Wealth gap?
Posted on May 21st, 2007 – 1:08 PMBy Kara McGuire
The wealth gap we most often hear about is the gap between the very richest and the rest of us.
But the USA Today had a story about another generation gap you may have noticed within your family or workplace: The gap between baby boomers and those of us in our 30s.
In a nutshell: The median net worth of 55-59 year olds over 15 years (1989-2004) rose 97 percent and incomes rose 52 percent. For 35-39 year olds, median net worth dropped 28 percent over the same period and incomes dropped 10 percent.
It only looks slightly better for people in their late 20s.
Median net worth for 55-59 year olds is about $250k. For 35-39 year olds it’s roughly $50k.
Sound familiar?
If so and you’re in the “shortfall” generation, what are you going to do about it? Can you do anything about it?
12 Responses to "Wealth gap?"
start saving and stop buying.
The major change for 35 to 39 year olds in the last 15 years is the increase in college costs. The corresponding increase in debt causes median net worth to drop, which makes sense. At the same time, people who are 55 to 59 have become more aware that pensions will not be available to them as they decide to retire and they have increased their level of savings. What this most likely means is that people will be retiring at a later age than they get to today, which is appropriate given that life expectancies continue to go up.
Jon summed it up. That’s what we do already & the wealth gap doesn’t look familiar.
I have the solution: Increase your annual income, decrease your monthly spending, take the extra available and put it into an investment account. Invest it into investments which will increase in value.
Your net worth will increase your overall net worth.
In the early ‘93 and ‘94 I was a graduate assistant teaching a topical research writing course called “Generation X.” At the time there was a lot of media attention on GenXers being the first generation not to be as “successful” as their parents. It never failed through 6 semesters that a few students in each class would realize that we were going to have an economic gap between generations.
What the media pundits had wrong in early 90’s were the reasons for the coming disparity. There was a lot of talk about GenXer’s not being focused on success and other such tripe. What is actually happening is even more disturbing. We’ve learned the bad habits from the generation ahead of us. We purchase too much house, too much car, too many gadgets, and save too little. I’m continually amazed at how many people think it’s reasonable to carry a $500K mortgage on a McMansion with $120K annual income. This has become the new norm and it’s sucking the financial well-being out of a large portion of a whole generation. Combine that lack of responsibility with the fact that many of us carried significant college debt into our 30s and the inevitable social security crisis - we are guaranteed to pay higher taxes, take lower benefits, or both - and it’s no wonder that our net worth is comparatively pathetic.
My wife and I, 31 and 36 respectively, have made it a point to live below our means, which means having half the house we might “qualify” for and refraining from driving status-mobiles. The 401Ks are maxed out, the 529 for the kid is funded, etc., etc. . . .
. . . Now if only the boomer generation had helped us out a bit by saving for retirement and fully funding social security and medicare. Because of these shortcomings we are realistic about retirement savings and building net worth. We plan on never seeing one cent of what we’ve paid into social security and also plan for future higher social security tax rates. Somebody has to bail out the generation who gave us all these bad examples and who so many of us blithely followed. Looks like we have no choice.
jb, great comment. great points. As a GenXer I wonder when we shed our cynicism and distrust of traditional values and got on the status and consumerism bandwagon. In any event, perhaps the hope for our generation is that as the baby boomers retire, they leave behind a large number of jobs to be filled by a significantly smaller generation.
JB/Steve. Agreed. One interesting note is that some boomers will be trying to hold on to their jobs for as long as possible due to their own wealth gap. One co-worker is in late 50’s…was a VP for 10+ years…yep - spent it all…now is planning to work until their late 60’s as they have a big mortgage and less than 5 figures saved for retirement. People like this are willing to do anything to keep their jobs.
hydrocodon
Nice!
j
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