July 2, 2024

In 2024, Baby Boomers hold a staggering 51.8% of total U.S. wealth, with an average net worth of $1.2 million.

Millennials? Just $48,000.

That’s a jaw-dropping 10X difference between generations.

What’s behind this massive wealth gap, and what does it mean for the future of wealth distribution in America?

Let’s explore the key factors contributing to Boomer wealth dominance and the challenges Millennials face in building their financial future.

What is Boomer Wealth?

  • Boomers, born between 1946 and 1964, hold the majority of wealth in the United States
  • The average Boomer net worth is over $1 million, while Millennials average just $48,000
  • The wealth gap between Boomers and younger generations continues to widen

Boomer wealth refers to the financial assets and net worth held by the Baby Boomer generation. As of 2024, Boomers control a staggering 51.8% of the total wealth in the U.S., according to the Federal Reserve’s Survey of Consumer Finances. This concentration of wealth highlights a significant generational divide.

Boomer Net Worth

The average net worth of Baby Boomers in 2024 is estimated to be around $1.2 million, based on data from the U.S. Census Bureau. This figure includes assets such as real estate, investments, and savings accumulated over their lifetime.

Real Estate and Home Ownership

A significant portion of Boomer wealth is tied to real estate. According to a 2021 report by the National Association of Realtors, 78% of Baby Boomers own their homes, with a median home value of $300,000. This substantial home equity contributes to their overall net worth.

Generational Wealth Gap

In stark contrast to Boomers, Millennials, born between 1981 and 1996, have an average net worth of only $48,000 in 2024, according to data from the St. Louis Federal Reserve. This wealth gap has widened over the years due to several factors:

Rising Housing Costs

Millennials face higher housing costs relative to their incomes compared to Boomers at the same age. A 2020 study by the Urban Institute found that Millennials spend a median of 25% of their income on housing, compared to 21% for Boomers at the same life stage.

Student Debt Burden

Student loan debt has significantly impacted Millennial wealth accumulation. The Federal Reserve reports that in 2023, the average Millennial carried $38,000 in student loan debt, hindering their ability to save and invest.

GenerationAverage Net Worth (2024)Percentage of Total U.S. Wealth
Baby Boomers$1,200,00051.8%
Millennials$48,0004.6%

The $30 trillion generational wealth transfer from Boomers to their heirs, often called the “Great Wealth Transfer,” is expected to take place over the next few decades, as noted by Forbes. However, the wealth gap between Boomers and younger generations remains a pressing concern for economic equality and stability.

Factors Contributing to Boomer Wealth

  • Boomers have benefited from several economic and societal factors that have contributed to their wealth accumulation
  • Real estate appreciation, stable employment, and long-term investing have been key drivers of Boomer wealth
  • Understanding these factors can provide insights into the wealth gap between Boomers and younger generations

Real Estate Appreciation

Many Baby Boomers purchased their first homes in the 1970s and 1980s when housing prices were significantly lower compared to today. According to the Federal Reserve Bank of St. Louis, the median sales price of houses sold in the United States in 1970 was $23,600. By 2020, that figure had risen to $336,900, representing a staggering increase of over 1,300%.

The Power of Homeownership

Owning a home has been a key driver of wealth creation for many Boomers. As their properties appreciated in value over the decades, their net worth grew substantially. Even after accounting for inflation, the appreciation of real estate has been a significant factor in Boomer wealth accumulation.

Stable Employment and Pensions

Baby Boomers entered the workforce during a time of relative economic stability and growth. Many were able to secure long-term employment with a single company, often staying with the same employer for their entire career. This job stability allowed them to consistently save and invest over several decades.

The Benefits of Defined Benefit Pensions

In addition to stable employment, many Boomers had access to generous defined benefit pension plans. These plans guaranteed a fixed income in retirement, providing a level of financial security that is less common among younger generations. According to the Bureau of Labor Statistics, in 1980, 38% of private industry workers had access to defined benefit plans. By 2020, that figure had dropped to just 15%.

