Millennials are now wealthier than previous generations were at their age. Even they are surprised by this shift.
Fifteen years ago, Andy Holmes was a recent college graduate living with his parents. He made extra money by mowing lawns and digging ditches. He and his friends, who could only find low-paying jobs, often wondered if they would ever achieve the success their parents had.
Today, Holmes is a chief financial officer in Kansas City, Missouri, and he is on track to retire by the age of 52.
“I’m in a financial position I never imagined when I graduated college,” he said. “At 37, my net worth is closer to what I thought I’d have at 47.”
The change in fortune for Holmes and his generation, now aged 27 to 44, happened quickly and recently. The median household net worth of older millennials, those born in the 1980s, increased to $130,000 in 2022 from $60,000 in 2019, according to inflation-adjusted data from the Federal Reserve Bank of St. Louis. Median wealth for younger millennials, those born in the 1990s, more than quadrupled to $41,000.
The turnaround has been so dramatic that millennials, who were sometimes teased for being behind in building wealth, buying homes, getting married, and having children, now find themselves ahead.
By early 2024, millennials and older members of Generation Z had about 25% more wealth, on average and after adjusting for inflation, than Generation X and Baby Boomers did at a similar age, according to a St. Louis Fed analysis.
Ana Hernández Kent, a senior researcher at the St. Louis Fed and a millennial herself, spent years studying whether her generation was a “lost generation.”
“They’re no longer lost,” she said. “They’re found.”
In the first quarter of 2024, the combined wealth of millennials and older Gen Z reached $14.2 trillion, up from $4.5 trillion four years earlier, according to the Federal Reserve.
The largest contributor to this increase was real estate. Millennials’ housing wealth grew by $2.5 trillion, even after accounting for the additional mortgage debt they took on. A huge jump in home prices benefited homeowners, whether they managed to scrape together a down payment in the early 2010s or bought just before the recent rise in prices and interest rates.
Stocks and mutual funds also played a significant role, partly because many millennials made larger contributions to their retirement accounts earlier in their careers.
However, inequalities still exist, and in some cases, they have widened. Disparities along racial and educational lines persist, and millennials’ financial situations vary based on factors such as student debt, homeownership, and the cost of living in their area.
It’s uncertain whether millennials are better off overall, considering the sharp increases in some of the most burdensome costs, such as child care, housing, and healthcare. They are also expected to live longer than Boomers, so they will need their money to last.
As a group, though, millennials have traits that point to long-term prosperity, according to economists. More of them have college degrees, which can boost income. And they are having fewer children, which, whatever the impact on society, can ease financial pressure on household budgets.
Two early decisions helped Holmes build a better financial future. Moving back home after college allowed him to save for a down payment. In 2010, he bought a three-bedroom house for $90,000. That home is now worth about $300,000.
“I have to give credit to the Andy from 2010,” he said.
In 2017, Holmes invested a significant amount of money in the stock market, which later resulted in a gain in the high five-figure range. This windfall, along with a well-timed job switch, made it easier for his wife, Megan Holmes, to leave her job. She now stays home full-time to care for their two young children.
How They’re Spending
Brent Royer received a 40% raise when he switched jobs in 2021, which gave him the funds to invest more in his passion for skydiving.
The 36-year-old accountant makes weekly trips to a wind tunnel near his home in San Diego. Last year, he participated in a record-setting jump where 108 people formed three different formations in midair.
Royer estimates he spent about $40,000 on skydiving in 2023, including parachutes, custom-made jumpsuits, and plane tickets for jumps.
He saves diligently but doesn’t want to miss out on enjoying life by saving more than necessary.
“We don’t know how long we have in this life, so I want to make sure I’m enjoying it now,” he said.
About 62% of millennials say vacations are a high priority in their households, compared to 54% of adults overall, according to Mintel, a market research firm. They are also more likely to have paid for luxury travel experiences.
The generation’s approach to leisure is influenced by witnessing the 2007-2009 recession during their formative years, said Mike Gallinari, a senior analyst at Mintel.
“They realized they could lose their possessions to forces outside their control,” he said. “But nobody can take their memories from them.”
Phantom Wealth
Overall, millennials hold about 9% of U.S. households’ wealth. That might seem small, but net worths tend to increase with age, so even small gains represent significant percentage increases for younger generations still building their wealth.
In 2023, roughly 66% of Americans aged 30 to 44 said they were doing at least okay financially, up from 55% a decade earlier, according to a Federal Reserve survey.
For many, though, success feels fragile.
On paper, Becky Wang and Christian Hutchinson of Grosse Pointe Shores, Michigan, are thriving. The married couple, both 40, have stable jobs, a mortgage with an interest rate below 4%, and nine rental properties.
“My wife and I are much more afraid of failure in 2024 than we were in 2014,” Hutchinson said. “Once you have something to lose, you often become more cautious.”
Hutchinson, a business analyst, was born in Detroit and watched as the area lost jobs while he was growing up. Wang moved there as an adult after emigrating from China at 14. Her awareness of how quickly luck can change comes from treating cancer patients as a nurse.
The couple began buying rental properties in 2013, when prices were low around the time Detroit filed for bankruptcy. To diversify, they are considering purchasing a laundromat or an online retail business. Both also want to have side jobs.
