Between the Silent Generation, baby boomers, Generation X and millennials, Americans hold roughly $156 trillion in assets. However, this wealth is not distributed evenly across all generations.
Millennials only have about 6% of all U.S. wealth — or $7.8 trillion — after subtracting liabilities from assets. In comparison, boomers have 53%, Generation X has 28%, and the Silent Generation has 13% of all wealth.
So, what does this mean for millennials’ future financial stability? And what are some ways for this generation to build substantial wealth for their own descendants? Here’s some insight from experts.
Millennials vs. Baby Boomers: Generational Wealth
Generational wealth in America is split into multiple categories. For millennials, it looks like this:
- $5 trillion in real estate
- $1.4 trillion in private businesses
- $1.5 trillion in durable goods
- $2.5 trillion in pensions
- $800 billion in equities and mutual funds
- $2.1 trillion in other assets
This adds up to $13.3 trillion, not accounting for liabilities such as mortgages and different types of consumer credit.
In comparison, here’s the estimated distribution of wealth for baby boomers, the generation with the most U.S. assets:
- $18.3 trillion in real estate
- $7.9 trillion in private businesses
- $2.9 trillion in durable goods
- $16.2 trillion in pensions
- $19 trillion in equities and mutual funds
- $13.8 trillion in other assets
The combined total of boomers’ wealth is $78.1 trillion — or $73 trillion after subtracting liabilities.
Current State of Millennial Wealth
Determining the current state of millennials’ wealth isn’t as simple as comparing how much overall wealth they have compared to other generations. Nor is it enough to simply calculate their current assets and liabilities. This is because there are many other factors that could affect how much wealth they currently have — as well as their ability to continue building wealth over the long term.
“My general opinion is that it is too early to tell the state of wealth for millennials,” said Ryan Redfern, ChFC, CMT, president and chief investment officer of Shadowridge Asset Management, LLC. “Most millennials are in their 30s right now. That’s not old enough to have saved a substantial amount or to even be very far along in their retirement savings at this point. They still have plenty of time to do something about it, so their financial futures aren’t bleak just yet. (Even though many seem to feel that way).”
Millennials Have Experienced Setbacks but Can Still Build Wealth
Some of the wealth disparity between generations is also due to the various setbacks millennials have faced.
“Many millennials entered adulthood with significant student loan debt, which has impacted their ability to accumulate wealth. High levels of debt have made it harder for them to save for things like homeownership and retirement. Millennials have often delayed major life milestones like buying homes and starting families, in part due to economic challenges and the burden of student debt,” said Blake Harris, founder of Blake Harris Law.
Another major setback millennials experienced was the 2008 financial crisis. “Many millennials entered the job market during or right after the 2008 financial crisis, which affected their job opportunities and initial earning potential. While the job market has improved over time, some millennials were still dealing with the long-term effects of early career setbacks,” added Harris.
Despite this, Harris noted that the younger generations — millennials and Gen Xers included — still have time to close the wealth gap that currently exists.
Millennials Are Already Starting To Secure Their Financial Futures
While millennials might not hold as much of the total amount of U.S. wealth right now, many of them are currently in the process of building more wealth and securing their financial futures and their descendants’.
“What will be key for this generation is to focus on building assets over the next decade,” said Redfern. “Being Gen X myself, I’m finding that only now (in our late 40s and early 50s) are we seeing wealth start to really accumulate.”
It’s also important to understand that while millennials might not have as much wealth as older generations, they’re not necessarily behind.
“What is missed in the discussion on the concentration of wealth within baby boomers is the size of their generation,” said James Franke, managing director at Rothschild Investment. “Using data from the Federal Reserve, on a per capita basis, millennials are as wealthy as boomers were at their age, and Gen X is wealthier now than boomers were at the same age. In my opinion, the boomers’ outsized ownership of wealth in this country is largely a byproduct of the size of their population and median age of the group.”
Millennials May Still Receive a Significant Inheritance
An inheritance could dramatically improve millennials’ financial situation and help them build a more secure financial future. However, not everyone is set to receive a substantial enough inheritance to have such a major impact.
“The data I’ve seen clearly shows that millennials hold significantly less of the country’s wealth,” said Michael Simon, chairman and CEO at wealth manager NDVR. “Millennials are predicted to be the eventual beneficiaries of the greatest wealth transfer in history, but it will likely be very concentrated — and the vast majority of millennials won’t see any of it.”
Of course, some millennials are set to receive an inheritance, which could help even out the playing field. They just might not be old enough yet.
“In your 50s and later is when generations start to see inheritances,” said Redfern. “Millennials still have a few years before their parents start to pass assets along to them.”
Millennials Haven’t Yet Reached Their Highest Earning Years
Something else to keep in mind is that millennials are still young — around 25 to 40 years old. This means they have time to increase their earning potential, build wealth, and secure their futures.
“Typically, people find their highest earning years in the last 5-10 years of their working life. So, if someone works from age 21 to age 66, their compensation is radically higher the last five years in comparison to the first five years. This means that there’s always a financial division between the older and younger generations. It’s not bad or evil, it’s natural,” said Christopher Manske, CFP, president of Manske Wealth Management.
“As people move forward on a 45-year arc of going out in the workplace and getting more experience, more promotions, and more connections, their value to their industry gets higher,” added Manske. “So at this time, it’s natural the younger generations don’t have the same amount of wealth than the older generations.”
Having a Financial Plan Could Be Vital To Building More Wealth
Having a solid financial plan plays an essential role when it comes to building wealth, achieving financial security and preparing for retirement. This is just as true for millennials as it is for other generations, and the sooner they get started, the better it’ll be for their futures.
“The best thing millennials can do to help improve their situation is take the time to build a solid financial plan, and construct a portfolio that will help them reach their individual goals while continuing to live within their means and contribute regularly to their investment accounts,” said Simon.
“It’s important that young people create a strong financial plan as soon as possible to ensure they’ll have enough spending power when it comes to retirement,” added Simon. “When building a portfolio to help meet your financial objectives, it is crucial to focus on tax and fee efficiency, taking longevity into account, as well as the fact that you may have to work longer before retiring.”
Millennials Can Keep Building Their Investment Portfolios
Having a diversified portfolio is also essential to securing one’s financial future, but it’s important to consider the current state of the market and adjust accordingly.
“It looks like millennials will be in a rising rate environment, which is a headwind on stocks,” said Michael Wagner, CFP, co-founder and COO at Omnia Family Wealth. “That’s not to say that we won’t be able to develop the same or more wealth than the boomers did, because hopefully, we’ll have a leg up in terms of intergenerational wealth transfers from the boomers, but we can’t count on the wind at our backs to push the sails of asset inflation. We’re going to have to put our heads down, build businesses, and take a more sophisticated approach to portfolio management.”
Right now, the distribution of U.S. wealth is uneven across generations with millennials holding the smallest percentage (not accounting for younger generations). However, millennials still have time to build secure financial futures for themselves and their families. It will just take some time, careful planning and perseverance.
“Their situation can be improved by focus and commitment,” said Redfern. “Wealth will come to them if they work on it, both consistently and intentionally.”
More From GOBankingRates