The Growing Wealth Gap Nobody Talks About
By Ana Swanson
What are your odds of being a millionaire, do you think? One in 10? One in 50? One in 100?
If you’re over 62, your odds of having at least $1 million in net wealth (your total assets minus your total debt) are relatively achievable – about 1 in 7. But if you are under 40, your odds are low: 1 in 55.
In the last 25 years, the odds that an old person is a millionaire have improved slightly. But for young people, they have gotten much worse.
Read also:• Gen X is earning more but ends up having less• Are lifetime earnings determined in your 20s?
These figures come from a new paper by economists at the St. Louis Fed’s Center for Household Financial Stability, which shows evidence of a growing wealth gap that few people are talking about – the gap between the young and the old.
The paper, by William Emmons, Bryan Noeth and Ray Boshara, draws on surveys of 40,000 families that the Fed carried out between 1989 and 2013 to examine the all-important role that your age plays in how much income you make and how much wealth you accumulate. It offers a few clues as to how young people can game the system and end up like their wealthy older counterparts, as well as a lot of evidence to show that things are just different for young people today.
One of the most important points that the paper makes is that everyone’s income and wealth tend to follow a kind of natural pattern during their life.
Young people (generally defined here as those under 40) haven’t been working for many years, so they don’t have an opportunity to save as much; they also need to make investments in things like education and new-home ownership. Middle-aged people (40-61) have been working long enough that they start to accumulate wealth rapidly. And old people (62 and up) begin to draw down on their wealth, to finance their retirement. enlighten me some more…