Investment Growth

Having had more time to invest in the stock market and other assets, Baby Boomers have benefited from the power of compound interest and long-term investment growth. Many started investing in their 20s and 30s, giving their investments several decades to grow and weather market fluctuations.

The Impact of Time on Investment Returns

The earlier one starts investing, the more time they have to benefit from compound interest. For example, if a Boomer invested $10,000 in the S&P 500 index in 1980 and left it untouched until 2020, their investment would have grown to over $700,000, assuming an average annual return of 11.8%. This highlights the significant impact that time and consistent investing can have on wealth accumulation. You can use online calculators like the Compound Interest Calculator from Investor.gov to generate examples.

Inheritance and Family Support

Some Baby Boomers have also benefited from inheritances and family support, further contributing to their wealth. As the Silent Generation and older generations pass away, many Boomers have received inheritances that have bolstered their net worth. Additionally, some Boomers have received financial support from their parents throughout their lives, such as assistance with college tuition or down payments on homes.

The Role of Generational Wealth Transfers

Generational wealth transfers have played a role in the wealth accumulation of some Baby Boomers. While not all Boomers have benefited from inheritances, those who have received them have seen a significant boost to their net worth.

Lower Cost of Living

Finally, many Baby Boomers have benefited from a lower cost of living throughout their lives compared to younger generations. The cost of essentials like housing, education, and healthcare has risen significantly in recent decades, making it more challenging for younger generations to save and accumulate wealth.

The Rising Cost of Education

One example of the rising cost of living is the increasing cost of higher education. According to the National Center for Education Statistics, the average cost of tuition, fees, room, and board for a four-year institution in 1980-81 was $3,499 (in current dollars). By 2020-21, that figure had risen to $25,487, representing a 628% increase.

These factors, combined with a generally favorable economic environment during their prime working years, have contributed significantly to the wealth accumulation of the Baby Boomer generation. Understanding these factors can provide valuable insights into the wealth gap between Boomers and younger generations, as well as potential strategies for narrowing that gap in the future.

The Great Wealth Transfer

  • Baby Boomers are expected to transfer trillions of dollars to younger generations in the coming years
  • This wealth transfer has the potential to reduce wealth inequality between generations
  • The distribution of inherited wealth may not be even, as wealthier Boomers are likely to pass on more to their heirs

Inheritance Expectations

Millennials and Gen Z are set to inherit a significant portion of the wealth accumulated by their Baby Boomer parents and grandparents. As Boomers age and pass away, trillions of dollars will change hands in what is being called “The Great Wealth Transfer.”

According to a 2019 report by Cerulli Associates, approximately $68 trillion is set to change hands between generations within a quarter-century. This massive transfer of wealth is unprecedented and has the potential to reshape the economic landscape for younger generations.

However, it’s important to note that the actual amount inherited by each individual will vary greatly. Factors like increased life expectancy, rising healthcare costs, and the desire of some Boomers to spend their wealth in retirement may reduce the size of inheritances. Additionally, not all Boomers have accumulated significant wealth to pass on.

Impact on Wealth Inequality

The Great Wealth Transfer has the potential to reduce wealth inequality between generations. As younger generations inherit wealth, they may have more opportunities to invest, buy homes, and build their own wealth. This could help narrow the wealth gap between Boomers and younger generations.

Uneven Distribution

However, the distribution of inherited wealth may not be even. Wealthier Boomers are likely to pass on more to their heirs, while those with less wealth may leave little or nothing behind. This could actually exacerbate wealth inequality within younger generations.

A 2018 study by the Federal Reserve Bank of St. Louis found that the top 10% of households own 77% of the wealth in America. If this trend continues, the majority of inherited wealth will likely go to those who are already well-off, rather than providing a boost to those who need it most.

Preparing for Inheritance

For millennials and Gen Z who expect to receive an inheritance, it’s important to have a plan in place. This includes:

  1. Having open conversations with parents and grandparents about their estate plans and expectations
  2. Developing financial literacy skills to manage and grow inherited wealth responsibly
  3. Considering the tax implications of inheritances and consulting with a financial advisor or tax professional

Books like “The Ultimate Gift” by Jim Stovall and “Beyond Gold: True Wealth for Inheritors” by Thayer Cheatham Willis offer guidance on navigating the emotional and practical aspects of inheriting wealth.

