How to Get Rich: The One Big Secret

NEW YORK (MainStreet) — What does it take to succeed financially? Try to be born lucky, just as a long period of prosperity begins.

O.K., hard work and good judgment pay off, too. But a study by the Federal Reserve Bank of St. Louis finds that America's most secure generation, today's 70- and 80-somethings, can credit luck for a good part of their financial well-being.

"Americans in their 70s and 80s have earned more and are wealthier than the baby boom generation — for the simple reason they were born at the right moment in history," says a review of the study by the Center for Retirement Research at Boston College.

"For example, for households who are currently at least 70 years old, inflation-adjusted incomes increased 28% between 1989 and 2010, and incomes rose by more than 60% for those in their 60s. But during that time, incomes fell slightly for younger households."

That's no reason for the generations that followed to despair. Key elements of financial success, such as thrift and investing stick-to-itiveness, can help make up for the shortcomings of being born in less-than-ideal times.

But if you had your choice, it would be best to be born at the just the right moment — assuming that finances and not, say, the availability of cable TV, iPhones and modern medicine were your main concerns.

So, what worked for that lucky generation? The key was to arrive at adulthood just after World War II. A 20% decline in births during the Great Depression left workers in short supply in those post-war years, leading to high demand that boosted pay and provided good job security.

Also, the economy took off in the post-war era. Decades later, post-war programs like Medicare helped stabilize older folks' incomes through the Great Recession, which was terribly damaging to younger generations.

The housing bust of the past decade was more damaging to younger generations who had a high percentage of their wealth tied up in their homes. The lucky generation was not as vulnerable, largely because, having owned their homes longer, they carried less mortgage debt. Since many in the older generation were retired, they have not been hit hard by the high unemployment of recent years, and they could rely on stable income sources like Social Security and pensions.

The older generation also the advantage of a habit of saving, which allowed many to benefit from the big gains in financial assets such as stocks and bonds. Younger generations tend to save less. They either came along too late to benefit from big gains in asset values, or they had too little invested to enjoy big returns.

Some of the keys to success for the older generation are simply not available for many younger folk. There's now an excess of workers, not a shortage. There are fewer union jobs, which tended to pay better. And a much smaller percentage of younger workers have traditional pension plans.

But younger folk can apply some lessons from the older generation's experience: Don't tie too much money up in your home, cut expenses to save more, and stick with investing for the long term to benefit from those unpredictable booms.

--Written by Jeff Brown for MainStreet

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