Which generation has the most wealth?
Jay Pelham, CFP®, President at Kaufman Rossin Wealth, has provided his insights to U.S. News & World Report in the article, “Which Generation Has the Most Wealth.” The article details the distribution of wealth among different generations in the U.S.
Article Excerpt:
Wealthiest Generation: Baby Boomers
“A basic reason for this generation’s wealth is that they’ve benefited from the time value of money and reinvesting the interest,” says Jay Pelham, CERTIFIED FINANCIAL PLANNER™ and president of Kaufman Rossin Wealth in South Florida.
“If people earned and saved and invested the same percentage of their income for 20 years or more, they’ve accumulated more than someone who has done this for five or 10 years,” he says.
Another reason for this generation’s wealth is owning and then selling a successful business. “We see this with baby boomers quite a bit,” Pelham says.
Second Wealthiest Generation: Gen X
“They may live in high cost urban areas, but this is a generation that has chosen to get married later in life,” Pelham says.
“Because of this they don’t have the benefit of a two-income shared living arrangement, or aren’t on one person’s health coverage. They are also becoming homeowners much later in life, which is the way a lot of us have built wealth in the past,” he adds.
Third Wealthiest Generation: Silent
“These are people who may have been living off of their wealth for many years now,” Pelham says, explaining that the biggest risk to their accumulated wealth is longevity. Some people predicted they only needed to have enough funds to live until age 85 or 90, but then outlive those assets.
Another risk factor is the rising cost of goods and services. “Inflationary cycles impact this generation the most,” Pelham says. “If they’re living off a fixed income, inflation has eroded the value of their assets.”
Fourth Wealthiest Generation: Millennials
“It’s where most people are at their lowest level of income,” Pelham says, explaining that basic living expenses comprise a much higher percentage of their paychecks. After covering the costs of housing, transportation, food and insurance, there’s often not much left over to save and invest.
How Will Generation Z Fare Financially?
“All the stats I see show we’ll have a shortage of housing that will drive up costs,” Pelham says. “This is a generation that will pay a higher portion of their income for it. It’s a simple supply and demand equation.”
Current and Future Generations Can Thrive with Planning
Pelham stresses the importance of starting to invest as early as possible with as much as you can afford to set aside.
“Most of us in the financial series industry would say that if we could go in a time machine, we’d save money earlier in our lives,” he says. “That’s because the time value of money makes the biggest impact on how much wealth you will accumulate.”
Read the full article at U.S. News World & Report.
Jay Pelham, CFP®, is President at Kaufman Rossin Wealth, LLC, a Registered Investment Adviser.
