Baby boomers may not feel rich right now, but they're still the wealthiest generation in U.S. history. Boomers have collectively earned $3.7 trillion, more than twice as much as the $1.6 trillion that members of the silent generation did at the same age, according to a new McKinsey Global Institute report. The researchers found that only 20 percent of that difference was due to economic growth. A whopping 80 percent of the increased earnings were due to three factors specific to the baby boomer generation:
Size. The exceptional size of the baby boomer generation—which is made up of 79 million people born between 1945 and 1964—raised output and growth rates. The baby boomer cohort is 50 percent larger than the preceding silent generation, and at birth, they represented a larger share of the population than generation X and the millennials did at their birth.
Social change. Female baby boomers streamed into the workplace at higher rates than their parents did. They also married and had children later and divorced and remained single at higher rates. That means there were more wage earners relative to the total population.
Education. The boomers' higher level of education than previous generations allowed them to better capitalize on economic changes like productivity growth, technological innovation, and globalization.
But baby boomers largely did not accumulate this wealth for their retirement. For previous generations, the savings rate peaked during the prime earnings years and was then used for retirement. But the baby boomer savings rate didn't peak during their top earnings years. Even before the current economic crisis, the boomers' ratio of debt to net worth was 50 percent higher than the silent generation's at the same age, according to McKinsey calculations.
It is not too late for members of the baby boomer generation, who are largely still in the work force. McKinsey concluded that the single greatest thing baby boomers can do to get their savings rate back on track is to work approximately two years longer. If boomers increased the median retirement age from 62.6, where it is today, to 64.1 by 2015, the number of households unprepared for retirement would drop from 69 to 40 percent, the study found.