Personal Finance

Charting The Growing Generational Wealth Gap

Published

2 months ago

December 2, 2020

Omri Wallach

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:

Generation	Birth Years	Age (2020)
Silent Generation & Earlier	1945 and earlier	75+
Baby Boomers	1946–1964	56–74
Generation X	1965–1980	40–55
Millennials	1981–1996	24–39

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.

Generation	Wealth (2019)	Population (2019)	Wealth/Person
Silent Generation & Older	$18.8 Trillion	23.0 Million	$817,391
Baby Boomers	$59.4 Trillion	71.2 Million	$834,270
Generation X	$28.6 Trillion	65.0 Million	$440,000
Millennials	$5.0 Trillion	72.6 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+	55–69	40–54	≤39
Real estate	21.6%	20.5%	27.6%	37.9%
Consumer durables	3.8%	3.6%	5.2%	9.4%
Corporate equities and mutual fund shares	24.6%	23.1%	18.6%	8.1%
Pension entitlements	16.3%	25.0%	21.9%	21.0%
Private businesses	7.9%	9.7%	12.1%	8.1%
Other assets	25.8%	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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Investor Education

Ranking Asset Classes by Historical Returns (1985-2020)

What are the best-performing investments in 2020, and how do previous years compare? This graphic shows historical returns by asset class.

Published

2 months ago

November 20, 2020

Jenna Ross

Historical Returns by Asset Class (1985-2020)

Mirror, mirror, on the wall, is there one asset class to rule them all?

From stocks to bonds to alternatives, investors can choose from a wide variety of investment types. The choices can be overwhelming—leaving people to wonder if there’s one investment that consistently outperforms, or if there’s a predictable pattern of performance.

This graphic, which is inspired by and uses data from The Measure of a Plan, shows historical returns by asset class for the last 36 years.

Asset Class Returns by Year

This analysis includes assets of various types, geographies, and risk levels. It uses real total returns, meaning that they account for inflation and the reinvestment of dividends.

Here’s how the data breaks down, this time organized by asset class rather than year:

