izusek
Maybe it was the prevalence of stock-trading apps combined with stimulus checks, but adults under 40 years old saw their wealth rise rise more than middle-aged or older adults since 2019, according to study by the Federal Reserve Bank of New York’s Liberty Economics.
For individuals 39 and younger, wealth surged by a whopping 80%. Contrast that with those 40-54, which saw wealth increase by 10% and those 55 and over, which logged in a 30% gain.
Financial assets contributed the most to the increase. For those under 40, the real value of their financial assets rose more than 50% between 2019 and 2023. The 40-54 group saw only a 3% rise, and the over-50 cohort experienced a 20% boost.
The under-40 group likely bulked up on equities and mutual funds during the period. The proportion of their financial assets in corporate equities and mutual funds increased to 25% from 18% in Q1 2019. That’s a 39% increase. Meanwhile, the over-55 cohort saw their equity/mutual fund portfolio share increase by 12%, and the 40-55 group saw their equity/mutual fund portfolio share decline to 25% from 30%.
Conversely, the proportion of assets held in pensions shrank for both the under-40 and over-55 groups, but increased for the 40-55 range.
“This increased exposure to equities — the fastest-growing financial asset class during the period — enabled younger adults to record higher growth in both financial assets and overall wealth,” the report said.
The study’s data, though, couldn’t differentiate between changes in investments from changes in returns, so the results are a combination of both factors.
The shift also reflects that younger adults can afford to invest in risky assets at a higher rate than older adults. In addition, with younger adults being closer to the beginning of their careers, their income is generally lower. Therefore, they received much of the COVID-era stimulus checks.
It’s important to note, though, that even with the increase in wealth of younger adults, they still hold a disproportionately lower amount of total wealth. In 2019, individuals under 40 years old held just 4.9% of total U.S. wealth, although they make up 37% of the adult population. Meanwhile, those over 54 make up a similar share of the population but hold 71.6% of total wealth.
“Analyzing shifts in the distribution of wealth since 2019, we find that faster wealth growth among younger adults has led to a limited narrowing of age-based wealth disparities over the past four years,” it said.
Tickers related to online trading: Robinhood (NASDAQ:HOOD), SCHW (NYSE:SCHW), Morgan Stanley (NYSE:MS), Interactive Brokers (NASDAQ:IBKR), SoFi Technologies (NASDAQ:SOFI), Ally Financial (NYSE:ALLY).
