Once the money was set aside, rising markets did the rest.
“More and more, the accumulation of wealth takes place through the boom in asset prices,” Bauluz said.
By contrast, generations older than the baby boomers weren’t as lucky timing the market. Hit by inflation and stock losses in their middle and later years, they couldn’t rely on capital gains to inflate their wealth—and needed to be far more conservative about spending in retirement.
The study found Americans born in the first two decades of the 20th century lost money in equities and housing overall, especially in the 1970s. They had to build up wealth the old-fashioned way: by setting aside money from each paycheck and saving it.
Will millennials’ wealth path resemble that of the boomers, or earlier generations? Bauluz worries the post-1980 boom was a one-off event that won’t repeat itself.
“There’s not a lot of room for this mechanism to be as powerful in the future,” Bauluz said. “My intuition is that we are close to the limit.”
This article was provided by Bloomberg News.