By now you’ve likely heard about the growing wealth gap, where the rich are getting richer and the poor are getting poorer while the middle class disappears. But did you know that the age structure of wealth is changing, as well?
Not surprisingly, older Americans have a higher median net worth than younger Americans. But over the past 25 years, the difference has grown dramatically. In 1984, households headed by an adult 35 or younger had a median net worth of $11, 521 while those headed by someone 65 or older had a median net worth of $120, 457.
Fast forward to 2009… The median net worth of households headed by someone under age 35 dropped to $3, 662 while the median net worth of those headed by someone over 65 years of age has grown to $170, 494. Thus, the gap has grown from 10.5x in 1984 to 46.5x in 2009 — the largest age-based wealth gap on record.
For those in the younger age group, this represents a 68% decline in wealth while the older age group has enjoyed a 42% increase. Yikes. That’s a huge change for those at the bottom end of the age distribution. So why the change?
A big part of the difference may be that there has been a gradual increase in college attendance over the years, which means that more and more young people have been going to college, and thus taking on more debt and delaying their entry into the work force. While it’s been argued that college is a good investment, it takes time to overcome those initial costs.
Another major player has likely been the housing market. While older homeowners typically got into the housing market long ago, before the massive boom (and eventual bust) in home prices, many younger homeowners bought into a red hot housing market that was poised for collapse.
Whatever the cause, it’s clear that the next generation might not have it better than the one before it.