The good, the bad, and the … stay tuned!

Posted On October 2, 2017

This week the Federal Reserve released the 2016 Survey of Consumer Finances (SCF).  The SCF is one of the largest (over 6,000 households were interviewed for the 2016 survey), comprehensive and representative surveys to track patterns of household spending, income, wealth and investment.  Conducted every three years since 1989, the SCF provides analysts – including demographics geeks like us – a treasure trove of information.  You might have already seen news stories documenting things like educational and geographic differences in income.

One of the big questions being asked this time around is whether or not household wealth has recovered to its pre-Great Recession levels.  That is an important question, but we’re (of course) interested in asking that question from a generational perspective.  And the answer is … good and bad.

The good news is that median[1] household net worth for Millennial, GenX and Boomer households has increased since it was last measured in the 2013 SCF.  Overall, net worth has increased by around 16% in that time.  But perhaps even more interesting is that it has increased the most for GenX households, by close to 70%.  Perhaps there is hope for them in terms of planning for a ‘normal’ retirement.

But the bad news, at least for GenX households, is that they also lost the most over the course of the Great Recession.  Their household net worth fell by close to 40% from 2007 to 2010.  So, they had a deeper hole to climb out of than did the Boomers.  And it gets a bit worse for them.  Their net worth is still less than it was when Baby Boomers were the same age as GenXers are now.  In 2001 (when Boomers were roughly the same age as GenXers are in 2016), household net worth of Boomers was roughly $160,000 (as measured in 2016 $).  In 2016 GenX household net worth was just under $100,000.

This leads us to ask many questions, including: will GenXers ever catch up to Boomer wealth standards?  is GenX net worth lower because of lower income? high debt? a bit of both?  And what about those Millennial households?  We are only starting to answer some of these questions.  But what is clear is that generational differences continue, with Millennals, GenXers and Boomers facing different financial challenges.

[1] Stats-geek alert: We use the median instead of the mean because the mean is inflated by the relatively high net worth of high income households.  The median is a better measure of what is typical when there are some households with much higher (or lower) incomes than the rest of the sample.

Categories: Financial Services, Generation X, Wealth