A report from the Wall Street Journal examines the role that stocks play in Baby Boomers and other generations’ portfolio. Two in three Americans over the age of 65 hold equity in the form of stocks or mutual funds.. This is an even greater number than before the 2008 crash, and with good reason.
With interest rates so low from 2008 to 2020, stocks were one of the few ways that retirees could expect respectable growth. However, this violates the traditional rule of shifting towards bonds and fixed-income securities as one ages, sometimes summarized as “100 minus age.”
Baby Boomers in particular have a difficulty parting with their stocks since they have performed very well in the long term. Even with major recessions and crashes, the S&P 500 has managed to keep a steady growth when averaged over time. Tech stocks in particular have been driving growth since 2008. Rising Federal Reserve rates are pushing up savings rate, around 4% APY for some banks. This is making fixed income more interesting to consumers.
Baby Boomers were also been the first generation of stocks being marketed to the masses. Brokers like Charles Schwab made stocks easier to purchase over the phone. Index funds from Vanguard made picking individual stocks no longer necessary to reap the benefits of investing.
With the rise of smartphone centric investment apps like Robinhood, the new generations of Millennials and Generation Z have also found stocks more accessible. The economy, upcoming elections, and Federal Reserve rates will all play a role in how people choose to allocate their funds. As the market recovers, more disposable income is invested in stocks. In a recession, consumers will keep their money liquid in savings accounts.
This is not financial or investment advice. Always conduct your own research and consult with a financial advisor to your own specific situation.
