U.S. young-old wealth gap worse than ever

CBS/iStockphotos

WASHINGTON - The wealth gap between younger and older Americans has stretched to the widest on record, worsened by a prolonged economic downturn that has wiped out job opportunities for young adults and saddled them with housing and college debt.

The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday.

While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation.

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The analysis reflects the impact of the economic downturn, which has hit young adults particularly hard. More are pursuing college or advanced degrees, taking on debt as they wait for the job market to recover. Others are struggling to pay mortgage costs on homes now worth less than when they were bought in the housing boom.

The report, coming out before the Nov. 23 deadline for a special congressional committee to propose $1.2 trillion in budget cuts over 10 years, casts a spotlight on a government safety net that has buoyed older Americans on Social Security and Medicare amid wider cuts to education and other programs, including cash assistance for poor families.

"It makes us wonder whether the extraordinary amount of resources we spend on retirees and their health care should be at least partially reallocated to those who are hurting worse than them," said Harry Holzer, a labor economist and public policy professor at Georgetown University who called the magnitude of the wealth gap "striking."

The median net worth of households headed by someone 65 or older was $170,494. That is 42 percent more than in 1984, when the Census Bureau first began measuring wealth broken down by age. The median net worth for the younger-age households was $3,662, down by 68 percent from a quarter-century ago, according to the analysis by the Pew Research Center.

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Net worth includes the value of a person's home, possessions and savings accumulated over the years, including stocks, bank accounts, real estate, cars, boats or other property, minus any debt such as mortgages, college loans and credit card bills. Older Americans tend to hold more net worth because they are more likely to have paid off their mortgages and built up more savings from salary, stocks and other investments over time. The median is the midpoint, and thus refers to a typical household.

The 47-to-1 wealth gap between old and young is believed by demographers to be the highest ever, even predating government records.

In all, 37 percent of younger-age households have a net worth of zero or less, nearly double the share in 1984. But among households headed by a person 65 or older, the percentage in that category has been largely unchanged at 8 percent.

While the wealth gap has been widening gradually due to delayed marriage and increases in single parenting among young adults, the housing bust and recession have made it significantly worse.

For young adults, the main asset is their home. Their housing wealth dropped 31 percent from 1984, the result of increased debt and falling home values. In contrast, Americans 65 or older were more likely to have bought homes long before the housing boom and thus saw a 57 percent gain in housing wealth even after the bust.

Older Americans are staying in jobs longer, while young adults now face the highest unemployment since World War II. As a result, the median income of older-age households since 1967 has grown at four times the rate of those headed by the under-35 age group.

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[skeezix06]

New government statistics as reported by CBS, ABC, etc. state the poverty rate of the elderly has risen from 9% to 15%; a direct contradiction to the premise of this article. The poverty rate among blacks is 23.4% and the hispanic rate of poverty is 27.6%. 20.5 million Americans or 6.7% live on an income of $5,570 or less for an individual and $11,157 for a family of four.

[skeezix06]

That doesn't make any sense, nadelio.

[rwsmith29456]

It's s shame that people don't even have a chance to build a future for themselves. It has always been true that young people/couples need to work for years to acquire what older people have but today's young people don't even have jobs to try to attain any wealth. And the typical older person has to beware lest their hard earned savings and investments aren't spirited away by someone's greed or be rendered worthless by economic problems. It's tough all over. However, I generally do not feel sorry for those that built their financial base on loans and credit, such as buying your 'dream home' when you are in your 20's.

[wdphil81]

I don't want the top earner's money. I want to earn my own money. I want a job in the field that I was trained in (or any field, for that matter) that allows me to save money, rather than live paycheck to paycheck working a cashier job trying to earn my keep. You try saving on minimum wage.

Society has changed dramatically since the previous generation was starting out. Email is now the preferred method of communications for business, driving out to the library eight times a day is impractical to check my inbox for potentially important messages from employers. If you would like to sit by your land line all day waiting for interview calls, be my guest. Miss their call and the next guy in line gets the job you were being offered. Go to any business and ask for a hard copy application, they'll tell you to go home and fill one out online. Many businesses are closing branches due to the growth of online shopping. Those jobs to carry you through the scary period of post college - pre-real job are scarce and competitive. If you don't believe me, beat the pavement and see how long it takes you to get one; you might have a little more compassion for those having a hard time out there.

