Wealth Gap Between Young and Old Grows

A new study finds older adults have seen greater gains in wealth than younger people.

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People generally accumulate wealth as they age, so it is not unusual for older people to have more money in savings and investments than their younger counterparts. But the wealth gap between the young and old has grown significantly over the past 25 years, according to a new Pew Research Center analysis of Census Bureau data. Here’s a look at why seniors are now doing much better financially than young people.

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Growing net worth. The median net worth of adults age 55 and older grew during the past quarter century, while it fell for adults 54 and younger. The typical household headed by someone age 65 and older in 2009 had 47 times as much net wealth as a household of people under age 35. In 1984, older adults had a net worth that was just 10 times more than younger Americans possessed. “The current gap is unprecedented,” according to a statement from the Pew Research Center. “Older adults have prospered in recent decades relative to younger adults.”

The median net worth of households headed by adults ages 65 and older grew by 42 percent from $120,457 in 1984 to $170,494 in 2009. In contrast, the median net worth of $3,662 that households younger than 35 had in 2009 was 68 percent less than the $11,521 net worth people the same age had in 1984.

Less debt. A growing share of young people now have no savings and investments or are in debt. The share of households headed by someone under 35 who has no net worth or negative net worth has grown from 19 percent in 1984 to 37 percent in 2009. In contrast, the proportion of age 65 and older households without any net worth has remained virtually unchanged, barely increasing from 7 percent in 1984 to 8 percent in 2009. The poverty rate has declined for older adults from 33 percent in 1967 to 11 percent in 2010. For people younger than 35, poverty rates have climbed from 12 percent in 1967 to 22 percent in 2010.

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Building wealth. There is also a growing share of older adults at the top of the income distribution. In 1984, 8 percent of older households had a net worth of at least $250,000 in 1984 dollars. Some 20 percent of 65 and older households had an equivalent net worth in 2009. Young people’s net worth has not grown nearly as fast. Just 1 percent of households younger than 35 were worth at least $250,000 in 1984, a proportion that has grown to just 2 percent in 2009.

Housing market timing. Home ownership has helped older Americans to accumulate their wealth. Adults ages 65 and older in 2009 were more likely to own a home and have more equity in their homes than households headed by older adults in 1984. People younger than 35 in 2009 were less likely to be homeowners and had less housing wealth than households headed by younger adults in 1984. The oldest homeowners have experienced the largest increases in home equity, while the youngest homeowners have seen the largest losses. For homeowners ages 65 and older, the median equity value rose 57 percent between 1984 and 2009. Homeowners younger than 35 had 31 percent less home equity in 2009 than in 1984.

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Rising income. Older adults, who tend to earn lower salaries than younger workers, are rapidly catching up. Wages for older workers have risen four times as fast as those of younger employees. In households headed by adults younger than 35, the median adjusted annual income has increased by 27 percent from $38,555 in 1967 to $49,145 in 2010. In households headed by adults ages 65 and older income more than doubled from $20,804 in 1967 to $43,401 in 2010.

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