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The Rising Wealth of Older Americans

The old prosper…relative to the young
  • March 11 2012

Households headed by older American are getting richer, while those headed by younger adults are seeing their economic well-being erode.

According to analysis of government data by the Pew Research Center, households headed by adults aged 65 and older possessed 42 percent more median net worth (assets minus debt) in 2009 than their equivalents did in 1984. During this same period, the wealth of households headed by younger adults moved in the opposite direction. In 2009, households headed by adults younger than 35 had 68 percent less wealth than households of their same-aged counterparts had in 1984.

In dollar terms, the net wealth of older households was 47 times as much as the net wealth of younger households in 2009: $170,494 versus $3,662. In 1984, the gap was much less lopsided. Pew indicates it was a ten-to-one ratio.

Housing has been the main driver of these divergent wealth trends. Rising home equity has been the linchpin of the higher wealth of older households in 2009 compared with their counterparts in 1984. Declining home equity has been one factor in the lower wealth held by young households in 2009 compared with their counterparts in 1984.

Trends over the same period in other key measures of economic well-being—including annual income, poverty, homeownership, and home equity—all follow a similar pattern of older adult households making larger gains, compared with households headed by their same-aged counterparts in earlier decades, than younger adult households, according to the Pew Research analysis.

While the housing market collapse of 2006, the recession of 2007-09 and the ensuing unemployment/underemployment climb affected the age-based divergences of households, they are as much linked to long-term demographic and social changes, Pew contends. For the young, these changes include delayed entry into the labor market and delays in marriage—two markers of adulthood traditionally linked to income growth and wealth accumulation. Today’s young adults also start out in life more burdened by college loans than their same-aged peers were in past decades.

For older Americans, one key change over the past quarter century has been an increase in the share who are employed. The share of adults ages 65 and older who are employed reached an historic low of 10 percent in 1985 but has since risen to 16percent  in 2010. 

 

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