Baby boomers, Generation X and Generation Y didn’t just grow up in different time periods. In many ways, they grew up in completely different countries. As such, the Great Recession had a unique effect on each generation. Baby boomers, who were born between 1949 and 1964, often found themselves needing to retire earlier because of a sagging job market, though plummeting property values and financial instability meant many were not as well off as they may have hoped.
With that in mind, Dr. Nilufer Ahmed of LIMRA, a financial services research industry leader, led a study entitled “U.S. Consumers Today: The Generations” to examine how each generation was affected by the Great Recession. The survey was conducted in 2013 with more than 6,000 participants aged 25 to 64 who are the financial decision makers. Participants ranged in household incomes from $25,000 to $149,999 and the data was weighed by age, gender, income, marital status, region, race and ethnicity.
In particular, the baby boomers were split into two segments: Those born between 1949 and 1956 were dubbed older boomers, while those born 1957 through 1964 are considered younger boomers.
Boomers remain in control
The study examined the financial decision makers in U.S. households and found that boomers still are largely in charge. According to the report, they head 30% of all households, with younger boomers edging out their older counterparts with 16% versus 14%.
In spite of this fact, it appears that boomers were hit hard by the recession, especially when compared to their younger counterparts. According to the data, 43% of older boomers and 35% of younger boomers reported that their household income is either somewhat or much lower than it was five years ago. About a third – 32% for older and 31% of younger boomers – reported that their income is the same and a quarter of older boomers said their income was higher or much higher, compared to younger boomers’ 35%.
Dropping household incomes and financial situations
Though there is not a strong downward trend in the boomer generation, there is nonetheless some negative shifting in terms of their household income. In older baby boomers, 34% say they are somewhat or much worse off than they were five years ago, while a similar number – 36% – felt that they were about the same. This means less than a third of baby boomers feel that they are better off now than they were five years ago, signaling the need for financial guidance from professionals as the generation moves quickly toward retirement.
However, these numbers need to be taken in context. As the report points out, a large percentage of baby boomers have retired, which generally leads to lower household incomes. And despite some dips in finances, 55% of older boomers and 45% of younger boomers said they were doing fine or very well while saving regularly. Plus, a large majority – 87% – of older boomers are keeping up with monthly payments, while 76% of younger boomers said the same.
How this affects financial professionals
Even as this economic uncertainty has tainted many boomers’ final working years, they still do not feel particularly strong about the need for financial help. According to the survey, just 16% of older boomers and 19% of younger boomers believe the need for professional financial advice has increased over the last few years. This means a large percentage of the population is likely eschewing financial advice in favor of striking out on their own, which isn’t always the best route.
For financial professionals, it’s important to convey the value of the services offered. While would-be clients may feel that they have taken the proper steps toward putting money away for retirement, they may have overlooked places where they can make their money work for them. Remind your clients that financial planning is not simply for themselves and their spouses, but for anyone whom they wish to benefit from their years of hard work and savings.