You’re not going to be a millionaire, sorry

You're not going to be a millionaire

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New paper from the St. Louis Fed (that’s a thing?) on how your age affects your income. Let’s start with something basic that no one ever really acknowledges, best I can tell: unless you have an inheritance or work in about 4-5 specific fields, it’s typically pretty hard to have a boatload of money before you’re 40-45 or so (and even then, it’s hard). You gotta work your way up the chain, and stuff like vacations/kids/horrible decisions around going to happy hour and staying till 10pm will cut into your finances. I make a decent salary relative to what I do, and I still often feel like I’m paycheck-to-paycheck. I’m 34, if you care.

Here’s the methodology behind everything:

The paper, by William Emmons, Bryan Noeth and Ray Boshara, draws on surveys of 40,000 families that the Fed carried out between 1989 and 2013 to examine the all-important role that your age plays in how much income you make and how much wealth you accumulate. It offers a few clues as to how young people can game the system and end up like their wealthy older counterparts, as well as a lot of evidence to show that things are just different for young people today.

And — drum roll, please — here’s the part that will make you feel as sad as when you saw that cat as roadkill:

If you’re over 62, your odds of having at least $1 million in net wealth (your total assets minus your total debt) are relatively achievable — about 1 in 7. But if you are under 40, your odds are low: 1 in 55.

I’m not very good at math, but … that seems that from one generation (parents!) to the next (children!), you have about an eight-times-less chance of achieving a million dollars. That’s kind of depressing, right? (I personally gave up on achieving a million dollars, which really doesn’t seem like that much money anymore if you consider housing prices, probably about eight years ago. But I’m a pessimist.)

Let’s have some fun with charts now, shall we?

Young people are poor

Here’s how that chart works: people born in different years (every three years from 1901 to 1994) are surveyed at different times (longitudinal study!). The median family income is on the vertical axis — so the youngest generations (left of the graph) rise more sharply, because they’re entering from years where you make no money (students) to years where you make more (salary).

Now compare that chart with this chart:

Young people have no money

That’s the same graph, but it’s for wealth (assets minus debt). Basically shows this: net worth is harder to amass than income (takes longer), but declines at a slower rate. That’s because large elements of net worth, like your house, are things people hold onto for longer. (My parents have lived in the same NYC apartment since 1974; it’s now worth probably $2 million. See what I’m saying?)

Here are a few takeaways that might make you weep:

Basically, young people have always been poor. But looking beyond that basic trend, you can see that today’s young people are poorer than young people of the past.

In just 25 years, the wealth gap between young and old people has yawned wider. In 1989, old families had 7.6 times as much median wealth as young families. By 2013, it had grown to 14.7 times.

According to the economists’ calculations, someone born in 1970 has a quarter less income and 40 percent less wealth than an identical person born in 1940.

Um. Yea. So … I guess the next question would be: Why?

The obvious reasons are:

  • Recession of 2008
  • Employers are trying to keep earnings down and replace them with “perks”
  • The millennials’ parents spent a bunch of money when times were better, so they need to think about retirement now
  • Massive disconnect between “how we educate” and “how we hire” in America (BAM!)

Here are a couple of reasons we maybe think less about:

  • Younger Americans right now are a more diverse young populace than ever before, and diversity-connected impediments to making a lot of money are a very real thing. (Discrimination, old boys’ networks, etc.)
  • Younger Americans tend to not have very diverse portfolios. (They’re also not buying homes.)
  • There’s a whole belief that millennials “want experiences,” possibly because their parents were on the grind so much or possibly because they have so many access points to see the rest of the world and they want to chase it. It’s hard to generalize about millions of people, but … usually to “pursue experiences,” you also “need money.” (Core issue.) So if you spend money now on experiences, that’s less savings, further from a house, less stocks/funds, etc.

Here’s the most depressing part: the guys who wrote that paper basically concluded that “some generations are born lucky” (1930 to 1950, yo!) and “some aren’t.” It’s sad to think your financial future is directly connected to chance, but … maybe it’s accurate.




Ted Bauer


  1. The primary reason is just inflation. It has some pernicious effects, three of which are a devaluation of savings over time, and an erosion of real wages over time, and a general rise in nominal prices over time. If you have a relatively fixed money supply, prices can’t generally rise because where does the money come from? Industries that enjoy increased demand and higher prices mean the producers of other products need to rein in production and lower prices to compete, because at the end of the day all goods and services compete against each other for dollars. But, if you’ve got a kleptocracy hell bent on giving easy money to banksters so they can ‘earn’ interest on it by loaning it out, even though the pool of loanable funds based on actual savings is next to nonexistent, well then the only way to do that is to pump the money supply. It certainly makes people feel richer for a while, but the end result is stagnant and falling wages and declining standards of living. Essentially, what happened in Zimbabwe is happening here, only slower.

  2. Globalization is the primary driver. No coincidence that the (manufacturing) offshoring that started in the latter 1970’s, and which is still spreading up the job chain is when wages started stagnating. Ditto for increasing foreign competition in almost every arena. The US economy is no longer the self-contained island that it used to be just after WWII. I’ll also wager that inequality is a significant secondary driver as well, and not just in the US, as revealed by the stunning lack of productivity gains flowing to the ordinary worker. So the FED’s conclusions don’t surprise me at all.

    This of course is affecting nearly everyone, but younger folks are hit harder as more of their career is exposed to these pernicious effects.

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