Generational wealth divide: Boomers’ gains, Millennials’ struggles

A new research from Edward Wolff, an economist at New York University who has long tracked wealth in the United States, showcases a striking generational divide: older Americans are far richer than the young.

His findings, highlighted by Bloomberg Opinion columnist Allison Schrager, show that the gap in net worth between Americans over 75 and those under 35 has grown significantly. Small wonder, Schrager notes, that “everyone hates the Boomers.”

Several economic shifts have tilted the playing field toward older generations. Chief among them is the rise of stock ownership. In 1989, only about a third of Americans held equities; by 2022, nearly six in ten did. This surge was driven largely by the spread of 401(k)-type retirement accounts, which displaced traditional pensions and older, less lucrative forms of saving.

The timing was especially favourable for Baby Boomers, who were the first generation to benefit from 401(k)s in their working years. And with the stock market delivering extraordinary returns — the S&P 500 has risen nearly 20-fold since 1989 — those savings compounded into significant wealth.

Housing: Dividing line

Housing is the other major factor. Between 1983 and 2022, overall US homeownership rose to 67.4%, with the sharpest gains among older Americans. Homeownership among those aged 65 and over jumped more than seven percentage points, while rates among younger households stagnated.

Rising property values, fueled by limited supply and demand for bigger, better homes, further boosted the fortunes of older homeowners. Younger buyers, meanwhile, not only faced higher entry prices but also carried heavier mortgage debt — making the dream of homeownership both more elusive and more burdensome.

Generational inequality, Schrager argues, is not the same as the rich-poor divide. Older Americans did not necessarily enrich themselves at the direct expense of the young. Rather, they had more time for compound returns to work and benefited from being first movers in both housing and stock markets.

In time, younger generations may also build wealth through savings, investments, and eventual inheritance. Still, perceptions of unfairness persist.

Boomers bought homes when they were cheaper, even if interest rates were higher. Government debt, meanwhile, has financed benefits and tax cuts that disproportionately aided older Americans, leaving future costs of Social Security and Medicare to today’s younger workers.

Better off, yet behind

The irony, Schrager points out, is that in absolute terms, young people today are not worse off than their predecessors. On the contrary, median and average net worth have risen across all age groups, particularly in the last five years. By those measures, today’s youth are better off than Boomers were when they were young.

That may be cold comfort, however, for those locked out of housing markets or feeling the weight of student debt. The generational wealth gap is widening, but it is also a reminder that inequality takes different forms. Older Americans may be sitting on outsized fortunes, yet the broader story remains one of rising wealth over time.

As Schrager concludes, young people may yet have their turn. Whether they do so in as prosperous an era as their parents enjoyed remains the unanswered question.

By Sabina Mammadli