They're Old, They're Rich and, Too Bad for the Economy, They're Kind of Tight
November 12, 2014 | By Victoria Stilwell
Jon Burkhart was born during the Great Depression. Like many of the so-called Silent Generation, he couldn’t have been more fortunate.
When he and his wife married in 1959, they lived in Texas and saved 10 percent of every paycheck. Thanks to well-timed equity and property investments, the 81-year-old now lives a much different life than the elderly he knew as a child.
“We just invested the money very wisely, some in markets and some in real estate, and as a result we built up a nice little nest egg by the time we were ready to retire,” said Burkhart, who lives at the Arbor Acres retirement community in Winston-Salem, North Carolina.
The median net worth for the oldest Americans has climbed to near the top compared with other age groups from near the bottom just two decades ago, based on the Federal Reserve’s Survey of Consumer Finances. This shift in buying power may not be a positive development for the economy as prime-age workers typically spend more than their elders.
The Silent Generation, born between 1928 and 1945, has benefited from improved health, a more generous social safety net, an exit from the job market ahead of the past recession and rebounding stock and home values. Combined with a diversified approach to investing, that’s made them “the richest old generation we’ve ever seen,” said William Emmons, a senior economic adviser at the Federal Reserve Bank of St. Louis. “They are in the sweet spot.”
The median family net worth of Americans 75 and older was $194,800 last year adjusted for inflation, compared with $130,900 in 1989, the Fed data show. Members of the Silent Generation are currently about ages 69 to 86.
With the youngest of the group eligible to start retirement in 2007, they had some protection against the largest financial downturn in the post-World War II era. The title of richest ever will probably go unchallenged for now as the hit to net worth for the two subsequent generations -- late-wave baby boomers and much of Generation X -- will be difficult to recoup before those groups begin to leave the workforce, Emmons said.
Increased net worth of today’s elderly may not translate into a boon for consumer spending, he said. While new retirees may release pent-up demand for travel and restaurant meals, that behavior usually doesn’t last for most people.
JPMorgan Chase & Co. found that household spending peaks at age 45 and then falls in every category except health care, dropping about 43 percent by the age of 75.
Impact on Economy
“The overall wealth numbers are going up, but they’re not necessarily translating into spending,” Emmons said. “That’s one of those implications of this aging population that we need to think more about.
The term Silent Generation was coined by Time Magazine in a 1951 article as the group was coming of age. It described the generation as “working fairly hard and saying almost nothing,” one that “does not issue manifestos, make speeches or carry posters.”
The generation came of age at a time when the U.S. and global economies were picking up.
From 1962 through 1991, when mid-wave Silent Generation members were in their prime working years, gross domestic product grew an average of 3.5 percent a year. Since then, GDP has expanded 2.6 percent a year.
“They were beneficiaries for part of their early working lives of what we now would characterize as a rapidly growing economy,” said Richard Fry, a senior economist at Pew.
The homes and financial assets they acquired as they aged saw outsized price gains over the decades. Someone putting money in the Standard & Poor’s 500 Index (SPX) at the start of 1977 would have seen that investment grow by almost 14 times on the last day of December 2007, the month the last recession started.
Meanwhile the Federal Housing Finance Agency’s home price gauge has risen 472 percent since 1975, when the earliest data is available.
Burkhart’s timing in the real estate and stock markets was particularly, and admittedly, fortuitous. After a 30-year career producing and directing live television, he and his late wife Elizabeth, moved to Maui, Hawaii, where they had bought property in the 1980s.
They sold the house for a 300 percent profit around 2008 and invested the money in mutual funds as the S&P 500 Index was approaching an almost 13-year low, he said. “It was the most fortunate timing you could imagine,” Burkhart said. “There’s no way you can plan on that.”
Federal outlays on programs benefiting those 65 and older also became more generous over the decades. They rose to $27,975 in 2011 per capita adjusted for inflation from about $4,000 in 1960, according to a report this year from the Urban Institute. As a share of GDP, those expenditures climbed to 7.5 percent from 2.1 percent over that time frame.
Consequently, 9.5 percent of Americans 65 and older were in poverty in 2013, lower than any other age group, according to the U.S. Census Bureau. That compares with 35 percent in 1959, when they had the highest poverty rate.
Back then, “the poor people were old,” said Neil Howe, a demographer and president of Saeculum Research in Great Falls, Virginia. “That’s a really fascinating contrast with today.”
The establishment of Medicare and Medicaid has increased access to health care, translating into longer lives for many older Americans. In 2009, a 65-year-old could expect to live another 19.2 years, compared with 12.2 years in 1930.
The increased life expectancy makes the added wealth that much more important.
“People are living so much longer, and they’re having to make that income and those pensions last a really long time,” said Kimberly Acquaviva, an associate professor at the George Washington University School of Nursing in Washington, who also serves on the National Advisory Council on Aging.
Stretching those savings has become more challenging in the aftermath of the recession, as some older Americans relying on fixed-income investments cope with yields on government and corporate debt near historical lows.
Still, the boon during their high-savings years has helped keep them afloat, said Howe.
“The Silents have done very well, and a lot of it has just been their location in history,” he said. “They planned ahead, they were risk averse, they played by the rules and the system worked for them.”
Cecilia Fishbein, 88, lives in the Stratford Court of Boca Pointe senior living community in Boca Raton, Florida, where she enjoys dining with friends, playing black jack, surfing the Internet and listening to the news.
She grew up during the Depression, married her late husband at 20, and together they saved and planned for their daughters’ educations.
“You can’t spend it all, you have to think of the future,” she said. “We lived comfortably -- we weren’t millionaires -- but we lived comfortably.”