Essay No. 3: Age, Birth Year and Wealth

The Demographics of Wealth
How Age, Education and Race Separate Thrivers from Strugglers in Today's Economy
Essay No. 3: Age, Birth Year and Wealth

Executive Summary

Although there may be downsides to old age, those 62 and older can take heart in knowing that the odds are in favor of their being wealthier than younger people. And the gap has widened considerably over the past quarter-century—in favor of old people.  That said, being old isn’t what it used to be.  Baby boomers, who are now retiring in droves, are likely to be less well-off than their “old” counterparts in the two previous generations. And it looks as if members of the next two generations — Generation X and Generation Y (the millennials) — might also end up less  wealthy than the generation before them.

These are just some of the connections between age and wealth that were found in researching this  essay—the third—in our “Demographics of Wealth” series. (The first looked at the link between race/ethnicity and wealth. The second examined the connection between education and wealth.) All of the essays are the result of our analysis of data collected between 1989 and 2013 by the Federal Reserve for its Survey of Consumer Finances. More than 40,000 families were interviewed by the Fed over those years.

For this essay, we looked at age in two ways: where a person stands in the life cycle (young, middle-aged or old) and how birth-year cohorts stack up against one another.  This latter approach allows us to make some comparisons of  generations, from “the greatest generation” of WWII fame to the millennials of today.

Among our findings:

• The median wealth of old families (headed by someone at least 62) rose 40 percent between 1989 and 2013, from just under $150,000 to about $210,000. The median wealth of a middle-aged family (40-61) in 2013 was 31 percent lower than in 1989, declining from $154,000 to about $106,000. The median wealth of a young family dropped more than 28 percent, from $20,000 to just over $14,000.  (All figures are adjusted for inflation.)   
• The explanations for this growing gap are difficult to pin down.  The lack of education does not appear to be to blame, given that each succeeding generation is better-educated than the previous one. Younger families could be losing ground, in part, because they are more racially and ethnically diverse than ever before—and  we know that race- and ethnicity-based disadvantages continue to loom large in our society.
• Baby boomers could be faring worse (not just in wealth, but income) because there are so many of them.  They’ve had to compete more for jobs, housing, investment opportunities, etc., than did the less-numerous generation before them. That so-called silent generation (born 1925-1944) was relatively small because birth rates dropped during the Great Depression; the “scarcity” of people then worked to their advantage during the post-WW II economic boom.

Read all the essays and watch all the videos in this series »