Here's some good news for millennials. In 2019 they were way below the curve in terms of wealth accumulation. Older millennials were 9% below expectations and younger millennials were a whopping 44% below expectations.
As of 2022, millennials of all ages were nearly 40% above expectations based on the wealth of previous generations at the same age.
Unsurprisingly, the main driver of increased wealth for millennials came from home appreciation. It turns out that millennials have been buying houses at close to normal rates for their age, so they benefited from the recent runup in home values.
Will this keep up? Probably not. This is a very unusual and sudden surge in wealth. Still, it's likely that in future years millennials will be close to or above the expectations of past generations. As they age, they're paying off student debt, getting better jobs, buying homes, and seeing those homes gain value. The same thing will eventually happen to Gen Z, even if many of them can barely even conceive of it yet.
When Baby Boomers die, do their fully paid homes passed down to their Millennial children get classified as home appreciation, other non-financial assets, or financial assets?
Also, their parents are dying.
So now that they're getting out from under that grievous Student Debt, they'll become Republicans like most generations before them. "I got mine, screw you!" is the American mantra.
But wait! Many many media outlets have featured stories about how millennials are so financially strapped that they are ready to start wearing barrels! How can both of these things be true?
alas, there's a shortage of coopers
Hey, my generation is #1 at 41%!
Dark Brandon works in mysterious ways.
Meanwhile, I’m closing in on 40 and can still barely pay rent some months. I am well and truly fucked.
Even if this is true, all that is being highlighted here is 1 of 2 things: (1) the heredity of wealth (their parents died), and/or (2) continued stratification of wealth - especially if (and it seems likely) it's true that this is from home value appreciation.
America is an insanely productive and prosperous country. It’s like nothing ever experienced in human history.
That’s why it’s so shameful that anyone here would go without housing, food, education, or health care. Shocking, really.
Wealth from your primary house and vehicle should be considered seperately from other assets. It isnt a productive or useful asset in the same way as cash, stocks, bonds, or investment property.
Obviously (?) there are 2 main problems:
1- Its much harder to liquidate 10% of your housing/car wealth and allocate it towards something else.
2 - Most people need a house, so selling your house/car frees up all this wealth that can be used to....probably buy another house/car. Imagine if all the value in your 401k or pension could only be converted into other stocks unless you were willing to move to a different country.
Housing wealth isnt worthless, but it isnt the same as other forms wealth for most people. We shouldnt pretend that its the same when we all know better.
That's what HELOCs are for.
Sure, but paying 6 to 10% to access some of your wealth before being forced to pay it back sure is a steep price to pay....and proves the point I was making. Housing wealth isnt the same as other forms of wealth.
Selling investments comes with tax bills. The bills are especially high if you sell invevestments held within retirement accounts, which is where most people hold the bulk of their investments.
Outside a savings account, which typically earns little compared to home appreciation or stock returns, pretty much every form of wealth results in costs when you take it out to spend it.
Well sure, but that still depends on your income level just like regular income does.... both earned income and savings income can have a tax cost.
Housing is so dramatically different as it has high holding costs (taxes, maintenance, etc), costs to access both your original investment (HELOC for example) and costs to access any gain (HELOC, real estate commissions, taxes). Plus, liquidating all of your housing wealth will likely require you to immediately reinvest in some other housing asset which will be very costly of everyone's house is going up in value.
Housing wealth is by far the least useful form of wealth even though other forms of income may also have taxes.
Let's not try to purposefully miss the point.
Kevin shows relative deviations from small average numbers for millennials - they just don't have much wealth. If individuals borrowed to get through college or took out a mortgage their wealth could be negative. And how accurate is the computation of "expected wealth"? As people get older the deviations would be more meaningful. The numbers would be better shown on an absolute scale.
The article says it uses a life-cycle model for expected wealth based on all families. Given shifts in how generations approach college (Boomer rarely went, and those who did paid less compared to Zers taking out lots of loans) and in housing costs (home appreciation increases are huge these days, so young people who typically have the bulk of their wealth in housing will see huge gains), this chart looks EXACTLY how I'd expect it to.
I'm Gen X and I can barely conceive of it.