Baby boomers are less bullish on ETFs than younger generations, research finds — with good reason

In spite of continuous financier need for exchange-traded funds, child boomers seem bucking that pattern, brand-new research study reveals. Professionals state there might be a great factor for it.

Just 6% of surveyed child boomers– those born 1948-1964– state they prepare to “substantially increase” their ETF financial investments in the next year, according to a brand-new research study from Charles Schwab. That compares to 32% of millennials– those born 1981-1996– and 20% of Generation X, born 1965-1980.

Boomers are likewise the generation least most likely to state they are open to putting their whole portfolio in ETFs in the next 5 years, with 15%, versus 66% for millennials and 42% for Gen X.

Schwab’s research study into ETF investing has actually been continuous for more than ten years. In 2025, it gathered actions from 2,000 financiers: 1,000 who take part in ETFs and another 1,000 who do not. From that sample, 16% were boomers, 35% were Gen X and 43% were millennials.

At the exact same time, child boomer homes were the biggest share of shared fund owners in 2024, at 35% according to a different report from the Investment firm Institute. The next-largest shared fund– owning family generations were Gen X, at 28%, and millennials, at 25%.

And therein lies the friction: Infant boomers own a great deal of shared funds– and most likely have for a long period of time, stated Dan Sotiroff, senior expert on passive techniques research study at Morningstar. While on the surface area it would appear they must offer their shared funds and purchase equivalent ETFs since they cost less and are tax effective, specialists state not so quick.

” On the surface area, the response is most likely yes,” that they must change their shared fund possessions to comparable ETFs, Sotiroff stated.

” However if you dig a little much deeper, the response may be no,” he stated. That relocation might show suddenly costly.

ETFs started getting traction in the 2000s as a method to purchase a fund with a mix of underlying financial investments, comparable to their cousin, shared funds. While lots of shared funds are actively handled– significance specialists are at the helm choosing the financial investments– most ETFs are passively handled since they track an index, and efficiency is based upon that of the index.

Normally, the benefit with ETFs is their lower expense, tax performance and intraday tradability. Since Sept. 30, ETFs held $12.7 trillion in possessions, up from $1 trillion at the end of 2010, according to Morningstar Direct.

While shared funds’ possessions are much greater at $22 trillion, more cash is leaving them than entering.

This year through Sept. 30, shared funds saw an outflow of $479.4 billion, compared to ETFs taking in $922.8 billion in brand-new cash, Morningstar information programs.

Boomers, who vary in age from 61 to 77 and were mainly the generation that started utilizing shared funds in earnest to purchase the stock exchange, may be resting on funds they have actually owned for several years, if not years.

If they have actually held those funds in a 401( k) or specific retirement account, selling and purchasing an ETF is not a taxable occasion since gains are tax-deferred and any withdrawals typically are taxed as common earnings (or are tax-free in a Roth) in retirement.

However if those shared funds remain in a brokerage account– and have actually been for a long period of time– the owner might be resting on considerable capital gains, which undergo tax. That suggests a prospective tax costs that has all type of consequences if you’re amongst the older boomers.

” If you have actually put, state $20,000 into a shared fund years back and it’s now worth $70,000 or $80,000, if you go and offer, that’s a substantial capital gain,” stated licensed monetary organizer Douglas Kobak, the principal and creator of Main Line Group Wealth Management in Park City, Utah.

Presuming you have actually owned the fund for more than a year, the development would be taxed at a long-lasting capital gains tax rate of 0%, 15% or 20%, depending upon your adjusted gross earnings. Otherwise, it’s taxed at common earnings tax rates.

In addition to a prospective tax costs, Kobak stated, that gain might press the financier into a greater tax bracket, which features ramifications for retired people registered in Medicare.

Income-related month-to-month modification quantities, or IRMAAs as they’re called, are contributed to the basic premiums for Part B outpatient care protection and Part D prescription drug protection for enrollees with greater earnings.

In 2025, IRMAAs use to earnings above $106,000 for single tax filers and $212,000 for couples submitting collectively. (Next year’s specifics have actually not been launched yet.) The greater the tax bracket, the higher the additional charge quantity. And, your income tax return from 2 years previously is utilized to figure out whether you pay IRMAAs.

Furthermore, if you would be offering an actively handled shared fund for a passively handled ETF, keep in mind that its efficiency will depend upon that of the index it tracks, for much better or even worse.

” It’s truly a concern of, ‘Do I desire that passive technique in [a particular] possession class relative to what’s going on in the economy around me, or am I much better off because active shared fund?'” stated CFP William Shafransky, a senior wealth consultant with Moneco Advisors in New Canaan, Connecticut.