A recent study conducted by the New York Federal Reserve has revealed that younger generations in the United States have experienced a significant increase in wealth accumulation since 2019, particularly attributed to stock investments. The study found that the total wealth of Americans under the age of 40 surged by 80%, reaching $9.5 trillion, between the first quarter of 2019 and the third quarter of 2023. This growth far outpaced that of older generations, with individuals between the ages of 40 and 54 seeing a wealth increase of just 10%, and those over 55 experiencing gains of 30%.
According to the study, the main driver behind the wealth gains for younger generations was the stock market. Individuals under 40 witnessed a 50% increase in the value of their financial assets since 2019, while those over 55 only saw a 20% increase. The study attributed this trend to younger adults receiving larger stimulus checks during the pandemic, which they used, in part, to invest in stocks. As of the third quarter of 2023, corporate equities and mutual funds accounted for 25% of the financial assets of those under 40, compared to 18% in 2019. This represents the fastest growth in this asset class among any age group.
“The under-40 group experienced a much greater increase in equity portfolio share than the older groups did,” stated the study. “This increased exposure to equities…enabled younger adults to record higher growth in both financial assets and overall wealth. This shift in portfolio composition toward equities likely reflects the fact that younger adults, being farther away from retirement, can afford to invest in risky assets at a higher rate than older adults.”
Despite these positive findings, it is important to note that individuals under 40 are still the poorest among the generations. Their total wealth of $9.5 trillion is just a fraction of the $29 trillion held by those between the ages of 40 and 55, and significantly lower than the $104 trillion held by those over 55. This disparity can largely be attributed to the life-cycle of wealth, where each generation accumulates wealth as they age.
Another study led by Rob Gruijters, an associate professor of education and international development at England’s University of Cambridge, found that the median millennial had 30% lower wealth than the median baby boomer at the age of 35. The figures stood at $48,000 for millennials and $63,100 for baby boomers. With the real estate market becoming increasingly unattainable for many millennials and Gen Z buyers, stocks have emerged as the most significant wealth builder. As the stock market continues to thrive, it is possible that 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 narrowing of age-based wealth disparities over the past four years,” concluded the study.
In conclusion, the study conducted by the New York Federal Reserve highlights the rapid wealth accumulation experienced by younger generations in the United States since 2019. Stocks have played a crucial role in this growth, with individuals under 40 witnessing significant increases in the value of their financial assets. While there is still a considerable wealth disparity between younger and older generations, these findings suggest that the gap may gradually narrow as younger adults continue to invest in stocks and benefit from the growth of the stock market.
