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Charting The Growing Generational Wealth Gap

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Charting The Growing Generational Wealth Gap

The Growing Generational Wealth Gap

As young generations usher into adulthood, they inevitably begin to accumulate and inherit wealth, a trend that has broadly remained consistent.

But what has changed recently is the rate of accumulation.

In the U.S., household wealth has traditionally seen a relatively even distribution across different age groups. However, over the last 30 years, the U.S. Federal Reserve shows that older generations have been amassing wealth at a far greater rate than their younger cohorts.

As the visual above shows, the older have been getting richer, and the younger have been starting further back than ever before.

By Generation: Baby Boomers Benefit & Millennials Lag

To examine the proportion of wealth each generation holds, it’s important to clearly define each age group. Though personal definitions might differ, the U.S. Federal Reserve uses a clear metric:

GenerationBirth YearsAge (2020)
Silent Generation & Earlier1945 and earlier75+
Baby Boomers1946–196456–74
Generation X1965–198040–55
Millennials1981–199624–39

Relative to younger generations growing up, the Silent Generation and Greatest Generation before them have seen a decreasing share of household wealth over the last 30 years.

However, the numerical levels have been relatively stable. For these combined generations, total wealth has gone from $16 trillion in 1989 to $19 trillion in 2019, with a peak of $27 trillion in 2007. Considering this cohort has understandably shrunk over time—from an estimated 47 million to 23 million in 2019—their individual shares of wealth have actually increased.

Immediately following are the Baby Boomers, who held more than half of U.S. household wealth towards the end of 2020. At $59 trillion, the generation holds more than ten times the amount held by a comparative number of Millennials.

GenerationWealth (2019)Population (2019)Wealth/Person
Silent Generation & Older$18.8 Trillion23.0 Million$817,391
Baby Boomers$59.4 Trillion71.2 Million$834,270
Generation X$28.6 Trillion65.0 Million$440,000
Millennials$5.0 Trillion72.6 Million$68,871

With $29 trillion held in 2019, Generation X has also been gaining in wealth over the last 30 years. It’s good enough for five times the wealth of Millennials, though at just $440k/person, they’ve fallen far behind Baby Boomers in rate of growth.

Finally, trying to catch up to their older cohorts are Millennials, who held the least amount of household wealth ($5 trillion) for the greatest population (73 million) in 2019, an average of just under $69k/person.

For a direct comparison, it took Generation X nine years to climb from their start of 0.4% of household wealth in 1989 to above 5%, while Millennials still haven’t crossed that threshold. But it’s not all doom and gloom for Millennials. Their rate of growth is starting to rise, with the generation’s level of wealth climbing from $3 trillion in 2016 to $5 trillion in 2019.

By Age: A Growing Share for 55+

Though the generational picture is stark, the difference in U.S. household wealth by age makes the picture of shifting wealth even clearer.

Until 2001, the shares of household wealth held by different age groups were relatively stable. People aged 40-54 and 55-69 held around 35% each of household wealth, retirees aged 70+ hovered around 20%, and younger people aged under 40 held around 10%.

Since that time, however, the shift in wealth to older generations is clear. The 70+ age group has seen their share of wealth increase to 26%, while the share held by ages 55-69 has grown from 35% to almost half.

But not all ages are seeing an increasing slice of wealth. The 40-54 age group saw its share drop sharply from 36% to 22% between 2001 and 2016 before starting to recover towards the end of the decade, while the youngest cohort now hover around just 5%.

Breaking down that wealth by components is even more eye-opening. The 39 and under age group holds 37.9% of their assets in real estate, the largest share amongst any age group (and concentrated in the hands of fewer people) while older age groups have their wealth spread out across real estate, equities, and pensions.

Assets Held by Age (Percent of Total, 2020)70+55–6940–54≤39
Real estate21.6%20.5%27.6%37.9%
Consumer durables3.8%3.6%5.2%9.4%
Corporate equities and mutual fund shares24.6%23.1%18.6%8.1%
Pension entitlements16.3%25.0%21.9%21.0%
Private businesses7.9%9.7%12.1%8.1%
Other assets25.8%18.1%14.7%15.5%

But the difference is as much in assets as it is in opportunity. In 1989, Baby Boomers and Generation X under 40 accounted for 13% of household wealth, compared to just 5.9% for Millennials and Generation Z under 40 in 2020.

