Younger generations grew their wealth much faster than older Americans after the pandemic began, thanks in large part to stocks, according to a new study.
The total wealth of Americans under 40 increased 80%, to $9.5 trillion, between the first quarter of 2019 and the third quarter of 2023, according to a study by the New York Federal Reserve. The increase in wealth far exceeded that of previous generations. Americans ages 40 to 54 saw their wealth increase only 10% during the same period, and those over age 55 saw a wealth increase of 30%.
According to the study, the biggest driver of rising wealth for younger generations was stocks. Americans under 40 saw the value of their financial assets increase by 50% since 2019, while those 55 and older saw only a 20% increase.
The study said younger generations received larger stimulus checks during the pandemic and used the funds in part to buy stocks. For those under 40, corporate stocks and mutual funds accounted for 25% of their financial assets in the third quarter of 2023, up from 18% in 2019, the fastest growth of any age group.
“The under-40 group experienced a much larger increase in stock portfolio participation than older age groups,” the study says. “This greater exposure to stocks (the fastest growing financial asset class during the period) allowed younger adults to record greater growth in both financial assets and overall wealth. This change in portfolio composition toward stocks likely reflects the fact that younger adults, being further from retirement, can afford to invest in risky assets at a higher rate than older adults.”
It is true that those under 40 years of age continue to be the poorest of all generations. Their total wealth of $9.5 trillion is a fraction of the wealth held by those ages 40 to 55, $29 trillion. The wealth of those over 55 years of age amounts to 104 trillion dollars. The disparity is largely a result of the life cycle of wealth, where each generation accumulates wealth as it ages.
A study led by Rob Gruijters, an associate professor of education and international development at the University of Cambridge in England, found that the average millennial had 30% less wealth than the average boomer at the age of 35: $48,000 versus $63,100. Dollars.
Still, with the housing market out of reach for many millennial and Gen Z buyers, stocks have become the most important wealth generator. As the stock market approaches all-time highs, the wealth gap between younger and older generations may continue to narrow.
“We find that faster wealth growth among younger adults has led to a limited reduction in age-based wealth disparities over the past four years,” the study said.
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