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+|
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|
|Corporate equities and mutual fund shares||24.6%||23.1%||18.6%||8.1%|
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.
Ranked: The Best and Worst Pension Plans, by Country
Which countries are best equipped to support their elderly citizens? This graphic compares pension plans around the world.
The Best and Worst Pension Plans Worldwide
Each year, millions of people around the world leave the workforce to retire.
But as the global population grows older, and the COVID-19 pandemic accelerates the already rising number of retirees, there is still a large degree of variance in the quality of public pension plans around the world.
Which countries have invested in robust public pension programs, and which lag behind?
This graphic, using 2021 data from Mercer CFA Institute Global Pension Index, compares retirement income systems worldwide.
How the Index Ranks Pension Plans
Because a country’s pension system is unique to its particular economic and historical context, it’s difficult to draw direct comparisons. However, there are certain elements that pension experts see as universally positive, and that lead to better financial support for older citizens.
As with previous rankings, Mercer and the CFA Institute organized these universal elements into three sub-indexes:
- Adequacy: The base-level of income, as well as the design of a region’s private pension system.
- Sustainability: The state pension age, the level of advanced funding from the government, and the level of government debt.
- Integrity: Regulations and governance put in place to protect plan members.
These three measures were used to rank the pension system of 43 different countries, representing more than 65% of the world’s population. This year’s iteration of the index notably includes four new countries—Iceland, Taiwan, UAE, and Uruguay.
The Full Ranking
When it comes to the best pension plans across the globe, Iceland, the Netherlands, and Denmark have the top three systems.
|🇭🇰 Hong Kong||61.8||55.1||51.1||87.7|
|🇳🇿 New Zealand||67.4||61.8||62.5||83.2|
|🇸🇦 Saudi Arabia||58.1||61.7||50.9||62.5|
|🇿🇦 South Africa||53.6||44.3||46.5||78.5|
Iceland’s system ranks high across all three sub-indexes. The country offers a state pension with two components: mandatory contributions from both employees and employers, and optional contributions to state-approved pension products.
Its system has a high contribution rate, which ultimately results in a generous state pension that retirees in Iceland can tap into. The country also has a relatively low gender pension gap, meaning the difference between the average female pension versus male pension is relatively small—especially compared to other OECD countries.
On the opposite end of the spectrum, the Philippines, Argentina, and Thailand scored the lowest on the ranking.
Thailand scores particularly low in the adequacy category, with a score of 35.2. To increase its score, Thailand could increase the minimum payments for its poorest demographic and include more employees in occupational pension schemes.
Recommendations for Better Pension Plans
According to the index, countries seem to be steadily improving their pension systems. From 2020 to 2021, the average score of the overall index increased by 1.0.
With an average of 60.7, the index shows that most countries’ systems have some good features, but they also have some significant shortcomings that could be addressed by the following recommendations:
- Boosting adequacy by increasing coverage, and including more employees in private pensions systems.
- Increasing sustainability by adjusting retirement pension age to reflect increasing life expectancy, and promoting higher workforce participation from older citizens.
- Raise integrity by introducing policies that reduce the gender pension gap and discrepancies amongst minorities.
Countries that implement even a few of these changes could make a huge difference for their next generation of retirees—and those that don’t could be in trouble in the near future.
Is $1 Million Enough for Retirement in America?
The average American needs their retirement savings to last them over a decade. In which cities is $1 million enough to retire comfortably?
Is $1 Million Enough for Retirement in America?
The average American needs their retirement savings to last them 14 to 17 years. With this in mind, is $1 million in savings enough for the average retiree?
Ultimately, it depends on where you live, since the average cost of living varies across the country. This graphic, using data compiled by GOBankingRates.com shows how many years $1 million in retirement savings lasts in the top 50 most populated U.S. cities.
Editor’s note: As one user rightly pointed out, this analysis doesn’t take into account interest earned on the $1 million. With that in consideration, the above calculations could be seen as very conservative figures.
How Long $1 Million Would Last in 50 Cities
To compile this data, GOBankingRates calculated the average expenditures of people aged 65 or older in each city, using data from the Bureau of Labor Statistics and cost-of-living indices from Sperling’s Best Places.
That figure was then reduced to account for average Social Security income. Then, GOBankingRates divided the one million by each city’s final figure to calculate how many years $1 million would last in each place.
Perhaps unsurprisingly, San Francisco, California came in as the most expensive city on the list. $1 million in retirement savings lasts approximately eight years in San Francisco, which is about half the time that the typical American needs their retirement funds to last.
|City||How long $1 would last (years)||Cost-of-living Index||Annual expenditures
(after using annual Social Security)
|El Paso, TX||40.3||81.4||$24,789|
|Oklahoma City, OK||37.3||85.4||$26,824|
|Kansas City, MO||36.7||86.2||$27,231|
|San Antonio, TX||34.4||89.7||$29,011|
|New Orleans, LA||30.8||96.3||$32,367|
|Forth Worth, TX||29.3||99.8||$34,148|
|Colorado Springs, CO||27.3||104.5||$36,538|
|Virginia Beach, VA||26.9||105.6||$37,097|
|Las Vegas, NV||24.8||111.6||$40,149|
|San Diego, CA||15.4||160.1||$64,816|
|Long Beach, CA||15.3||160.4||$64,969|
|Los Angeles, CA||13.9||173.3||$71,530|
|New York, NY||12.7||187.2||$78,599|
|San Jose, CA||10.8||214.5||$92,484|
|San Francisco, CA||8.3||269.3||$120,355|
A big factor in San Francisco’s high cost of living is its housing costs. According to Sperlings Best Places, housing in San Francisco is almost 6x more expensive than the national average and 3.6x more expensive than in the overall state of California.
Four of the top five most expensive cities on the list are in California, with New York City being the only outlier. NYC is the third most expensive city on the ranking, with $1 million expected to last a retiree about 12.7 years.
On the other end of the spectrum, $1 million in retirement would last 45.3 years in Memphis, Tennessee. That’s about 37 years longer than it would last in San Francisco. In Memphis, housing costs are about 2.7x lower than the national average, with other expenses like groceries, health, and utilities well below the national average as well.
Regardless of where you live, it’s helpful to start planning for retirement sooner rather than later. But according to a recent survey, only 41% of women and 58% of men are actively saving for retirement.
However, for some, COVID-19 has been the financial wake-up call they needed to start planning for the future. In fact, in the same survey, 70% of respondents claimed the pandemic has “caused them to pay more attention to their long-term finances.”
This is good news, considering that people are living longer than they used to, meaning their funds need to last longer in general (or people need to retire later in life). Although, as the data in this graphic suggests, where you live will greatly influence how much you actually need.
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