Document date: March 15, 2013
Released online: March 15, 2013
When it comes to saving, owning a home, paring down debt, and growing a retirement nest egg, those under age 40 have stagnated as their parents' generation accumulated, new research from the Urban Institute's Opportunity and Ownership Project demonstrates. Average household net worth, even with the fallout from the Great Recession, nearly doubled from 1983 to 2010, but not for those born after 1970. Their average inflation-adjusted wealth in 2010 was 7 percent below similarly aged individuals in 1983.
Contact: Simona Combi, (202) 261-5709, firstname.lastname@example.org
WASHINGTON, D.C., March 15, 2013 -- When it comes to building wealth -- adding to savings, owning a home, paring down debt, growing a retirement nest egg -- those under age 40 have stagnated as their parents' generation accumulated, new research from the Urban Institute's Opportunity and Ownership Project demonstrates.
Average household net worth, even with the fallout from the Great Recession, nearly doubled from 1983 to 2010, but not for those born after 1970. Their average inflation-adjusted wealth in 2010 was 7 percent below similarly aged individuals in 1983.
While the housing and stock market crashes of the last decade hurt younger people, researchers Eugene Steuerle, Signe-Mary McKernan, Caroline Ratcliffe, and Sisi Zhang said, these households were generally falling behind even before the Great Recession.
They were on the losing side of stagnant wages and weak job opportunities, negating the long-observed pattern that, as our society gets wealthier, each generation gains relative to the previous one at any given age.
The situation for today's adults in their 30s and younger is particularly gloomy, with more storm clouds on the horizon. Their net worth relative to their parents is only about half what their parents' net worth was relative to their own parents.
In addition, Washington's continual deficits and unresolved budget woes, the researchers pointed out, portend higher interest costs, higher taxes, or lower benefits, especially for younger generations.
"If these generations cannot accumulate wealth, they will be less able to support themselves when unexpected emergencies arise or when they eventually retire," the researchers observed. "This financial uncertainty could reverberate throughout the economy, since entrepreneurial activity, saving, and investment tend to build on a base of confidence and growing wealth."
The researchers recommend that federal policy turn more attention to asset building for younger households and other low-wealth groups. With older, high-income families benefiting disproportionately from hundreds of billions of dollars of subsidies annually via the mortgage interest deduction and preferential tax treatment of retirement savings, "a greater sharing of those benefits with the young likely would improve both their lifetime accumulation of wealth and the economic well-being of the nation as a whole."
"Lost Generations? Wealth Building among Young Americans," which used the 1983 to 2010 waves of the Federal Reserve Board's Survey of Consumer Finances, was funded by the Ford Foundation and the Russell Sage Foundation.
The Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, and governance challenges facing the nation. It provides information, analyses, and perspectives to public and private decisionmakers to help them address these problems and strives to deepen citizens' understanding of the issues and trade-offs that policymakers face.
Other Publications by the Authors
Usage and reprints: Most publications may be downloaded free of charge from the web site and may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact email@example.com.
If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.
Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute.