Bold Predictions for Baby Boomers

Garvens Mortgage Group Baby Boomers

To prepare for this week’s show, I made a lot of predictions about the future. But here’s one more that I think summarizes the rest: Sometime in the near future, historians will begin referring to the Baby Boomers as the Baby Busters—a generation determined to spend the wealth they inherited, deplete the wealth they created, and just go completely bust before they die.

Past generations treated wealth as just another heirloom—something to be accumulated over a lifetime then bequeathed. The Greatest Generation presently holds around $10 trillion of wealth. My first prediction for this week: Over the next fifteen years, we will witness one of the largest wealth transfers in our nation’s history, as the Greatest Generation passes down this $10 trillion to their Baby Boomer children. Whether in cash, real estate, or other assets, the Greatest Generation spent their lifetimes accumulating wealth with the sole intention of passing it down to their children.

Baby Boomers, however, don’t share this impulsive desire to squirrel and save. Instead, they have a compulsive need to spend. My second prediction for this week: the Boomers will spend every cent they inherit from their parents. Over their lifetimes, the Baby Boomer’s net savings rate has been negative. They not only spend every penny they make, they spend more! It’s a near-guarantee that as the Greatest Generation’s $10 trillion in wealth starts trickling down to the Baby Boomers, it will be spent as quickly as it’s received.

The Boomers have had sixty years to prove they aren’t a mob of profligate spendthrifts, and they’ve failed to do so. Their saving’s rate is negative. They have massive credit card debt. They have mortgages. They have second mortgages. They use every financial tool they can access to ensure they can live beyond their means.

And so my third and fourth predictions are: Boomers will insist they can afford their lifestyle, and they will use leverage to support it. Hands-down, the most important mortgage product of the future will be the reverse mortgage. Boomers—the first generation to really take advantage of the only-possible-through-government 30 year mortgage—at least spent their later years actually paying down their mortgage. Now that they’re retiring with no substantial savings to live on, they will utilize reverse mortgages to turn their homes’ equity into streams of income, thereby supporting the same borderline-frivolous lifestyle most have grown accustomed to.

The notion of retiring—of settling down, reducing expenditures, and repositioning priorities—is entirely alien to the Baby Boomers. This is a Peter Pan generation that never ages and, therefore, never matures. My fifth prediction is that Boomers will refuse to grow old. But this isn’t a fair prediction since it has already come to pass. Hair dye, Viagra, hair transplants, Botox, plastic surgery—these are all luxuries enjoyed by virtually every member of the Baby Boomer generation, regardless of income. Future archaeologists will be puzzled when excavating today’s cities, finding only person-shaped molds of plastic where they expected people to be.

But before the Boomers reach that stage—before they pass away dead broke and perfectly preserved—they will make fundamental changes to our domestic economy.

First, they will exhaust certain resources, making them unavailable for future generations. Social Security is projected to be broken within two decades—and this assumes extremely rosy (some might say delusional) assumptions. Any Millennial that thinks they’re going to collect from the same Social Security system they’re currently paying into is in for a horrible surprise. Social Security is broke, and within a decade expenditures will exceed revenues. And finally, the Boomers’ spending habits will transform, or completely destroy, many of today’s dominant industries. McMansions, SUVs, big box stores—these products and industries will vanish as Boomers expend their wealth and become the dominant economic force in our country.

As the saying goes, making predictions is hard—especially about the future. But the predictions outlined in this show are simply continuations of trends already at work in today’s economy and culture. We have seen it coming for years, and now it’s finally here. If there is any silver lining, it’s that the Millennial generation seems to have values and temperaments more in line with their grandparents than with their parents.

The Generational Parade: The Greatest Generation to the Millennials


♫ Doo doo-doo doo doo ♫


That’s, of course, the sound a parade makes, and this week we spent time discussing the Generational Parade. If you’re not familiar with the Generational Parade, you should be: It not only affects every aspect of your life, but you’re marching in it right now. We all are. Normally, I march somewhere near the middle, but today I’ve got my tasseled hat and marching baton, and I’m leading this parade. That’s me: Grand Marshal Garvens. There is a lot to cover, so sit back, settle in, and enjoy the procession.

At the head of the parade marches the Greatest Generation—those born between 1901 and 1924. They were raised during the Great Depression and went on to fight in World War II. Today there are only between 5-8 million members of this generation left, and we lose about 8,000 of them each day.

Immediately behind the Greatest Generation is a smaller generation: the Silent Generation. The uncertainty and insecurity resulting from World War I and the Great Depression caused families to have fewer children. Their impact and influence of America’s culture and economy is minor. They are, seemingly, mere placeholders for the most important generation of the modern world: the Baby Boomers.

The Boomers were, until the Millennials, the largest generation this country had seen. The vast numbers of their parents, the Greatest Generation, and the sense of security brought by the conclusion of World War II, propelled this generation’s numbers up to 76 million. Their entry into the workforce in the mid-1980s, and their subsequent exit beginning in 2006, is the macro-economic reason for the Reagan and Clinton booms and today’s general economic lethargy.

Have you noticed a pattern? Generations alternate between large and small. Once a section of the Generational Parade gets going, its numbers cannot change, and the entire parade cannot stop. The factors shaping today’s economy were, in fact, set in motion decades ago. Today’s economy—its labor force, its supply, its demand—is shaped by the needs, wants, and purchasing power of its population, and its population is composed simply of its generations in aggregate.

The largest generation active in today’s economy, the Baby Boomers, have reached the peak of their earning and productive power and are starting to diminish. Those succeeding the Baby Boomers, Generation X, do not have the numbers necessary to replace the Boomers. This is why we are, at present, in economic purgatory. Wages are stagnant, economic growth is anemic, and the housing market is taking years to recover. There simply are not enough workers and consumers to replace those who are exiting the labor force and reigning in their spending habits as they prepare for retirement.

Following the pattern of the last century, we can expect a marked economic recovery sometime around 2020. This is when members of the Millennial Generation will begin entering their most productive years (ages 40 through 60). Their vast numbers—over 80 million!—will not only sufficiently replace Generation X, but will exceed even the Boomers. This will spark the economic recovery that has remained elusive since 2008.

But 2020 is a long way off. When you’re watching a parade pass by, waiting for a particular section to reach you, it seems to just crawl. Although I anticipate an economic recovery in 2020, I urge everyone to get their financial houses in order now. This includes:


  • Eliminating your debt
  • Hoarding your cash:
  • Living with less
  • Working harder now


Over the coming months, I’ll be talking more about prudent financial planning. It will make a good antidote to the coming holiday season spending splurge and subsequent New Year’s hangover.

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