This article takes a look at the 5 brilliant money moves baby boomers are making in retirement. If you wish to check out our detailed analysis of Baby Boomer wealth and retirement, you may go to the 12 Brilliant Money Moves Baby Boomers Are Making in Retirement.
5. Investing in Stocks
Insider Monkey Score: 22
Baby Boomers are making some savvy money moves by investing in stocks. This cohort initiated their investment journey during the prosperous era of the 1980s when the stock market experienced significant success. As of 2023, the Wall Street Journal reports nearly two-thirds of US adults owning equity through individual stocks, retirement savings accounts, or mutual funds.
According to Federal data, Baby Boomers, in particular, hold 56% of mutual-fund wealth and corporate equities. Although over-investing in stocks isn’t prudent given market volatility, it’s essential to allocate a sufficient portion to them to ensure that retirees’ nest eggs continue growing throughout their retirement.
4. Estate Planning and Wealth Transfers
Insider Monkey Score: 23
Baby Boomers have been involved in proactive real estate planning as well as wealth transfers. Skilled attorneys are assisting them in crafting an estate plan designed to optimize tax efficiency, and minimize elements such as estate taxes, inheritance taxes, etc. Another option that is helping Boomers gain tax advantages is opening up a trust.
Trusts allow for the smooth transfer of assets while providing control over how and when beneficiaries receive their inheritances. Another wise move they are making is using gifting strategies to transfer their wealth while they are alive. Strategies such as funding 529 plans and annual exclusion gifts allow for transferring wealth in a rather tax-efficient manner.
3. Entrepreneurship
Insider Monkey Score: 25
Establishing a home-based business is another way Boomers are supplementing their retirement income. Not only does starting a business help seniors gain additional money, but it also allows them to keep busy and utilize their talents and skills to the best of their abilities. According to a survey by Guidant Financial and the small business alliance, this demographic makes up 41% of small business or franchise owners, next only to Generation X.
2. Reverse Mortgage
Insider Monkey Score: 27
In the case of a reverse mortgage, the home is the collateral. Reverse mortgages let Boomers leverage home equity as part of retirement planning and also allows them to age in place. As of fiscal year 2022, 64,489 Home Equity Conversion Mortgages (HECMs) were issued in the US. Even those people who have adequate savings can use this to boost their retirement income.
1. Downsizing
Insider Monkey Score: 29
“Baby boomers have the upper hand in the home-buying market. The majority of them are repeat buyers who have housing equity to propel them into their dream home – be it a place to enjoy retirement or a home near friends and family. They are living healthier and longer and making housing trades later in life.”
– Dr. Jessica Lautz, NAR deputy chief economist and vice president of research.
Baby boomers are being wise with their money by buying smaller homes in affordable areas. Not only does it help them reduce housing costs, but also allows them to cut down on mortgage payments, property taxes, utilities, as well as maintenance costs. As quoted by AARP, 51% of people aged 50 and above are set to downsize their homes beginning in late 2024. With more homes put up for sale, the US housing market will likely see home prices coming down and 30 million units housing units back on the market.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a peek at 20 Countries with Free Health Care and 15 Most Expensive Medical Treatments/Procedures in the US.
Hedge Fund Resource Center