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Generation X Baby Boomers Go Wealthy; Racial inequalities persist

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Caught between the cultural extremes of baby boomers and millennials, Millennials saw their wealth surge during the Trump administration and during the coronavirus pandemic as they reached their prime earning years in a record bull market for stocks.

Recent data from the Federal Reserve showed Gen X, which the US central bank defines as currently between 40 and 55 years old, took a big step at the end of last year: their share of net worth. of households, at 26.9%, exceeded about 26.8% of the generation. share of households.

A byproduct of population aging as the silent generation of World War II and the baby boomers that followed the household share decline, this shift nonetheless marks a passing of the torch. In short, Gen X is now the bottom generation, in terms of wealth.

Additionally, Gen Xers are emerging from the pandemic more strongly than when it started, and most of them still envision two more decades of peak gains.

At the start of the Trump administration in 2017, the 34.6 million households headed by a Generation Xer held only 17.4% of household net worth. According to quarterly data from the Fed, which estimates the distribution of assets and liabilities among households by race, age and education, this percentage had climbed to 25.4% by the end of 2019 and continued to expand during the pandemic.

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Baby boomers still hold more than half of U.S. household net worth, at around 52.7%, well above their roughly 33% of households. But that figure peaked at 55.8% in fall 2016, fell almost half a percentage point in 2020, and will likely continue to decline.

Millennials, considered those aged 24 to 39 at the end of last year, still hold less than 5% of household net worth despite making up nearly 30% of households, according to data from the Fed.

The data is starting to answer questions about how wild swings in stock prices, a resilient housing market and massive federal aid linked to the pandemic in 2020 have changed the distribution of wealth in the country.

The rich do better

Some trends continued as richer households increased their share of wealth; but the bottom also got a bit too, and data by race indicates the country has avoided turning back the clock even as blacks and Hispanics faced disproportionate job losses.

The richest 1% of households added $ 4 trillion and nearly half a percentage point to their share of total net worth. At the end of 2020, the roughly 1.29 million households in this group held 31.4% of stocks and real estate and other assets held by households, less amounts owed on mortgages and other debts, compared to 31% at the end of 2019.

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Although his holdings were much smaller, the bottom 50% saw their share of net worth drop from 1.8% to 2%, largely thanks to an increase in real estate and pension holdings, including through tax-deferred 401 (k) retirement savings. accounts, which increased the group’s net worth by $ 470 billion.

There have been offsetting declines in the share of household equity held by the 50th to 99th percentiles, even though the bottom and top halves have seen an increase in the value of their assets minus their liabilities.

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Racial inequalities

Race-based assets have remained relatively unchanged, showing little progress in reducing wealth inequalities based on racial lines, which has become a key social problem in the United States. At the same time, these data indicated that the pandemic had not caused a dramatic setback on this front.

Since the calculation of net worth includes things like credit card debt, it might reflect the influence of federal unemployment assistance and other payments that have led some households to reduce loan balances and to increase their savings.

For blacks and Hispanics, the gap between their shares of net worth and their shares of households in the population narrowed slightly during the pandemic, while the comparative surplus held by bald-headed households narrowed slightly.

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However, the differences remained significant.

Black households started the year of the pandemic with 4% of US household net worth while comprising about 14% of households, and ended it slightly up at 4.1%. The Hispanic share, at 2.4% of household net worth compared to about 9.3% of households, has not changed.

The average white family’s net worth has remained about four and a half times that of the average black family and five times that of the average Hispanic family.

Education-related wealth gaps continued to widen. Of the $ 11 trillion added to household net worth over the past year, a figure driven by gains in financial investments as well as real estate, more than 81% went to families headed by someone with a d ‘university. These households represent a growing share of the population, but still only represent 36.7% of the total, according to demographic estimates used by the Fed.

The share of net worth held by households headed by college graduates was 71.8% at the end of 2020, up 1 percentage point from 2019.

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Demographics were last updated in the second quarter of last year.

(Report by Howard Schneider edited by Dan Burns and Paul Simao)

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