“Deep down, we kind of fear that one day everything could fall apart,” Wang said.
That feeling is not uncommon among their generation, according to Taylor Leary, a financial planner in Greenwood Village, Colorado, whose practice focuses on millennials.
Gains in the value of a home or 401(k) can feel like phantom wealth because they are not liquid assets and don’t affect day-to-day cash flow. Meanwhile, millennials are dealing with the high costs of big-ticket items like daycare.
Many also remember a parent losing a job during the 2007-2009 recession, graduating college in a tough job market, or more recently, navigating the uncertainty of the Covid-19 pandemic.
“It’s almost like many millennials are looking over their shoulder, waiting for something bad to happen,” said Leary.
Growing Gaps
Despite the overall success of this generation, wealth inequality has widened among millennials compared to previous generations.
The gap between the 80th percentile of wealth and the 20th percentile of wealth among millennials was about $343,000 in 2022, according to the St. Louis Fed. Adjusted for inflation, that gap was about $286,000 for Boomers when they were a similar age in 1989.
One explanation is that the rewards for white-collar jobs have increased during that period, while the earnings for working-class jobs have stagnated, according to a 2023 study in the American Journal of Sociology. Another significant divide is homeownership.
Older millennials’ homeownership rate recently caught up with that of previous generations, rising to around 60% between 2019 and 2022, according to the St. Louis Fed. Meanwhile, only about 39% of Americans born in the 1990s owned a home in 2022.
Black millennials are half as likely to own a home as white millennials, the largest gap of any generation, according to Redfin. Low-income Americans are also missing out. About 8% of new mortgages went to low-income buyers aged 25 to 34 in 2023, down from 9% in 2020, according to Redfin.
Saving for a home and retirement feels like a distant goal for many, especially those who are not high earners. It takes an annual household income of at least $100,000 to afford the median-priced home in nearly half of all metro areas, according to Harvard University’s Joint Center for Housing Studies. A job loss or unexpected medical bills can delay saving for a home even longer.
Deanna Fuller, 40, and her husband, Marc Fuller, 42, both earn more money than they did before the pandemic, but their budget remains tight due to inflation.
The couple from Salt Lake City, Utah, earns about $89,000 a year from her job in the back office of a financial-services firm and his job in a warehouse distribution center. After paying $1,300 in rent for their 800-square-foot apartment and covering other expenses like food and transportation, they can save about $200 a month.
Medical bills wiped out most of their savings, and they haven’t been able to save much for
retirement.
With recent pay raises, the Fullers’ first priority is to build on the roughly $3,000 they have saved for emergencies and then start saving for a down payment.
“Maybe we’ll be able to buy a house when we’re 50,” Deanna Fuller said.
Strong Foundation
Many millennials who bought homes before the pandemic are in a strong position, even with rising insurance premiums and property taxes in some parts of the U.S.
“One of the biggest wealth divides, especially for millennials, is whether you bought a house in 2020 or before, or after—or not at all,” said Jean Twenge, a psychology professor at San Diego State University who has been studying generational differences for decades and has written several books on the topic.
Nationwide, existing home prices have risen 19%, adjusted for inflation, since June 2020, according to the National Association of Realtors. The average home equity among owners with mortgages increased by $122,900 over the past four years, according to CoreLogic.
Some millennials credit their good housing fortune to careful financial planning. Others attribute it to luck.
Justin Moorhead, 37, and his wife, Natalie Sheppard, 38, bought their 1,500-square-foot A-frame home in Nashville for around $215,000 in 2016.
They had been renting a two-bedroom, 900-square-foot apartment when their rescue dog, Scarlett, started barking loudly whenever she saw other dogs in the complex’s hallways. They wanted to give the 45-pound collie mix more room to play and realized their monthly mortgage payment would be less than their rent.
Their house is now worth about $500,000, and they owe around $165,000 on their roughly 4% mortgage.
“It’s not lost on us that the best financial decision we’ve made so far was just because we wanted a lawn for our dog,” Moorhead said.
Good Timing
While rising home prices have played a major role in the financial success of many millennials, other factors have also worked in their favor, including the increasing value of retirement funds.
In the first quarter of 2024, millennials had an average 401(k) account balance of $59,800, compared to $27,600 in 2019, according to Fidelity.
Good timing played a role here as well.
Millennials were the first generation to have access to automatic enrollment in workplace retirement plans during their early working years, said Matt Brancato, chief client officer at Vanguard Institutional Investor Group.
In 2006, 57% of employees aged 25 to 40 were enrolled in workplace retirement plans where Vanguard was the record-keeper. By 2022, 83% were enrolled.
Vanguard estimates that older millennials with median incomes will be able to replace almost 60% of their preretirement income with Social Security and savings from 401(k)s, individual retirement accounts, and other sources. By contrast, the youngest Boomers with median earnings are likely to replace about half of their paychecks in retirement.
Adam Chen and Margeaux Anderson started contributing to their 401(k) plans in their early 20s. The Denver couple has changed jobs several times within the technology field and now has about $800,000 invested, mostly in their 401(k)s.
Chen, 40, and Anderson, 34, prefer to live below their means. They grow their own lettuce, cook at home frequently, and enjoy free activities like hiking.
“We don’t want to have to work forever,” Chen said.
