Millennials: Here Are 5 Key Signs You’re Doing Better Financially Than Gen X Was at Your Age
The Duke University Center for Child & Family Policy credits the writer James Truslow Adams with coining the term “American dream” in 1931. The concept’s central tenet was upward mobility — “That through hard work, one can go on to earn more money than one’s parents.”
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Seventy-four years later, in 2005, comedian George Carlin said, “It’s called the American dream because you have to be asleep to believe it.”
The late comic’s cynicism was rooted in what the American Enterprise Institute refers to as “late capitalism,” the idea that since baby boomers became adults, “Each generation is worse off than the one before.”
But there’s plenty of evidence that the American dream is alive and well. An AEI report from February found that “each of the past four generations of Americans was better off than the previous one.”
If skeptical millennials — long pilloried as financially inadequate — are looking for proof, there are several key signs that American capitalism has not failed them, and that they’re doing better than Gen Xers were at their age.
Millennials Outearn Gen Xers — and Everyone Else — at the Same Age
The myth of the broke millennial stems from the many financial hits the generation encountered right out of the gate. Most notably, the Great Recession, which crippled their upstart careers and homeownership aspirations just as their supersized student loans were coming due.
The Atlantic reported last May that by 2012, the median household income of 25-to-34-year-olds had fallen 13% from its 2000 peak. However, things began to turn around in the mid-2010s, and by 2019, households headed by millennials were earning considerably higher inflation-adjusted incomes than not just those headed by Gen Xers when they were the same age, but also by the Silent Generation and baby boomers.
The year before the pandemic hit, the median millennial household was earning roughly $9,000 more in 2019 dollars than the median Gen X household at the same age and $10,000 more than the median boomer household.
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They’re Better Educated Than Gen Xers — and, Once Again, Everyone Else
Millennials are often associated with the rise of crippling student loan debt — but all that borrowing purchased much of the generation’s outsized incomes.
“Millennials tend to have higher levels of education, which correlates with greater earning potential,” said Dayten Rynsburger, chief revenue officer of Niche Capital.
“Higher levels” is actually an understatement.
First American Financial Corporation said that according to its own research, “Millennials are the most educated generation in history.”
The company’s research shows that “approximately 38% of millennials have a bachelor’s degree or higher, compared with 32% of Generation X and 15% of baby boomers when they were the same age.” On top of that, millennials earned their undergrad degrees “much faster than previous generations.”
Gen X, Not Millennials, Are at the Apex of the Student Loan Crisis
Not only are millennials better educated than all the generations that came before, but contrary to popular belief, they did it with much less borrowing than their older siblings in Generation X.
According to the Education Data Initiative, Gen X holds 56.73% of the nation’s $1.63 trillion student debt, the most of any generation. Millennials, on the other hand, account for 30.26%.
Individual debt is also lower than that of both older generations, with Gen X, once again, owing the most.
The average millennial owes $32,800, compared to $44,290 for the average Gen Xer and $42,520 for the average boomer. Only Gen Zers have a lower average balance, but they just started borrowing for college.
Millennials Started Saving Earlier and Are on Track for Better Retirements
The most noticeable sign of one generation’s financial advantage over another generation is savings — and here, too, millennials seem to be outpacing their older siblings.
“We see millennials saving more than Gen Xers during similar stages of their lives,” said Jennifer Kirby, senior fiduciary financial advisor and managing partner of Talisman Wealth Advisors. “This includes retirement savings, so that immediately puts millennials at an advantage. The earlier they save for the long term, the better off they are later in life.”
According to The Wall Street Journal, older millennials earning a median salary are on pace to replace nearly 60% of their pre-retirement income with savings, including 401(k)s and individual retirement accounts, and Social Security. Gen Xers and the youngest baby boomers, on the other hand, are on track to replace only about half of their income in retirement.
According to the 22nd Annual Transamerica Retirement Survey of Workers, published in October 2022, the median millennial began saving for retirement at age 25, compared to 30 for Gen Xers and 35 for baby boomers.
Millennials Got a Later Jump on Major Life Events — Wisely, It Seems
According to Goldman Sachs, millennials have put off major life milestones like marriage and homeownership until later than previous generations. For example, The Journal Record, citing Census Bureau data, reported that the homeownership rate for millennials was 51.5% in 2022 compared to 58.2% for Gen X in 2006 and 56.5% for baby boomers in 1990.
But that might be a blessing in disguise.
“This delay often allows for more substantial financial planning and savings accumulation,” said Justin Godur, financial advisor, real estate expert and CEO and founder of Capital Max, a commercial real estate family office. “Though it may appear as a setback, this strategic delay enables millennials to be financially more prepared when they do decide to make these large commitments.”
Kirby agrees.
“Gen Xers experienced two epically painful phenomena that really hurt them financially,” she said. “First, the dot-com bust of 2000-2002, which was followed by a lost decade in the market. This is when many of them were buying their first homes. Second, it got even worse during the 2008-2009 financial crisis. Many Gen Xers bought homes at the peak before the crash, and a lot of these homes were underwater for years. Add to that a painful job market, and this equaled a real hit to wealth accumulation. By comparison, the millennials have been slower out of the gate sinking capital into homes. This gave them more time to accumulate wealth.”
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This article originally appeared on GOBankingRates.com: Millennials: Here Are 5 Key Signs You’re Doing Better Financially Than Gen X Was at Your Age
