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Microsoft, Alphabet Q3 Earnings Disappoint
Microsoft, Alphabet Q3 Earnings Disappoint

Getting Rich Will Get Harder After Baby Boomers

Study shows a widening wealth gap between young and old, but very recent data hold out hope for Millennials and Generation Z.

Since 1980, the gap between rich and poor grew, but a new study  suggests the real news is the wealth disparity between young and old.

The gains over the last four decades, according to the study, were certainly primarily among those who were wealthier to begin with. It also says younger Americans are likely to be unable to experience the same circumstances that generated the types of wealth gains Baby Boomers have enjoyed.

Retirement Planning Lead

Older Americans Have Much More Wealth by Retirement

Using the authors' models, they concluded that older Americans reach significantly more wealth by retirement than younger Americans do.

"We identify a steepening of the life-cycle wealth accumulation profile for recent cohorts," write Luis Bauluz, an economics professor at CUNEF University in Madrid, and Timothy Meyer of the Bonn Graduate School of Economics. "All cohorts start from approximately similar wealth levels, but the more recent ones (e.g., those born between 1940 and 1960) reach 65% more wealth by retirement."

The study concludes that in the U.S., wealth is aging.

"We uncover that this is strongly linked to a steepening of the age-wealth profile, mainly driven by booming asset prices in the past decades," it says. "We further find a shift in the saving profile of US households, with more saving happening at middle ages and less when old."

There are Reasons for Hope

A different paper  (by Scott Smith of Cerulli Associates) notes some positive developments that younger American generations can look to for optimism.

Smith said looking at very recent data, Millennial and Generation Z financial wealth rose significantly, from $2.9 trillion in 2020 to $3.6 trillion in 2021.

"The second-largest generational cohort but the smallest in terms of assets, Millennials and Generation Z have been able to grow their wealth in line with, or even better than, their older peers," Smith writes. "This is due in part to Millennials seriously investing in retirement accounts and Generation Z dipping its toes in the investing water through brokerage platforms."