Societal Implications

The Great Wealth Transfer also has broader societal implications. Some experts believe it could lead to a surge in entrepreneurship and innovation as younger generations invest their inherited wealth in new businesses and ideas. Others caution that it could lead to increased consumerism and a widening of the wealth gap if not managed responsibly.

Philanthropy and Charitable Giving

The Great Wealth Transfer also presents opportunities for increased philanthropy and charitable giving. As younger generations inherit wealth, they may be more inclined to engage in philanthropic activities, potentially leading to a significant increase in charitable donations and support for social causes.

As The Great Wealth Transfer unfolds in the coming years, it will be important for individuals, families, and society as a whole to grapple with these complex issues and work towards a more equitable distribution of wealth and opportunity.

Boomer Debt and Financial Challenges

  • Despite holding 10 times more wealth than Millennials, Baby Boomers still face financial challenges and debt
  • Many Boomers are still paying off mortgages, credit card balances, and other loans, which can erode their wealth
  • Understanding the types and amounts of debt Boomers carry is crucial for their financial planning and the upcoming wealth transfer

Mortgage Debt

According to recent data from the Federal Reserve, approximately 40% of Baby Boomers still have mortgage debt in 2024. The average mortgage balance for this generation is around $150,000. While having a mortgage is not necessarily a negative thing, it does mean that a significant portion of Boomers’ monthly income goes towards paying off their home loans.

For Boomers nearing retirement, carrying a mortgage can be particularly challenging. They may have to consider downsizing or using other assets to pay off their mortgage before they stop working. Additionally, if they experience unexpected medical expenses or other financial setbacks, having a mortgage payment can add extra stress to their situation.

Credit Card Debt

Another common type of debt among Baby Boomers is credit card debt. On average, Boomers carry a credit card balance of $6,500. Credit card debt can be particularly problematic because of the high interest rates associated with these accounts.

GenerationAverage Credit Card Debt
Baby Boomers$6,500
Generation X$7,200
Millennials$4,800

The Impact of High-Interest Debt

When Boomers carry high-interest credit card debt, it can quickly erode their wealth and financial stability. For example, if a Boomer has a $6,500 credit card balance with an 18% interest rate and only makes minimum payments, it would take them over 20 years to pay off the debt, and they would end up paying more than $7,000 in interest alone.

To avoid this situation, financial experts recommend that Boomers prioritize paying off high-interest debt as quickly as possible. This may involve creating a budget, cutting back on expenses, or using a debt consolidation strategy to secure a lower interest rate.

Other Types of Debt

In addition to mortgages and credit cards, some Baby Boomers may also have other types of debt, such as:

  • Auto loans
  • Personal loans
  • Medical debt
  • Student loans (either for themselves or cosigned for their children)

While these debts may not be as common as mortgages and credit cards, they can still have a significant impact on Boomers’ financial well-being. It’s essential for Boomers to consider all of their debt obligations when creating a financial plan and preparing for retirement.

The Importance of Debt Management

As Baby Boomers navigate their financial challenges and prepare for the upcoming wealth transfer to younger generations, effective debt management is crucial. By taking steps to pay off high-interest debt, create a budget, and plan for retirement, Boomers can help ensure their financial stability and the successful transfer of wealth to their heirs.

Some helpful resources for Boomers looking to manage their debt include:

  • The Total Money Makeover” by Dave Ramsey
  • The Debt-Free Spending Plan” by JoAnneh Nagler
  • How to Get Out of Debt, Stay Out of Debt, and Live Prosperously” by Jerrold Mundis

By educating themselves about debt management strategies and seeking professional advice when needed, Baby Boomers can work towards overcoming their financial challenges and securing a stable financial future for themselves and their families.