Thanks allowing me to vent :)

[ark60]

Capitalism has gone very bad in the United States of America. This country is on a downfall and could possibly collapse. Once a GREAT country, does not seem to be that any longer. All know it is MONEY/MONEY/MONEY. Americans idolize people that make movies, sports people, etc. They have million dollar homes, why? Those individuals are human beings, no one needs 1 million dollars to live on. This country is failing/falling and all know why.

[moretruthnow]

What we need in America is fairness. It is true that young people today want what more than we had. It is getting harder for a family to provide the basics. What we see now is greed, corruption and evil that has led so many republican politicians to do everything for the wealthy. Now they are showing they don't care about the middle class surviving. Fairness is what we want restored.

[askagain]

What makes you think that there aren't just as many greedy and corrupt democratic politicians? Your post would be credible if it applied to both Republicans and Democrats.

[askagain]

My younger son, age 39, spends over $100 per month on his smart phone service. My basic phone comes in around $30 per month. He has cable TV with the premium channels. My cable TV is basic plus. My last mortgage was under $1,000 per month. His rent in a large city is @ $2,500 per month. Our vacations are modest and infrequesnt. My son doesn't think twice about travelling around the world. Are you beginning to see a pattern. It is any wonder why my net worth is much greater than my son's net worth.

[-LiftingSkirts-]

by Woody_BoundForGlory November 7, 2011 2:57 PM EST
Here are my recommendations to the younger generation on how to avoid the pitfalls in this article and become financially <stable?> with increased net worth like the older generation.

1) eat at home and prepare your own food. if you can't afford food, go to a community food share program or food program in your community. never eat fast food and never eat at a restaurant.

[Wrong Woody! dollar menu is cheaper than eating at home. use the $ menu once a day to save money. No more than once a day or you'll get fat. Use community kitchens. Donate you're time to help at community kitchens if you are able]

2) if you have cable or satellite tv, cancel it. go to the library and read books on saving and investing.

[Wrong Woody. The library is hardly EVER open. Get a free air antenna. HD will cost about $15 and you'll at least have some TV. Never read books on saving or investing. Those books teach you how to fatten up for the slaughter]

3) if you have a cell phone bill, cancel it or get a simple cell phone with a pay as you go plan. avoid any activities that would drive your cell phone bill up like texting.

[Not exactly Woody. A cell phone is mandatory for job seekers. Texting plans are cheap. No iPhones or Androids tho. No Data plans. Metro is cheap and there are entitlements if you qualify]

4) do not use credit cards. if you have a credit card, get rid of it. if you have a credit card balance, pay it off asap.

[Wrong Woody. Completely wrong Woody. Use a credit card for everything. Even if it's a guaranteed card. Use it on the $ menu. Pay it off in full every month and NEVER fail. NEVER. You need to build credit. No excuses...pay it off in full, every month. If you ALWAYS pay in full, your credit rating will soar]

5) if you have an internet bill, cancel your service and use free internet at your library or some other free public offering

[You're right Woody! Use your neighbors wifi. You can buy (or get for free) 3 year old laptops, PC's, Mac's, and rebuild them. IT skills are valuable. learn how to do IT stuff, especially the boring stuff i.e. imaging, data management and integrity, VLAN and boring network tasks, MS office suite, etc. IT pays good and it's not rocket science]

6) take a portion of your take home pay each payday and save it.

[You're right Woody! even if it's only 5%, save something]

7) establish savings goals and measure your progress each payday.

[You're right Woody! At least once a month]

Two outta seven ain't bad Woody! Especially if it's hitting a baseball, or hitting on chicks at a bar. 2 outta 7 aint bad....

[internethandle]

It would also help to have a time machine so you could once again live in an era where jobs paid more and everything costed less, adjusted for inflation.

The real estate market wasn't inflated to ridiculous levels due to investors trying to dodge capital gains taxes.

Good jobs could be found without a bachelors/masters degree.

Banks paid interest rates more than 0.1%

The attitude in most of these comments can be described as nothing short of delusional.

[NewWorldPartyDotOrg]

Read:

Stealing from Children:

http://www.newworldparty.org/2008/11/stealing-from-children.html

It has gone into overdrive.

[PulSamsara]

Youth ! Take Heart ! There's a new 'Design a Guillotine' App for that !

[noloyalisti]

The top 1% will not be satisfied until they destroy America and its middle class. That is why they love the Republicons so much, they want the Top 1% to rule, it makes governing so much easier when you only have to answer to a few of your corporate masters.

That is why this literally a fight to the death and much more like another 3rd world country, Egypt, than anyone wants to yet admit.