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Wealth Chasm Between Old and Young

Let us set aside the rich bankers versus the every day person or the 1% versus the other 99%.  The true gap resides in generational wealth.   According to a Pew Research Study, older americans were 47 times more wealthy than younger americans in 2009 while that ratio was a modest 10 times in 1984:

Also notice that today's 65 year old is 41.5% wealthier than his parent while the median 35 year old has 31.8% of the wealth of his parent (all in 2010 dollars)

Social Security and Medicare continue to pay out healthy entitlement benefits to current retirees at the cost of future tax payers.  The median 35 year old is struggling to get his/her head above water, much less save money in a retirement plan.  In other words, government provided retirement benefits for the 65+ cohort will be paid by the 35 year old individuals who have saved nothing for their own retirements.  This same 35 year old cohort will most likely receive little or no entitlement benefits in the future as the US deficit is balanced.

How did this happen?  A healthy stock market from 1980-2000, prolific economic growth, robust jobs market, and a 30 year easy money central bank policy which provided a debt-fueled binge.

To the 65+ cohort with private pension retirement payments, social security checks, fully paid health care, and a robust private brokerage/retirement account due to 30 years of declining interest rates and rising stock prices – congratulations for winning the generational lottery at the cost of other generations.

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Posted in Economics, Media, Politics.

One Response

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  1. Carol@inthetrenches says

    Very interesting statistics but I think the one point you don’t mention is that the younger generation has entirely different money management practices than the older and of course the older has had more time to acheive their postion. Most of the older generation came out of or grew up during the depression and had frugal spending habits in their younger years. Security was #1 financial goal and they managed accordingly. Or another reason could simply be that the younger generation thinks they have to use pampers which will strap and waste money for young families faster than anything. One can’t save what is being thrown in the landfills. Your comment on debt-fueled binge is right on and probably the biggest factor. The good news is that we still have our land and freedom and can do it better in the future. Starting over is not fun but if the first house was a house of cards it was inevitable that it would be necessary.

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