Millennial Financial Struggles

  • Millennials face unique financial challenges that have hindered their wealth-building compared to Boomers
  • Student loan debt, rising costs of living, and stagnant wages contribute to Millennials’ financial struggles
  • Delayed milestones and limited investment opportunities further widen the wealth gap between generations

Student Loan Debt

Millennials are the most educated generation in history, but this achievement comes at a steep cost. The average Millennial carries a student loan debt of $31,300, according to a report by the Federal Reserve. This substantial debt burden has far-reaching consequences, delaying major life milestones and limiting their ability to build wealth.

High education costs and the necessity of student loans have forced many Millennials to postpone homeownership, a key factor in building long-term wealth. A study by the National Association of Realtors found that 83% of non-homeowners cite student loan debt as a primary obstacle to buying a home. This delay in entering the housing market limits Millennials’ ability to build equity and benefit from rising property values.

Impact on Retirement Savings

Student loan debt also hinders Millennials’ capacity to save for retirement. A report by the National Institute on Retirement Security reveals that 66% of Millennials have nothing saved for retirement. The need to allocate a significant portion of their income towards student loan repayments leaves little room for long-term savings and investment.

Rising Cost of Living

Millennials face a higher cost of living compared to when Boomers were the same age. While wages have remained relatively stagnant, the prices of essential goods and services have skyrocketed. This disparity makes it increasingly difficult for Millennials to make ends meet, let alone save and invest for the future.

Housing Affordability Crisis

The housing affordability crisis is a prime example of the challenges Millennials face. In many major cities, the cost of housing has far outpaced wage growth. A report by the National Low Income Housing Coalition found that a full-time minimum wage worker cannot afford a one-bedroom rental in 95% of U.S. counties. This leaves Millennials with limited options: either spend a disproportionate amount of their income on housing or delay homeownership indefinitely.

Healthcare Costs

Rising healthcare costs also strain Millennial budgets. A study by the Kaiser Family Foundation found that the average annual premium for employer-sponsored health insurance has increased by 54% over the past decade. This increase far outpaces wage growth, leaving Millennials with less disposable income to save and invest.

Limited Investment Opportunities

Millennials face limited investment opportunities compared to previous generations. The Great Recession of 2008 left many Millennials entering the job market during a time of high unemployment and economic instability. This delayed their ability to start saving and investing, putting them at a disadvantage compared to Boomers who benefited from decades of economic growth.

Moreover, the rise of the gig economy and the prevalence of part-time and contract work have made it more difficult for Millennials to access employer-sponsored retirement plans. A report by the Pew Research Center found that only 41% of Millennials have access to an employer-sponsored retirement plan, compared to 56% of Gen Xers and 70% of Boomers at the same age.

Stagnant Wages

Despite being the most educated generation, Millennials face stagnant wages that have not kept pace with the rising cost of living. A study by the Economic Policy Institute found that the average hourly wage for young college graduates has only increased by 2.9% since 2000, when adjusted for inflation. This wage stagnation limits Millennials’ ability to save, invest, and build wealth.

Impact on Financial Stability

Stagnant wages, combined with the rising cost of living, have made it increasingly difficult for Millennials to achieve financial stability. A report by the Federal Reserve found that 44% of Millennials believe they are worse off financially than their parents were at the same age. This perception of financial insecurity can lead to increased stress, lower quality of life, and a reduced ability to plan for the future.

Delayed Milestones

The cumulative effect of student loan debt, rising costs of living, and stagnant wages has forced many Millennials to delay major life milestones. Homeownership, marriage, and starting a family are all being postponed as Millennials struggle to achieve financial stability.

A study by the Urban Institute found that the homeownership rate for Millennials aged 25-34 is 8 percentage points lower than it was for Gen Xers and Boomers at the same age. This delay in homeownership not only limits Millennials’ ability to build wealth through equity but also has ripple effects on the economy as a whole.

The postponement of marriage and family formation also has long-term consequences for Millennials’ financial well-being. A report by the Pew Research Center found that married adults tend to have higher incomes and greater wealth accumulation than their single counterparts. By delaying these milestones, Millennials may be limiting their potential for long-term financial success.

