Smart SpendingSmart Spending

Wealth gap widens between young and old

It turns out the wealth gap is also a generation gap, with the financial disparity between older and younger Americans widening sharply in recent years.

By Giselle Smith Nov 8, 2011 6:50PM

Old age and treachery may not always overcome youth and skill, as the proverb goes, but the old do have more wealth. That in itself is not necessarily surprising, but how much more wealth they have certainly is. 


Older people today have 47 times more money than younger people, and they have 42% more wealth than their same-aged counterparts in 1984, while the younger generation has 68% less than theirs.


The main reason for this growing wealth gap is the prolonged economic recession, which has hit younger Americans disproportionately hard. Light job prospects, heavy student loan debts and depressed real estate values make life today considerably bleaker than what 30-somethings experienced in the 1980s.


An analysis of census data shows that the wealth gap has been growing for some time, according to a Pew Research Center report, which compared households headed by adults aged 65 or older with those headed by individuals under age 35 in 2009 -- and with similar households 25 years earlier.


People typically accumulate assets as they get older, but the wealth gap has more than doubled since 2005, and it is almost five times what it was in 1984, The The Associated Press reported.


Other contributing factors

I wasn't surprised to see that housing is another primary driver of this divergence. For the past two decades, I've assumed -- without any proof -- that I would never achieve the standard of living enjoyed by my parents. As evidence, I pointed to my 840-square-foot urban cottage as compared to the five-bedroom, water-view home in which I was raised.


The Pew Research analysis confirms that the wealth of many older households has been based on rising home equity, while declining home equity has factored into the lower wealth of young households, many who owe more than they paid for their homes.


Though 65% of households age 65 and older are not paying a mortgage, half of all older homeowners purchased their homes prior to 1986, so they've seen a net increase in equity despite the recent downturn.


Social changes have led to other factors in the gap, including delayed marriage and increases in single parenting.

Relief for the young?

The Pew report found that the percentage of employed Americans aged 65 and older was at an historic low of 10% in 1985, but rose to 16% in 2010. Older adults today -- as in 1984 -- can count on inflation-indexed Social Security for an average 55% of their incomes, however.


The report has led some to question whether congressional budget cuts later this month should look more closely at older Americans' government safety net of Social Security and Medicare.


"It makes us wonder whether the extraordinary amount of resources we spend on retirees and their health care should be at least partially reallocated to those who are hurting worse than them," Harry Holzer, a labor economist and public policy professor at Georgetown University, told The Associated Press. Holzer called the magnitude of the gap "striking."


Readers disputed the validity of the report, and the causes of the gap. Some children of immigrants said their income and wealth are far greater than that of their own parents, and others blame young people for their own situations.


A Forbes reader commented:

"The consumption of goods and services that weren't available 25 years ago costs the young a tremendous amount of money. … As long as people, especially the young, insist that 'wants' are 'needs,' they won't reach financial stability, much less get ahead."

And NPR reader Darin Sexton wrote:

"Your story failed to mention that young men today have about 50% of the work ethic their dad had. As an employer of over 25 people (and 46 years old -- not out of touch) I can personally attest to the fact that today's young workforce is simply not willing to put forth the effort to even attempt to earn the money that's available."

What do you think? Are you better off than your parents?


More on MSN Money:
Nov 9, 2011 2:42AM

DUH!!  Old people have worked longer and saved more money and have more wealth!! DUH!!!


Socialism is EVIL... Communism is even worse, all purport the same thing, evil people who work hard and have more money need to give it to lazy people who think they deserve it by just showing up on planet earth..  The dumbing down of America IS working..  Get a clue and WAKE up from your slumber Americans!!

Nov 9, 2011 1:27PM

To add to my comments - you must invest time and money and make intelligent smart decisions to build wealth.  It does not happen at STARBUCKS throwing money away on $5 lattes, buying tattoos, having to have the latest cell phone, newest car, newest designer clothes - this is called CONSUMPTION and it does not nor will it ever build WEALTH!!!


Everyone needs to read "The Millionaire Next Door".  It just might make some of the DUMB MASSES a part of the SMART MASSES! 

Nov 9, 2011 1:17PM

All things being equal, if an older person has lived below or within their means and has been a steady saver all their life (AS I HAVE), I would expect older people to have more wealth than younger people.


The biggest problem with many of the  younger generations is these people think they are entitled to have everything now that I worked for for 40 years.  It is called instant gratification-and it does not work this way.  Some younger people have been either smart enough or lucky to make it BIG at an early age.  Go ask the average person who grew up in the depression or who work hard and saved all their life - it was and is not easy.


It is called FINANCIAL DISCIPLINE - as I have said before.  The problem is with the DUMB MASSES!

Nov 9, 2011 3:49AM

I don't know which retirees they are talking about....the ones around here have had their pensions stolen by corporate America.  Their houses may be paid off but they have no spending cash. 


Their are two political persuasions in our country....those that participate in Corporate Welfare and those that are proponents of Social Welfare.  Its the insane and short-sighted policies of purchased politicians and it has finally caught up with us. 

Nov 9, 2011 2:52PM
The children will come into the assets of their parents in the future. If you factor that in things are pretty good for the young as the "boomers" have accumulated a lot and that is due  to their parents (the greatest generation) getting them well educated.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.