An analysis of income data by The Pew Charitable Trusts found that younger cohorts of investors are more likely to experience downward economic mobility in their retirement than older investors. Generation X is especially at risk to suffer a downgrade in lifestyle after retirement.
“The two youngest cohorts studied are on shaky financial ground,” Diana Elliott, research manager for the economic mobility program, said on a media briefing covering the results. “Generation X is undoubtedly in worse shape.”
The report analyzed data from the Survey of Consumer Finances and the Panel Study of Income Dynamics to compare trends in wealth and project retirement replacement rates for five age groups: Depression babies, born between 1926 and 1935; war babies, born between 1936 and 1945; early boomers, born between 1946 and 1955; late boomers, born between 1956 and 1965; and Generation X, born between 1966 and 1975. Generation Y was excluded from the report to focus the analysis on people in their prime working years between 1989 and 2010, Erin Currier, director of the economic mobility project, said on the call.
Earlier boomers were in better financial shape in 2010 than either of the older cohorts. Investors born between 1946 and 1955 benefited from the dot-com boom and the housing bubble, and consequently had higher financial net worth, overall wealth and home equity in their 50s and 60s than war babies or Depression babies did at the same age.
In their 30s and 40s, net worth for Gen X was higher than late boomers at that age, but both groups had lower levels of wealth than earlier boomers. In terms of financial net worth, which looks at savings accounts and retirement accounts without including nonfinancial assets, neither Gen X nor late boomers are on track to exceed older cohorts.