Addressing Wealth Inequality by Age

  • Multi-faceted approach needed to bridge wealth gap between Boomers and Millennials
  • Financial education and policy changes are key steps in leveling the playing field
  • Encouraging open conversations about wealth transfer can help align financial goals

Financial Education and Planning

Empowering Millennials with financial literacy and planning skills is crucial in helping them make the most of their inherited wealth. Many Millennials may not have had the opportunity to learn about personal finance, investing, and wealth management due to a lack of exposure or resources. By providing accessible financial education programs and resources, Millennials can gain the knowledge and confidence needed to navigate their financial futures effectively.

Encouraging Boomers to have open conversations with their heirs about wealth transfer and financial goals is another important aspect of financial planning. These discussions can help ensure that both generations are on the same page regarding expectations, responsibilities, and objectives. By fostering transparency and communication, families can work together to create a comprehensive wealth transfer plan that benefits everyone involved.

The Importance of Starting Early

One of the most significant advantages Millennials have when it comes to building wealth is time. By starting to invest and save early, even with smaller amounts, Millennials can harness the power of compound interest to grow their wealth over the long term. Financial education programs should emphasize the importance of starting early and provide practical guidance on how to begin investing, even with limited resources.

Policy Changes

Implementing policies that address issues like student loan debt, affordable housing, and wage stagnation can help level the playing field for Millennials. Student loan debt has been a significant burden for many Millennials, limiting their ability to save and invest for the future. By implementing policies that provide relief or forgiveness for student loans, Millennials can redirect more of their income towards building wealth.

Affordable housing is another critical issue that affects Millennials’ ability to build wealth. With rising housing costs and stagnant wages, many Millennials struggle to save for a down payment or afford monthly mortgage payments. Policies that promote affordable housing, such as incentives for developers to build more affordable units or down payment assistance programs, can help Millennials achieve homeownership and build equity.

Promoting retirement savings plans and incentives for younger generations to invest early is another policy change that can help address wealth inequality. By encouraging employers to offer retirement savings plans and providing tax incentives for contributions, policymakers can make it easier for Millennials to start saving for retirement early on in their careers.

The Potential Impact of Inheritance

While not all Millennials can count on receiving an inheritance, those who do may see a significant boost to their wealth. According to recent studies, Millennials are expected to inherit an estimated $68 trillion from their Baby Boomer parents over the next few decades. However, the distribution of this wealth is likely to be uneven, with a small percentage of Millennials receiving the lion’s share of the inheritance.

For Millennials who do receive an inheritance, financial education and planning will be critical in ensuring that the wealth is managed responsibly and used to support long-term financial goals. By working with financial advisors and creating a comprehensive wealth management plan, Millennials can make the most of their inherited wealth and use it to build a more secure financial future.

Tackling the Boomer-Millennial Wealth Divide

The staggering wealth gap between Baby Boomers and Millennials in 2024 is a stark reminder of the financial challenges faced by younger generations. Boomers, with their $1.2 million average net worth, have benefited from real estate appreciation, stable employment, and long-term investments. Meanwhile, Millennials grapple with student loan debt, rising living costs, and delayed financial milestones.

As the Great Wealth Transfer looms, it’s crucial for Millennials to prioritize financial education and planning. Seek out resources to help you make informed decisions about inherited wealth and your own financial goals. Advocate for policy changes that address student loan debt, affordable housing, and wage stagnation.

What steps can you take today to start building your wealth and securing your financial future?

Consider starting an emergency fund, investing in a diverse portfolio, or seeking guidance from a financial advisor.

By understanding the factors contributing to the wealth divide and taking proactive steps, Millennials can work towards closing the gap and achieving long-term financial stability.

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About the author 

Jeremy Horowitz

Jeremy's mission: Buy an Ecommerce brand ($10m - $100m revenue) and Saas app ($1m - $10m revenue) in the next year.

As he looks at deals and investigates investing opportunities he shares his perspective about acquiring bizs, the market, Shopify landscape and perspectives that come from his search for the right business to buy.

Jeremy always includes the facts and simple tear-downs of public bizs to provide the insights on how to run an effective biz that is ready for sale.

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