Net Worth as a Function of Age

Net Worth as a Function of Age

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.

Source: CNN/Money

9 Responses to “Net Worth as a Function of Age”

  1. The issue isn’t that older people have more money. That’s perfectly understandable. The point here is that the gap has grown dramatically over the past 25 years — from a 10x difference to a 47x difference.

  2. Anonymous

    I believe there are several things to learn from this data if one looks at it objectively. As someone else mentioned, it takes years to accumulate wealth, so it makes sense that 35 year olds do not have as much wealth as those who are 65. It is really an embarrassment though of our education system that we have not prepared our youth to function in society in a fiscally responsible manner.

    Just because you can get a credit card with a $6,000 credit limit it doesn’t mean you have to max it out. Also, in regards to counting the home value, if you buy a house when you are 30 and pay it off when you are 60 then when you are 65 you will have a higher net worth.

    I still think everyone should save more and spend wisely.

  3. Anonymous

    Everyone always touts that TIME is one of the principals of getting wealthy. When taking a snapshot like this it fails to account for the fact that at some point everyone was under 35, or will be 65. Anyone who is reading this blog baring any major disaster will be raising the median of wealth thru their lifetimes and those that don’t will be dropping it. There is also something to how easy it is to get credit for any purchase now days.

  4. Anonymous

    “Honestly, I wonder how the seniors survive with a mere $140k net worth.”

    Who needs assets or an otherwise positive networth if you are collecting social security, medicare, and pension payments from your previous employer?

    The younger generation (< 35) will most likely have NONE of those benefits (unless you are a government employee today so you will have a pension) — and as the numbers show, the younger generation has a much WORSE start at this age group than the previous generations did.

    Honestly, I could care less about worrying how seniors can survive with their combined wealth (which is the vast majority of the wealth BTW), and am more concerned about the absolutely crushing burden that the baby boomers are going to be on the younger generations due to the sheer numbers of boomers heading into retirement and the expected Social Security, Medicare, Medicaid payments that they are going to drain from the younger generations.

  5. Anonymous

    This is probably all due to the housing bubble.

    Also, I wonder if they took into account the value of a traditional pension. In the 80s, many of the 65+ would have had one. Today, few would. In another 30 years, almost nobody will. If a pension isn’t counted but a 401(k) is, it would make a pretty big change in the numbers.

    Honestly, I wonder how the seniors survive with a mere $140k net worth.

  6. Ugh. Good catch. I completely missed the faint grey text at the bottom of the graph. I actually searched the page for the word inflation to be sure I hadn’t missed it, but it was hard-coded into the image. I’ll make the correction… Thanks!

  7. Anonymous

    According to the chart on CNN, the numbers are already adjusted for inflation.


    Why are you adjusting for inflation again?

  8. Anonymous

    Not sure about your spending habits Annie — but mine are predominately in the form of Social Security and Medicare payments (15+%) and pension payments (built into the cost of everything I buy) to that generation with all the wealth…

  9. Anonymous

    One should also take into account the spending habits of the under 35 generation. They see it, they want it, they buy it. And it almost always has to be the top of the line. The over 65 generation never spent like that.

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