	U.S. Large Cap Stocks	U.S. Small Cap Stocks	Int'l Dev Stocks	Emerging Stocks	All U.S. Bonds	High-Yield U.S. Bonds	Int'l Bonds	Cash (T-Bill)	REIT	Gold
Ticker	VFIAX	VSMAX	VTMGX	VEMAX	VBTLX	VWEAX	VTABX	VUSXX	VGSLX	IAU
2020*	1.5%	-5.5%	-10.3%	-0.7%	4.9%	-0.5%	2.6%	-0.7%	-16.4%	21.9%
2019	28.5%	24.5%	19.3%	17.6%	6.3%	13.3%	5.5%	-0.1%	26.1%	15.9%
2018	-6.2%	-11.0%	-16.1%	-16.2%	-1.9%	-4.7%	1.0%	-0.1%	-7.7%	-3.2%
2017	19.3%	13.8%	23.8%	28.7%	1.4%	4.9%	0.3%	-1.3%	2.8%	9.3%
2016	9.7%	15.9%	0.4%	9.5%	0.5%	9.0%	2.5%	-1.8%	6.3%	6.6%
2015	0.6%	-4.3%	-0.9%	-16.0%	-0.3%	-2.0%	0.3%	-0.7%	1.6%	-12.3%
2014	12.8%	6.7%	-6.4%	-0.2%	5.1%	3.9%	8.0%	-0.7%	29.3%	-1.2%
2013	30.4%	35.8%	20.3%	-6.4%	-3.6%	3.1%	-0.4%	-1.5%	0.9%	-29.0%
2012	14.0%	16.2%	16.5%	16.8%	2.4%	12.5%	4.5%	-1.7%	15.7%	6.5%
2011	-0.9%	-5.5%	-15.0%	-21.0%	4.6%	4.2%	0.8%	-2.9%	5.5%	5.5%
2010	13.4%	26.0%	6.8%	17.2%	5.0%	10.9%	1.7%	-1.5%	26.6%	26.0%
2009	23.3%	32.7%	24.9%	71.5%	3.2%	35.6%	1.6%	-2.4%	26.3%	20.2%
2008	-37.0%	-36.1%	-41.3%	-52.8%	5.1%	-21.3%	5.5%	2.0%	-37.0%	5.4%
2007	1.3%	-2.7%	6.8%	33.6%	2.8%	-1.8%	0.1%	0.7%	-19.7%	25.8%
2006	12.9%	12.9%	23.1%	26.3%	1.8%	5.7%	0.5%	2.1%	31.8%	19.3%
2005	1.4%	3.9%	9.8%	27.7%	-0.9%	-0.5%	1.8%	-0.5%	8.3%	13.0%
2004	7.3%	16.2%	16.5%	22.1%	1.0%	5.2%	1.8%	-2.0%	26.7%	1.4%
2003	26.2%	43.1%	36.1%	54.7%	2.1%	15.1%	0.4%	-0.9%	33.3%	19.2%
2002	-23.9%	-21.8%	-17.6%	-9.6%	5.8%	-0.6%	4.2%	-0.7%	1.3%	20.8%
2001	-13.3%	1.6%	-23.1%	-4.4%	6.8%	1.3%	4.6%	2.6%	10.7%	-0.4%
2000	-12.0%	-5.8%	-17.1%	-29.9%	7.7%	-4.1%	5.4%	2.5%	22.2%	-9.6%
1999	17.9%	19.9%	23.6%	57.3%	-3.4%	-0.2%	-0.6%	2.0%	-6.5%	-1.7%
1998	26.6%	-4.2%	18.0%	-19.4%	6.9%	3.9%	10.2%	3.5%	-17.7%	-2.4%
1997	31.0%	22.5%	0.0%	-18.2%	7.6%	10.0%	8.9%	3.5%	16.8%	-23.2%
1996	18.9%	14.3%	2.6%	12.1%	0.3%	6.0%	8.3%	1.9%	31.4%	-7.7%
1995	34.0%	25.6%	8.4%	-1.9%	15.3%	16.2%	14.3%	3.1%	10.0%	-1.7%
1994	-1.5%	-3.1%	4.9%	-10.1%	-5.2%	-4.3%	-7.3%	1.3%	0.4%	-4.9%
1993	7.0%	15.5%	28.9%	69.4%	6.7%	15.1%	10.7%	0.2%	16.3%	13.9%
1992	4.4%	14.9%	-14.7%	7.8%	4.1%	11.0%	3.3%	0.6%	11.2%	-8.7%
1991	26.3%	40.9%	8.7%	54.5%	11.8%	25.2%	7.5%	2.5%	31.5%	-12.5%
1990	-8.9%	-22.8%	-27.9%	-16.1%	2.4%	-11.3%	-2.7%	1.6%	-20.3%	-8.3%
1989	25.5%	11.0%	5.6%	56.9%	8.6%	-2.6%	-0.6%	3.7%	3.9%	-6.8%
1988	11.3%	19.7%	22.8%	33.9%	2.8%	8.8%	4.4%	2.1%	8.6%	-19.6%
1987	0.3%	-12.7%	19.3%	9.3%	-2.8%	-1.7%	4.5%	1.3%	-7.8%	19.0%
1986	16.8%	4.5%	67.5%	10.4%	13.9%	15.6%	10.1%	5.0%	17.7%	17.9%
1985	26.4%	26.2%	50.3%	22.9%	17.6%	17.5%	7.0%	3.8%	14.6%	1.7%

*Data for 2020 is as of October 31

The top-performing asset class so far in 2020 is gold, with a return more than four times that of second-place U.S. bonds. On the other hand, real estate investment trusts (REITs) have been the worst-performing investments. Needless to say, economic shutdowns due to COVID-19 have had a devastating effect on commercial real estate.

Over time, the order is fairly random with asset classes moving up and down the ranks. For example, emerging market stocks plummeted to last place amid the global financial crisis in 2008, only to rise to the top the following year. International bonds were near the bottom of the barrel in 2017, but rose to the top during the 2018 market selloff.

There are also large swings in the returns investors can expect in any given year. While the best-performing asset class returned just 1% in 2018, it returned a whopping 71.5% in 2009.

Variation Within Asset Classes

Within individual asset classes, the range in returns can also be quite large. Here’s the minimum, maximum, and average returns for each asset class. We’ve also shown each investment’s standard deviation, which is a measure of volatility or risk.

