USA Today had an excellent front page story with almost a full page inside (unusual for this publication) discussing the gap in wealth between people in their late 50s and 60s and people under 55. Now, while we would all expect folks in their 50s and 60s to have more net worth than those in their 20s and 30s, the problem is that the gap is widening, and while the wealth of the 50s and 60s demographic has increased in the past 10 years, the wealth of those in their 30s and 40s has actually decreased.

Some of the big factors that caused the decline in the wealth of those under 55:

Student Loans.

Cost of Social Security and Medicare.

People go to college longer (advanced degrees)

People are waiting longer to have children.

People are waiting longer to get married.

People are unwilling to live within their means.

The gap is huge. The median net woth of those between 55 and 64 is $250K. The median net of those in their 30s is $50K

 

Bill,

Does the article say what the gap was 10, 20 and 30 years ago? I'd like to know by how much it increased.

I would expect there to be a gap, but without prior years to compare it to, it's hard to tell how dramatic it is.

 

It compared 1989 to 2004 for both net worth and annul income. Demographics were broken down into 5 year increments starting with 20 to 24 year olds and ending with 75 and older. The data showed that the 55 and older demographic had increased net worth and annual income by anywhere from 18 to 98% while the various 20 to 54 yo demgraphics either LOST as much as 28% or gained up to 48%.


Edit

Here is the on-line version. It doesn't seem to have the nice chart on line.

http://www.usatoday.com/news/nation/2007-0...on-wealth_N.htm

 

Thanks Bill. That's very interesting.

 

Remember though, that as the old generations die off, us young people will be inheriting (and squandering) your wealth, and hopefully paying off some of that debt. Yee-HA!




Kidding, kidding. I'd be interested in knowing how the net worth is calculated, however. I've seen several studies that discuss the lack of saving in the gen x/gen y groups, but they base it entirely on (After Tax income)-(spending) = Savings. Problem is, that type of calculation doesn't take into account pre-tax savings tools like 401(k )s and IRAs. Now, that is relevent because it appears people like myself, who do the majority of their saving PRE-tax, don't save anything. I spend most of my POST tax income, yes, but quite a bit of my PRE tax income is going into savings/investments (401k/IRA/employee stock purchase).

Now, my point is that sure, it doesn't look like I have a very large net worth now. However, if you adjust for compound interest, those few thousand I have in an IRA will be a very significant chunk of change by the time I am eligible to take it/need it. Likewise with the 401(k ). Also, many people who are 55-60-65 have a house that is almost or entirely paid off, and that equity counts as a huge portion of their net worth. People my age (25) who are just buying a house may not have much liquid cash, in part due to the purchase of a house, but are buying something that will significantly contribute to their net worth number down the road.


So, the short version is that people my age DO need to save more, and DO need to live within their means. However, I bet the situation isn't as dire as it looks considering the financial tools we have at our disposal to invest with, and the fact that for many young people little real estate equity is accounted for (rightly so) in their net worth, but it probably makes up the bulk of the older generations'. And, though I was kidding, we are going to get your money sooner or later anyways, which will brighten the picture for us.

 

Trust me, don't count on that one!

Nursing homes, health insurance, drug co-pays, energy costs, are taking a HUGE portion of retired folks' income. They are/ will be spending more and more just for the basics. IF nursing homes do come into play, the $$ goes faster than you can ever imagine, ask me how I know.

I hope my son isn't planning his retirement based on his inheritance. Can you say reverse mortgage?

 

[QUOTE=Lainey8484,May 21 2007, 01:42 PM]Trust me, don't count on that one!

Nursing homes, health insurance, drug co-pays, energy costs, are taking a HUGE portion of retired folks' income. They are/ will be spending more and more just for the basics.

 

I'm sure the real estate boom helped a lot of older folks too. My parents' house was worth $60,000 in 1996, but now it's worth over $1,000,000.

In 1996, my Mom used to joke about our inheritance, saying we should each pick our favorite piece of furniture. Now they discuss house prices and get a maniacal gleam in their eyes when talking about what the house is worth

They travel a lot, so they are enjoying themselves.

 

What country do they live in? I'm not sure, but over 10 years, that looks something like 40% compound escalation.

 

Net woth is usually defined as total assets minus total liabilities.