The Illusion of the Ownership Generation

The past 50 years have seen an unprecedented rise in home ownership, and for that matter ownership of all manner of financial assets (like stocks). This will probably change, slowly but surely over the next 25 years.

I’ve been writing a bit already about the impact that the country’s demographics have on the investment markets. We saw stock prices and P/E ratios stay much higher for much longer than we ever thought possible for several decades leading up to 2008. Now that baby boomers are going to retire and start selling off their financial assets, we will probably see a reversal.

Here’s a fact. Most baby boomers will blow through their retirement savings far too quickly. How might a baby boomer continue to access their remaining assets for financial support once the investment portfolio is gone? That’s right….A reverse mortgage.

Reverse mortgages aren’t awful or evil financial instruments. They can be great for someone who really needs them, but they do come with one particular caveat – the property will generally need to be sold once the borrower dies to pay off the loan.

All these baby boomers that became part of this huge wave of increased home ownership probably won’t be able to pass those assets on to their heirs. It’s all part of a slow and steady march over the next 25 years toward increased wealth concentration.

As I wrote before, this increased concentration of wealth won’t be apocalyptic. It won’t be a catastrophe. But it will feel a lot better to be on the side where wealth is concentrating rather than on the side of the equation where wealth is dissipating.

It got me to thinking about why preserving assets and passing them on to future generations is so important to so many families (including mine). If an asset isn’t passed on….if it is forced into liquidation…was it ever really being “owned,” or was the asset really being rented. Perhaps this “renting” lasted for an entire lifetime. But if the asset is eventually forced into liquidation and sold to another party at a future date, was the notion of ownership just an illusion?

Photo by Steven Depolo