"Whoever dies with the most toys wins!"
That, of course, is largely antithetical to the collective ethos of the Silent generation but, from a balance sheet perspective, it’s increasingly defining the capacity of that age cohort.
The latest Federal Reserve data on Consumer Finances shows that a disproportionate share of gains in wealth and income in recent years have gone to consumers age 75+, who now have the highest median net worth of all age groups for the first time ever.
This latest good news for the elderly comes atop 30 years of rapid wealth growth among older Americans. As a result, the net worth of older families now towers over that of younger families. In fact, The relative affluence of today’s elderly is historically unprecedented. Never before have Americans age 75 and older had a higher median household net worth than that of any younger age bracket.
Back to the Global Macro Grind…
Let’s dig in…
The latest Federal Reserve numbers reflect broad-based gains that cut across the economic spectrum. In 2016, the median net worth of American households was $97,300, up 16% from 2013 after adjusting for inflation. Mean net worth also rose nearly 26% to $692,100. The figures represent a welcome shift from the years immediately following the recession, when wealth declined for many families.
But the fruits of the recovery have been spread unevenly across age groups. Faring the best are the oldest families led by those age 75+—an age bracket largely occupied by the Silent Generation. (The G.I. Generation, born 1901-24, now comprises barely 7% of Americans age 75 and older.) From 2013 to 2016, this age bracket experienced a 32% increase in median household net worth and a staggering 60% increase in mean net worth. Today, the net worth of a typical age 75+ (Silent) householder is $264,750. This amount shrinks moving down the age ladder: Comparing median net worth between households, the Silent are roughly 1.3 times better off than Boomers, more than twice as well off as Xers, and 23 times better off than Millennials.
The post-recovery gains made by older Americans echo this age bracket’s strong financial performance over the past several decades. Since 1983, families led by those age 75+ have seen their real net worth grow sevenfold, by far the biggest gains made by any age bracket. (The next-biggest gainers, 65- to 74-year-olds, roughly quadrupled their net worth over the same time period.)
But working-age adults have not fared nearly as well. In fact, today’s Xer-led families have a lower real median net worth than like-aged families did back in 1995. In fact, since 2001, the median net worth of every age bracket except for the 75+ has actually declined: The medians for households under age 35 and ages 35 to 44 both plunged by more than 30%, for example, while the median for households age 75+ rose by 26%.
By type of asset, Silent wealth doesn’t differ much from that of younger generations outside of the (unsurprising) fact that they owe much less in mortgage debt.
On the financial side of the ledger, forget any notion that these elders are “spending down.” Financial asset ownership averages $538,000 per household. (Keep in mind we’re including family heads in their late 80s and 90s!) That’s only slightly less than late-wave Boomers (55-64), at $576,000. And it is vastly more than early-wave Xers (45-54), at $310,000, or any younger age bracket.
Economists may also want to give their theories of life-cycle portfolio preference a serious rethink. In fact, 75+ households are more invested in equities than any younger age bracket—both in the share of households directly owning any stock (19%) and in the average stock ownership across all households (nearly $100K). Even including stock held indirectly by mutual funds and retirement accounts, these “late elders” give today’s 50-somethings a serious run for their money and easily lap today’s 40-somethings.
And that reality has carried tangible implications for savings and consumption preferences across the age continuum.
The Silent and early-wave Boomers have become economic anchors for America’s new renaissance in multigenerational family living. Many routinely pay for extended-family vacations, fund 529 plans to cover college costs, or subsidize their grown Boomer or Xer kids. In fact, according to a recent report from the Kenan Institute, Americans age 65+ are more than twice as likely to be caring for non-elderly family members in their household (15.1%) than they are to be receiving care themselves (6.7%).
Further, A recent TD Ameritrade survey reported that grandparents spend an average of $2,383 annually on their grandchildren—an amount that includes household items like clothing and toys along with heftier expenses like college savings and vacations.
So how much longer will the nation’s 75+ elderly occupy their current position as the wealthiest Americans and pillars of financial support for their children and grandchildren?
Hard to say, of course. A market crash would clearly pull down the net worth of the very old more than that of the very young (who have little financial net worth to speak of). In any case, we expect this golden age for “senior” seniors to come to a close no later than the mid-2020s.
A more important dynamic will be the “aging in” of Boomers. For roughly the next decade, the relatively prosperous early-wave Boomers will be crossing the age 75 threshold. By 2025, it will be the less prosperous late-wave Boomers (today age 55-64). Late-wave Boomers have underperformed early-wave Boomers at every age: They’re less educated, have acquired fewer assets, are less likely to qualify for retirement benefits, and have more debt. The same cohort group which is now starting to pull down the economic welfare of the “young old” will, by then, be entering the category of “older old.”
In time, the misfiring late stage of the Boomers’ retirement years will take the luster away from this phase of life. But for now, the 75+ story is all about the Silent, the generation which continues to coast on a streak of wonderful fortune luck that has propelled them—like Warren Buffett writ large—from a childhood of Winnie the Pooh to sunset years presiding over fortunes beyond anything they ever imagined.
Our immediate-term Global Macro Risk Ranges (with intermediate-term TREND views in brackets) are now:
UST 10yr Yield 2.33-2.42% (bullish)
SPX 2 (bullish)
NASDAQ 6 (bullish)
VIX 8.92-12.04 (bearish)
USD 92.75-94.30 (neutral)
Oil (WTI) 55.75-58.60 (bullish)
Best of luck out there today,
Neil Howe
Demography Sector Head