Will the Tide Turn for Generation Z?

As new and accumulated wealth has been built up in older generations, it’s a matter of time before the pendulum starts to swing the other way.

The Millennials age group are expected to inherit $68 trillion by 2030 from Baby Boomer parents. Of course, that payout isn’t going to be even across the board, with wealthier families retaining the bulk of wealth and the majority of Millennials laden with debt.

And with Generation Z (born 1997-2012) starting to come of age, the uneven playing field is making it hard to begin accumulating wealth in the first place.

Since it is in the best interest of societies to have wealthy generations that can drive economic growth, potential solutions are being examined all over the political sphere. They include different taxation schemes, changing estate laws, and potentially cancelling student debt.

Whatever ends up happening, it’s important to track how the distribution of wealth changes over the coming decade, and begin accumulating your personal wealth as best as you can.

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Maps

Where the Ultra-Rich Spend Their Holidays

In this graphic, we visualize the destinations that saw the biggest influx of seasonal centi-millionaire residents in 2022.

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where the ultra-rich vacation

Visualized: Where the Ultra-Rich Spend Their Holidays

There are more than 25,000 centi-millionaires around the world today, forming an elite club composed primarily of founders and heirs of family fortunes.

According to Henley & Partners, most of these individuals—who have more than $100 million in investable assets by definition—split their time between several properties each year.

To explore the destinations that are the most sought-after by the ultra-wealthy, we’ve visualized the cities that saw the biggest influx of seasonal centi-millionaire residents in 2022, using data from Henley & Partners.

Centi-Millionaire Vacation Hotspots

The top three seasonal vacation hotspots of the ultra-rich are found in the United States: Miami, the Hamptons, and Florida’s West Palm Beach.

This may not come as a shock given the concentration of centi-millionaires in the United States, with New York, the San Francisco Bay Area, and Los Angeles being home to the highest number of centi-millionaire residents in the world.

Regardless of where they live year-round, the table below reveals where these elites flock for seasonal getaways in their secondary homes.

RankCity or TownYear-Round Centi-Millionaire Residents, 2022Peak Holiday Month Centi-Millionaire Residents, 2022
1🇺🇸 Miami, Florida160800
2🇺🇸 The Hamptons, New York25700
3🇺🇸 West Palm Beach, Florida64400
4🇫🇷 Paris, France126300
5🇺🇸 Santa Barbara & Montecito, California82200
6🇺🇸 San Diego, California70200
7🇫🇷 Nice, France60200
8🇺🇸 Napa, California28200
9🇵🇹 Golden Triangle, Algarve, Portugal20200
10🇺🇸 Aspen, Colorado6200
11🇺🇸 Carmel-by-the-Sea, California40150
12🇺🇸 Boca Raton, Florida38150
13🇵🇹 Lisbon, Portugal35150
14🇨🇭 Lugano, Switzerland30150
15🇫🇷 Cannes, France20150
16🇫🇷 Antibes, France18150
17🇺🇸 Jackson Hole, Wyoming10150

The data above only considers centi-millionaires vacationing in their secondary residences, therefore excluding hotel stays, holiday rentals, and yachts. Peak holiday months vary for each location.

Beyond the 10 U.S. cities that constitute the top 17 centi-millionaire seasonal hotspots, we come across several French cities on the list, including Paris, Nice, Cannes, and Antibes, as well as Portugal’s Golden Triangle and Lisbon.

Global Centi-Millionaire Trends

According to Henley & Partners’ 2023 Centi-Millionaire Report, the global centi-millionaire population is expected to grow by 38% in the next decade, reaching nearly 40,000 by 2033.

Much of this growth is expected to be seen in countries such as China, India, and Saudi Arabia. China’s Hangzhou and Shenzhen, specifically, are expected to see the highest percentage growth in centi-millionaire populations through 2033, growing by 95% and 88%, respectively.

Despite the rapid growth of the wealthy in the global East, however, it’s notable that many centi-millionaires are still graduating from American universities.

More than half of the top 20 universities with the most centi-millionaire alumni are in the United States, with Harvard, Stanford, and the University of Pennsylvania making up the top three spots.

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