Generation X: Are You Worse Off Than Your Parents?
The Great Recession is known as the ultimate wealth destroyer. Between the damage done to personal balance sheets and the perpetual sluggish labor market, American households are still trying to make a full recovery. One generation was hit particularly hard and continues to lag their parents in regards to wealth accumulation.
Generation X, which includes people born between 1965 and 1980, are managing to earn higher family incomes than their parents did at the same age, but their net wealth is failing to follow the same trajectory, according to a new report from the Pew Charitable Trusts. Gen Xers earn an average median of $43,000 annually, well above their parents, who only earned an average median of $31,000, adjusting for family size and inflation. Overall, three-quarters of Gen Xers have exceeded their own parents’ family income at the same ages.
Despite receiving higher paychecks, Generation X is not building wealth like their parents. Excluding home equity, which Gen Xers lost at higher a rate than other generations due to the Great Recession, the typical Gen Xer holds nearly $13,100 in wealth. In comparison, their parents’ wealth totaled $18,350 at the same age. Gen Xers lost nearly half of their wealth between 2007 and 2010, more than any other generation during the recession.
The report explains: “This gap is cause for concern. If the members of Generation X are unable to translate their higher incomes into wealth holdings, they will remain more financially fragile than the previous generation, especially as they move toward retirement, and at a disadvantage in terms of their own and their children’s mobility prospects.”
What’s holding back Generation X from building wealth? The aftershocks of the recession are still being felt across the economy, but Gen Xers are also saddled with more debt than their parents. In fact, 97 percent report holding some form of student loan, medical, credit card, or other debt. Gen Xers owe nearly six times as much as their parents did at the same age: $7,232 versus only $1,237. Nearly four in 10 Gen Xers who have college degrees and have more income than their parents are saddled with student loan debt, with a median amount owed of $25,000.
“Their debt burdens and inadequate savings cause a ripple effect throughout their balance sheets,” says the report. “Low levels of savings mean that many Gen Xers could have difficulties weathering unexpected and costly life events such as unemployment or a health issue. An inadequate financial cushion could also put Gen Xers’ future economic security at risk, given that they are already behind previous generations with respect to their retirement preparedness. The drag of student loan debt could prevent many Gen Xers from providing for their own children’s college aspirations, creating an intergenerational reach of student debt.”
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