Owning more than you owe is the initial step toward achieving economic security. As your net worth escalates, so does your wealth. On an individual level you have considerable control over your money, from how much you earn and borrow to the amount you save and invest.
Despite pandemic-related setbacks and rising costs of living, a 2024 Schwab Modern Wealth survey found that more than 60% of Americans feel they are in a better position to achieve their financial goals than the generations that came before them.
Each age group holds a certain amount of the country’s wealth, for various reasons. Here are the latest statistics for which generation is the most and least wealthy, per Federal Reserve’s June 2024 data. These differentials exist for a reason, though, and not all are negative.
How Personal Wealth Is Determined
Before diving into broader generational wealth, you should understand where those figures come from. Wealth is determined by a person’s net worth, which is then aggregated for statistical data.
To calculate your net worth, add up the market value of all your assets. These often include cash and the current value of your investment accounts, equity in real estate, vehicles, personal property and cash value life insurance policies. Then, tally all of your debts, like what you might owe on credit cards and loans, and subtract that number from your assets.
When the total of your assets eclipses that of your liabilities, your net worth is positive. As that figure rises, wealth grows.
Your personal net worth will likely fluctuate over the years, for reasons that are both in and out of your control. For example, you may have to pay for a large expense that temporarily depletes your emergency fund. If you take out a loan to start a business, that debt can negatively impact your net worth in the short term but can create much greater capital in the long term.
[READ: Good Reasons to Spend Money from Your Emergency Fund]
Wealthiest Generation: Baby Boomers
According to the Federal Reserve data, baby boomers — people born between the 1946 and 1964– win the top spot for the wealthiest generation in the U.S. In aggregate, their total net worth is $78.55 trillion.
If you’re in this age group, you may have purchased a home and paid off your mortgage, received an inheritance from relatives and saved money early and consistently.
“A basic reason for this generation’s wealth is that they’ve benefited from the time value of money and reinvesting the interest,” says Jay Pelham, certified financial planner and president of Kaufman Rossin Wealth in South Florida.
“If people earned and saved and invested the same percentage of their income for 20 years or more, they’ve accumulated more than someone who has done this for five or 10 years,” he says.
Another reason for this generation’s wealth is owning and then selling a successful business. “We see this with baby boomers quite a bit,” Pelham says.
[Are You Rich? How the Wealthy Are Defined]
Second Wealthiest Generation: Gen X
The Federal Reserve found that people born between the years 1965 and 1980 hold a total of $39.09 trillion.
So why is their wealth only about half of the generation just before them, the baby boomers? The number of years they have had to earn, invest and enjoy the time value of money is a factor, but there are other considerations at play.
“They may live in high cost urban areas, but this is a generation that has chosen to get married later in life,” Pelham says.
“Because of this they don’t have the benefit of a two-income shared living arrangement, or aren’t on one person’s health coverage. They are also becoming homeowners much later in life, which is the way a lot of us have built wealth in the past,” he adds.
Third Wealthiest Generation: Silent
The Federal Reserve found that people born between 1928 and 1945, nicknamed the silent generation, have a collective net worth of $19.84 trillion.
If you are like many in this age group, you have been retired from your job for a couple of decades or more.
“These are people who may have been living off of their wealth for many years now,” Pelham says, explaining that the biggest risk to their accumulated wealth is longevity. Some people predicted they only needed to have enough funds to live until age 85 or 90, but then outlive those assets.
Another risk factor is the rising cost of goods and services. “Inflationary cycles impact this generation the most,” Pelham says. “If they’re living off a fixed income, inflation has eroded the value of their assets.”
Fourth Wealthiest Generation: Millennials
Millennials, who were born between the years 1981 and 1996, show a precipitous decline in total net worth. According to the Federal Reserve, their share of the country’s wealth is just $14.21 trillion.
A primary reason for people in this generation being the least wealthy among the four recorded age groups is that the youngest among them have not been in the workforce for long, whether they started soon after high school or delayed the process by going to college.
“It’s where most people are at their lowest level of income,” Pelham says, explaining that basic living expenses comprise a much higher percentage of their paychecks. After covering the costs of housing, transportation, food and insurance, there’s often not much left over to save and invest.
Eric Croak, CFP and president at Croak Capital, a wealth management firm located in Toledo, Ohio, says millennials face other barriers to wealth accumulation, too.
“Since 1985, tuition rates have skyrocketed, tripling the average student debt in 30 years,” Croak says.
“The housing market isn’t any kinder. Down payments relative to family income have doubled since 1980, pushing the age of first-time home buyers up by four years. On the work side, fewer companies, especially in the private sector, offer pension plans, and those that do are less generous,” he adds.
How Will Generation Z Fare Financially?
The Federal Reserve has yet to calculate the wealth of Generation Z, which is composed of people born between 1997 and 2012, but homeownership may be the most significant challenge.
“All the stats I see show we’ll have a shortage of housing that will drive up costs,” Pelham says. “This is a generation that will pay a higher portion of their income for it. It’s a simple supply and demand equation.”
Other hurdles may include less confidence in Social Security income at their retirement and escalating medical costs, especially for long-term care.
On the bright side, the Schwab survey found that half of all Americans believe they have various ways to build wealth, but among Gen Z, the top reason for increased financial confidence is improved access to investing.
[How to Build Generational Wealth]
Current and Future Generations Can Thrive with Planning
Pelham stresses the importance of starting to invest as early as possible with as much as you can afford to set aside.
“Most of us in the financial series industry would say that if we could go in a time machine, we’d save money earlier in our lives,” he says. “That’s because the time value of money makes the biggest impact on how much wealth you will accumulate.”
Historically, the average stock market return is impressive. The Nasdaq Composite index, which contains more than 3,700 stocks, has an average annualized return of 10.4% for the past 30 years. Therefore, if you begin at age 25 with an investment of $5,000 then added $1,000 to the account every month, you might have $2,326,618 at age 55.
While Croak acknowledges that the generational wealth gap mirrors broader economic trends like falling incomes, less secure jobs and wage stagnation, younger generations shouldn’t lose hope. Years of compound interest will be on their side to help.
“Particularly Gen Z and millennials will need to start saving and spending money early, be smart with their money and not spend more than they can afford,” says Croak.
“And the next generation could go even further. For example, if millennials wisely spend the money they receive from baby boomers along with their own investments, this could set the stage for a continued growth trend,” he adds.
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Which Generation Has the Most Wealth? originally appeared on usnews.com
