to give you the ability to live comfortably without also having at least a part-time job.

The real problem though is that with better investment decisions, that $230,000 could have been much, much more. An investment of $15,000 in 1984 could have appreciated to over $350,000 by this point. What happened?

Boomers fiddled with their investments. They played the market. They shuffled and reshuffled their portfolios, attempting to ride highs that were already on their way down and clinging to stocks that were depreciating out of pure sentiment.

In fact, putting too much money into the stock market alone is a huge mistake that will prevent you from getting rich. Who doesn’t remember the Great Recession? The stock market lost almost 40% of its value at the time, but did you know that bonds increased? That tells you that your money is in the wrong place.

Market Nastiness Contributes to Lost Wealth

That brings us to another mistake – putting your money into the stock market and not pulling it out ahead of a disaster. Boomers have suffered through more than one disaster. There was the meltdown in 1987. There was the Dot Com bust. There was tech market meltdown in the early 2000s. There was the Great Recession.

You’re Still Living Beyond Your Means

Perhaps the single largest mistake made by Boomers that prevents them from getting rich is living beyond their means.

Bigger homes, more expensive cars, nicer dinners, finer clothes – all of these are nice things to have, but they’re just drains on your financial power.

Live below your means and see how quickly things change.

These are just a few of the most common reasons that Baby Boomers have failed to strike it rich.

The good news is that most of them can be corrected.
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Sergey Sanko
Sergey had started an IncomeClub after years of being an investment advisor for high affluent investors and managing fixed income securities. He is the lead investment advisor representative and holds a Series 65 license. Sergey earned his Executive MBA degree from Antwerp Management School.
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