Assets and Debt across Generations

Previous research has documented both similarities and differences in the economic experiences of existing birth cohorts. For example, although college-educated members of more-recent generations have so far had similar life-cycle income patterns to those of their predecessors, they are much less likely to own homes. Among individuals without a college education, there is both an income gap and a homeownership gap. This homeownership gap does not appear to stem from differences in location choices. In this blog post, we complement our existing work by examining how cohorts differ along the wealth dimension.

Generational Wealth Data

We draw on the Survey of Consumer Finances (SCF) as our source of wealth data. The SCF is a triennial survey conducted by the Federal Reserve Board to gather detailed information about the financial circumstances of households. It collects data on various aspects of household finances, including income, assets, debts and other demographic characteristics. We use the survey years 1989 through 2019.We stop in 2019 to avoid the pandemic period, which was characterized by a lot of atypical financial conditions that may not reflect long-term trends or underlying economic fundamentals. Based on year of birth, we classify respondents (the individuals answering the household survey) as belonging to one of three birth cohorts: baby boom (1946-1964), Generation X (1965-1980) and millennial (1981-1996).The sample sizes for this study were 545 baby boomers, 2,096 Gen Xers and 1,215 millennials. For each cohort, we examine only the respondents’ wealth data at age 30, so that we are comparing them at similar points in their life cycles.This is similar to work done for the Open Vault blog, but the focus here is more on decomposing the sources of wealth, specifically among people at age 30. All dollar values are converted to 2019 dollars.

Decomposing the Sources of Household Wealth

The table below summarizes the mean, or average, asset holdings of each cohort, in which assets are divided as follows. Financial assets include the values of checking and savings accounts, stocks, bonds and retirement accounts. Nonfinancial assets include the values of their primary residence, vehicles, business interests and other real estate. The table also highlights three subtypes of assets: liquid assets and retirement accounts, which are part of financial assets, and home value, which is part of nonfinancial assets. Note that this is not a complete breakdown of total assets and that some categories are omitted here.

The table shows that in terms of total assets, Gen Xers held the most at age 30, with about $201,000, and baby boomers at the same age held the least, with about $135,000. Breaking this down into different asset subtypes reveals that later generations held more liquid wealth and also had more wealth in their retirement accounts at age 30. The average millennial held about $12,000 in retirement wealth, compared with the roughly $5,000 held by the average baby boomer.

In terms of nonfinancial assets, Gen Xers had the highest average value of their primary residence. With real estate in particular, some of the differences can be explained both by the variation in home values during the year when each generation was 30 (for example, real house values generally appreciate over time) and by disparities in how many members of that particular cohort held that asset at all (for example, millennials at age 30 were less likely to own a house compared with baby boomers and Gen Xers at age 30).

The table below summarizes the mean debt holdings of each cohort. We focus on two types of debt: mortgage debt and education loans.

The patterns reveal a clear increase in debt holdings for more recent generations. Specifically, both Gen Xers and millennials held more debt than baby boomers. The reasons, though, are different. Gen Xers had the highest level of mortgage debt, consistent with the fact that they also had the highest level of home values. However, there are stark differences in educational debt: Millennials had nearly twice as much as Gen Xers. Thus, the level of debt holdings is what sets baby boomers apart from later generations; in contrast, the types of debt differentiate Gen Xers from millennials.

In the SCF, we can also subtract a household’s debts from its assets to obtain a measure of net worth. We report the mean and the median (the net worth for which half the households are above it and half are below it) for each generation in the table below.Up to now, we used means because many of the components had zero medians; that is, the majority of households didn’t own or owe anything in these components. This is not as significant of an issue with net worth because it combines everything.

Gen X, with their relatively high asset levels and moderate debt levels, had the highest net worth at age 30. The median baby boomer turns out to be similar to the median millennial; even though millennials had a higher value of assets than baby boomers at the same age, their higher level of debt brings them back to around the overall net worth of baby boomers.

Notes

1. We stop in 2019 to avoid the pandemic period, which was characterized by a lot of atypical financial conditions that may not reflect long-term trends or underlying economic fundamentals.
2. The sample sizes for this study were 545 baby boomers, 2,096 Gen Xers and 1,215 millennials.
3. This is similar to work done for the Open Vault blog, but the focus here is more on decomposing the sources of wealth, specifically among people at age 30.
4. Up to now, we used means because many of the components had zero medians; that is, the majority of households didn’t own or owe anything in these components. This is not as significant of an issue with net worth because it combines everything.