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By 
January 03, 2023 at 01:09 PM
What You Need to Know
- Gen X appears on track to eventually match or exceed the wealth of baby boomers.
- Millennials, in turn, are set to leverage greater educational achievement to raise the wealth bar even further.
- Both millennials and Gen X represent a key client segment for financial planners with an eye on long-term growth.
Much of the press dedicated to the financial outlook of Gen X focuses on the unique challenges facing the so-called “sandwich generation.”
The idea is that Gen Xers face financial pressures from both sides — having to care for aging parents while also raising their own children. As both the cost of health care and child care continue to mount, this puts Gen Xers in an uncomfortable position, even as they enjoy their peak years in terms of earnings and career achievement.
With these challenges in mind, a new analysis published by Jeremy Horpedahl, an associate professor of economics at the University of Central Arkansas, questions the premise that Gen X is falling behind financially. In fact, building on prior work published in 2022 and 2021, Horpedahl finds Gen X is now significantly wealthier than baby boomers were at the same age.
Horpedahl’s analysis shows millennials’ average wealth has also pulled ahead of that of the baby boomer generation on a point-in-time basis at age 35. As such, both millennials and Gen X represent a key client segment for financial planners looking to bolster their book of business with a younger and more diverse set of clients.
The Gen X Advantage
As of late 2022, Gen X boasts about $100,000 more in wealth per capita, or approximately 18% more, compared with baby boomers when they were at the same life stage. In this case, the age being considered is approximately 50 years old.
According to Horpedahl, who frequently publishes summaries of his academic work on the Economist Writing Every Day blog, Gen X deserves a lot of collective credit for making sound saving, spending and investment decisions in the face of some serious headwinds.
Horpedahl notes that millennials have also now fallen slightly behind what Gen X achieved at the same age — in this case, at approximately 35. This is mainly because millennials have experienced little wealth growth in real, per capita terms between the end of 2021 and the present. That said, millennials fared much better in 2022 amid the massive drop in market-based wealth, Horpedahl finds, so the picture looking forward is mixed.
Key Facts About Millennial Wealth
Because of their lower representation in the markets and their outsized holding of housing wealth, relatively little of the approximately $6.6 trillion in total wealth lost in the markets in 2022 was suffered by millennials. Instead, Horpedahl finds, the losses were roughly evenly shared among the three older generations, with baby boomers hit the hardest.
As Horpedahl writes, this outcome is based largely on the fact that millennials hold more assets in real estate (which went up) than in equities (which went way down). Conversely, the other generations have much more relative exposure to the stock market at their current point in life.
While millennials are now lagging behind Gen X’s point-in-time wealth, they have pulled slightly ahead of the baby boomer generation, Horpedahl finds. His prediction is actually that, by the time millennials are in their late 40s on average, they will in turn surpass Gen X in point-in-time wealth.
