Baby Boomers, defined as those Americans born roughly between 1946 and 1964, were born under a lucky star. At least that’s what it looked like to the world back then. They were destined to be financially successful, politically active, and leaders of a bright future. They indeed accomplished much of what they had dreamed of; many had rewarding careers, achieved impressive levels of income, and experienced abundance in their life. This large generational cohort of about 75 million folks worked hard and enthusiastically and was able to enjoy their increased affluence. One thing many Baby Boomers might have missed the mark on, though, is the importance of planning for the future. Financial awareness was a topic that most had to face alone throughout the course of their active years in workforce, and not surprisingly, the majority ended up unprepared and misled.
Based on a recent Wall Street Journal study, around 15 million American households comprised of people between age 55 and 70, lack sufficient resources to maintain their quality of life once they retire. Many are trying to pay off their children’s education and/or are using their savings to care for elderly parents. On average, for a household of two, their 401(k) retirement funds will bring in a median income of under $8,000 a year! Does that sound a bit scary? Baby Boomers were the first generation of Americans who were encouraged (some would say forced) to manage their own retirement savings. Without proper guidance they made many mistakes; some invested and lost money, some didn’t stash enough away, or they waited too long to take a lead in this area. Common in all cases was they missed out on the compounding effect that is key to wealth accumulation. Under the current circumstances, many will have to keep working even in advanced age and rely more on their kids for financial support.
It’s impossible to think of the American dream and not to think of Baby Boomers and the promise of a new era. Among the many peaks reached by this ambitious generation, home ownership scores high! Did the home play any role in Baby Boomer’s wealth creation and management? You bet it did. Home ownership, truly, is the primary way Baby Boomers were able to create wealth and homes is where most of their wealth is concentrated today. Currently, the median Baby Boomer has 75% of their net worth tied up to the value of their home. Although it’s great that home ownership produced the bulk of the wealth for them, being scarcely diversified outside the home and lacking liquidity poses its challenges and calls for effective solutions.
Debt-based tools cannot properly address this issue because – as we saw in our “Why Should You Share?” miniseries – debt implies payments, current or accrued interest, and burden. Debt rarely helps when the objective is to grow and manage liquidity. Our equity sharing program – EFI for Equity Access – is designed to allow Baby Boomers – and any homeowners with sufficient equity in the home – access the wealth available under their own roof, without pressuring them with deadlines and re-payment schedules. In many ways, Equity Access is a tool designed to liberate individuals from the weight of debt and help them lead their way to responsible financial freedom. Equity sharing in our mind is an alternative for those who are looking to gain liquidity from an illiquid asset and understand that the value of their home is only helpful to them once it’s accessed. Thank you for being here one more time. As always, we hope to see you again next week, same time, same place!