Return Variation Within Asset Classes Over History

Although emerging market stocks have seen the highest average return, they have also seen the highest standard deviation. On the flip side, T-bills have seen returns lower than inflation since 2009, but have come with the lowest risk.

Investors should factor in risk when they are looking at the return potential of an asset class.

Variety is the Spice of Portfolios

Upon reviewing the historical returns by asset class, there’s no particular investment that has consistently outperformed. Rankings have changed over time depending on a number of economic variables.

However, having a variety of asset classes can ensure you are best positioned to take advantage of tailwinds in any particular year. For instance, bonds have a low correlation with stocks and can cushion against losses during market downturns.

If your mirror could talk, it would tell you there’s no one asset class to rule them all—but a mix of asset classes may be your best chance at success.

Personal Finance

Visualizing How the Pandemic is Impacting American Wallets

57% of U.S. consumers’ incomes have taken a hit during the pandemic. How do such financial anxieties affect the ability to pay bills on time?

Published

3 months ago

October 23, 2020

Iman Ghosh

A Snapshot of U.S. Personal Finances During the Pandemic

If you’ve felt that you’ve needed to penny-pinch more during the pandemic, you’re not alone.

In the past seven months, 42% of U.S. consumers have missed paying one or more bills, while over a third (39%) believe they will need to skip payments in the future.

This visualization breaks down the state of U.S. consumers’ personal finances during the COVID-19 era, and projects into future concerns around savings.

Pandemic Personal Finances: Key Takeaways

Based on data from the doxoINSIGHTS Bills Pay Impact Report across 1,568 sampled households, three themes emerge:

57% of consumers’ incomes have taken a hit in the past seven months
70% have delayed discretionary spending on big purchases
75% continue to be very worried about their future financial health

How do these anxieties translate into day-to-day consequences?

Pandemic Postpones Bill Payments

Unsurprisingly, worrying about personal finances also means that more Americans are deferring their bill payments during the pandemic. However, these vary depending on the type of bill, total amount, and immediate urgency.

Over a quarter (27%) of U.S. consumers report having missed a bill on their auto loans, followed by 26% for utilities and 25% on cable or internet costs.

The average cost of the above three bill types is $258—but that’s still a fraction of the two most expensive bills, mortgage or rent, which come in at $1,268 and $1,023 respectively.

Bill Type	$ Value	% Missed
Auto loans	$374	27%
Utilities	$290	26%
Cable/ Internet	$110	25%
Rent	$1,023	20%
Mobile phone	$88	19%
Mortgage	$1,268	17%
Alarm/ Security	$76	17%
Auto insurance	$181	15%
Dental insurance	$25	14%
Life insurance	$76	13%
Health insurance	$94	10%

Prioritizing Payments

While 20% of Americans say they’ve missed a rent payment over the past few months, what’s even more alarming is that 28% of U.S. consumers believe they will most likely skip paying rent in the future.

Bill Type	% Likely to Skip in Future
Cable/ Internet	29%
Utilities	28%
Rent	28%
Auto loans	26%
Mobile phone	26%
Mortgage	21%
Auto insurance	21%
Alarm/ Security	19%
Dental insurance	16%
Life insurance	17%
Health insurance	15%

Another clear trend is that many Americans are prioritizing insurance payments, particularly health insurance. This is good news during a global pandemic—only 10% have missed paying this bill type, although 15% expect to skip it in the coming months.

According to the report, some U.S. consumers seem to prioritize the bill types which come with strings attached, from late-payment penalties to accrued interest.

While missing a single payment might seem harmless, a pattern of missed payments over time have the potential to negatively impact your credit score.

Enough Savings To Stay Afloat?

Finally, Americans are wary about how much they have stashed away in the bank to weather the tumultuous months ahead.

While unemployment figures are recovering from historic troughs, the fear of losing one’s job remains prevalent. How many months’ worth of savings do U.S. consumers think they have if this were to happen?

# Months	% Responses
7+ months 💰💰💰💰💰💰💰	23%
4-6 months 💰💰💰💰💰💰	15%
1-3 months 💰💰💰	27%
<1 month 💰	35%

No one knows how long the COVID-19 chaos will last. In order to adapt to this economic uncertainty, consumer priorities are shifting along with their tightened budgets.