Jill On Money: Why ownership still pays

After a lifetime of work, many Americans over 75 hold two major assets: a home and investments, Jill Schlesinger writes.

The Federal Reserve’s Survey of Consumer Finances, released every three years, offers a close look at what U.S. families earn, own and owe. The newest report shows a result that may not surprise many readers: households led by someone age 75 or older have become the country’s wealthiest age group.

Adjusted for inflation, the median net worth of families headed by someone 75 or older rose 37 percent to $504,900. By contrast, households headed by someone under 35 saw their median net worth fall 23 percent to $33,000. The other age groups changed by 6 percent or less in either direction.

The gap is not simply about age. It is also about ownership. Economic commentator Kyla Scanlon has pointed out that renters have a median net worth of about $10,000, while homeowners sit above $450,000. After decades in the workforce, many people over 75 own both a house and an investment portfolio, which helps explain the difference.

The scale of the divide becomes clearer when looking at long-term gains. Since 1990, after inflation, the average full-time worker’s weekly pay has increased about 18 percent, home prices have climbed around 67 percent, and the S&P 500, with dividends reinvested, has risen roughly 1,700 percent. Older households have had more time to build assets, while many younger adults are still living paycheck to paycheck, and that has widened the wealth gap.

There is, however, one encouraging sign in the latest survey: wealth inequality has barely changed over the past three years. According to Robert Armstrong of the Financial Times, most of the sharp rise in wealth growth disparity happened between 1989 and 2013. He notes that in the years since, the growth advantage of the richest 10 percent has largely narrowed or disappeared, depending on how the data are measured.

For younger adults discouraged by the numbers, there is a bit more good news. The under-35 group that saw a decline in net worth in the latest survey had posted a dramatic gain in the prior one. Their median net worth more than doubled between 2019 and 2022, the largest increase on record, likely helped by stimulus payments, student loan payment pauses and rising asset values. Some pullback was expected, and even after the decline, younger households are still better off than they were in 2019.

Still, not everyone is doing well. The Fed found that the share of families behind on loan payments climbed from about 12 percent to nearly 20 percent, the highest level since 2010. At the same time, the mortgage payment on a median-priced home now consumes about one-third of median family income, also a record.

For older Americans who have benefited from the rise in wealth, Nick Maggiulli of Ritholtz Wealth Management offers a simple idea: give now rather than later. Once retirement is secure, helping children in their 30s and 40s can have more impact than leaving the money as an inheritance.

Younger people, meanwhile, should avoid measuring their progress against their parents or peers, since circumstances can be very different. A better approach is to keep tabs on spending, limit debt and keep contributing to a retirement account, especially when an employer match is available.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected]. Check her website at www.jillonmoney.com)