Numerous
articles in news and commentary sites lately have reported the difficulties
Millennials and Zoomers are facing in their attempts to establish independent
lives. High rents and college debt are cited as serious drags on them. A
minority is very successful indeed almost directly out of college, but the
majority struggle. I recall similar articles in past decades about Boomers and
Xers, but that is not to deny actual changes in the challenges faced by the
young in the 80 years since World War 2. At this stage in my life, the issue in a personal way is largely academic, but I do see friends and relatives affected by it. The
immediate post-war period was a remarkable anomaly. After a decade and a half
of desperate times, members of the GI and Silent Generations created for
themselves a civilian economic boom in the US and most of the rest of the West
that set an unprecedented standard of widespread (not universal by any means,
but widespread) middle class prosperity. They started adulting (a word that
didn’t exist at the time) early; it doesn’t seem to have occurred to them to do
anything else. My parents were typical: my dad was discharged from the service
in 1946, he and my mom married at ages 21 and 19 in 1947, and they built their
first house (a suburban ranch) in 1949. A loose regulatory environment for land
development resulted in a construction boom that made housing 1945-65 as
affordable as it ever had been or has been since.
My parents at work on their house. 1949.
Each
generation since then has launched a little later than the one before. (They
are Boomers 1946-64, Xers 1965-79, Millennials 1980-94, and Zoomers 1995-2012;
the oldest of the upcoming Alphas won’t be legal adults for another 6 years.)
Each generation blames the one before for shutting economic doors on them (e.g.
through zoning and licensing) and each in turn blames the one after it for
being laggards. There always is some truth in both accusations, but just some:
the matter looks more complex, unsurprisingly, in detail. Millennials
and Zoomers have had particular trouble affording housing in the 2020s. In
consequence, according to RentCafe, 68% of adult Zoomers live with parents or
some other relative. 20% of Millennials still do. Of those, nearly half have no
plans to move in the next two years. Of those that do move out, roommates are a
commonplace way to afford rental units. Some even opt for alternative housing
such as RVs. News sites are rife with stories about how most live paycheck to
paycheck without so much as $1000 for emergency expenses; they rely on credit
card debt for those. Yet, Millennials and Zoomers are not in as bad shape as
all the stories suggest. Every generation takes time to build net worth and
savings. The current crop of young people are a few years behind, but not by all
that much. Housing for purchase was actually less affordable in the early 1980s
(when mortgage interest rates were in double digits) than today. To be fair, rents
and (especially) education costs really are significantly higher today in
inflation adjusted terms than in previous decades. However, a windfall is
coming. Baby
Boomers have capital – much of it is in home values rather than liquid but it nonetheless
adds up to a lot. (To be sure, there are plenty of broke Boomers, especially
among those needing long term health care, but we are talking about the center line
of the bell curve.) According to the Federal Reserve’s 2023 Survey of Consumer
Finances, the median US household net worth (i.e. 50% have more and 50% have
less) in 2023 was $409,000 for those aged 65-74 and $335,600 for those over 75.
This gives a falsely low impression of how much is in this generation’s hands. Thanks
to the millionaires among them, the average (not the median) net worth for
Boomers is closer to $2,000,000; most of those wealthy people will have
multiple heirs. So, an unprecedented transfer of wealth, mostly to Millennials
and Zoomers, is set to take place as the Boomer generation passes: some 84
trillion dollars. Together with their own earnings, the kids should be alright
– again, talking about the generation collectively. Individually, every person’s
story will be different. At least half of Zoomers shouldn’t count on any rescue
by inheritance – especially if health care saps Boomers’ bottom lines in the
years ahead – but this was the case for earlier generations too. The
generation in most immediate trouble is X. According to a 1000-person survey by
Clever Real Estate, 56% of Xers said they had less than $100,000 in savings and
22% said they had none at all. Two thirds said recent inflation has seriously harmed
them financially and 40% don’t think they ever can afford to retire. The
windfall from Boomers will largely pass over them. The oldest of the Xers turn
59 this year, so they are not entirely out of time to repair their finances,
but it is getting short. No
one wants to be old and broke. (No one wants to be young and broke either, but
one can recover from that easier.) So, it is natural to worry about these
things. But there are limits to the value of worry too. We do what we can with
what cards we have at each point in life. We can do no more.
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