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| DATE | 2024-08-13 |
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https://www.msn.com/en-us/money/markets/the-dramatic-turnaround-in-millennials-finances/ar-AA1oKIcC

The Wall Street Journal

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The Dramatic Turnaround in Millennials’ Finances
Story by Joe Pinsker, Veronica Dagher • 1h • 8 min read
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Millennials are now wealthier than previous generations were at their
age. They can’t believe it either.
Fifteen years ago, Andy Holmes was a college graduate living with his
parents, mowing lawns and digging ditches for extra income. He and his
college pals who could only get low-paid jobs wondered if they would
have a shot at the success their parents had.

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Today, Holmes is a chief financial officer in Kansas City, Mo., on track
to retire at 52.
“I’m in a place financially that I couldn’t have imagined coming out of
college,” he said. “At age 37, my net worth is closer to what I thought
it’d be at 47.”
The change in fortune for Holmes’s generation, now between 27 and 44
years old, was recent and swift.
The median household net worth of older millennials, born in the 1980s,
rose to $130,000 in 2022 from $60,000 in 2019, according to
inflation-adjusted data from the Federal Reserve Bank of St. Louis.
Median wealth more than quadrupled to $41,000 for Americans born in the
1990s, which includes the generation’s youngest members, born in 1996.
The turnaround has been so dramatic that millennials—mocked at times for
being perpetually behind in building wealth, buying homes, getting
married and having children—now find themselves ahead.

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In early 2024, millennials and older members of Gen Z had, on average
and adjusting for inflation, about 25% more wealth than Gen Xers and
baby boomers did at a similar age, according to a St. Louis Fed analysis.
Ana Hernández Kent, a senior researcher at the St. Louis Fed and a
millennial herself, spent years examining whether her cohort was a “lost
generation.”
“They’re no longer lost,” she said. “They’re found.”
In the first quarter of 2024, the collective wealth of millennials and
older Gen Z stood at $14.2 trillion, up from $4.5 trillion four years
earlier, according to the Federal Reserve.
The biggest driver of that increase was real estate. Millennials’
housing wealth grew $2.5 trillion, after accounting for the additional
mortgage debt they took on. A colossal jump in home prices benefited
owners, whether they scraped together a down payment in the early 2010s
or squeaked in just before the recent leap in prices and rates.

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Stocks and mutual funds also played a key role, in part because many
employees made larger contributions to retirement accounts earlier in
their careers.
Inequalities remain, and in many instances have grown. In addition to
disparities along racial and educational lines, millennials’ fates
diverge based on whether they are burdened by student debt, can buy a
home or live in an expensive area.
It’s unclear if millennials are better off overall, given the outsize
increases in some of the most burdensome costs, such as child care,
housing and healthcare. They’re also projected to live longer than
Boomers, so they’ll need to make their money last.
As a group, though, they have traits that point to long-term prosperity,
economists say. More have college degrees, which boost income. And they
are having fewer children, which, whatever the effects on the country,
is a boon to budgets.
Two early decisions helped set Holmes up for a better financial future.
Moving back home after college allowed him to save for a down payment.
He ended up purchasing a three-bedroom for $90,000 in 2010. That home is
now worth about $300,000.
“I have to pat Andy from 2010 on the back,” he said.
In 2017, Holmes put a chunk of money into the stock market, which later
yielded a gain in the high five-figures. The windfall, combined with a
lucrative job switch, made it easier for his wife, Megan Holmes, to quit
her job. She now looks after their two young children full-time.

The Dramatic Turnaround in Millennials’ Finances
© Arin Yoon for WSJ
How they’re spending
Brent Royer got a 40% raise when he switched jobs in 2021, giving him
the funds to invest more in his passion, skydiving.

The Dramatic Turnaround in Millennials’ Finances
© Jim Hawthorn
The 36-year-old accountant makes weekly trips to a wind tunnel near his
home in San Diego and last year took part in a record-setting jump where
108 participants assumed three different formations midair.
Royer estimates he spent about $40,000 on skydiving in 2023, including
parachutes, custom-made jumpsuits and “lift tickets” on planes.
He saves diligently, but doesn’t want to miss out by socking away any
more than he needs to.
“We don’t know how long we will have in this life, so I want to ensure
that I’m enjoying it now,” he said.
Some 62% of millennials say vacations are a high priority in their
household, compared with 54% of adults overall, according to Mintel, a
market-research firm. They are also more likely to have paid for a
luxury travel experience.
The generation’s approach to leisure is informed by witnessing the
2007-09 recession in their formative years, said Mike Gallinari, a
senior analyst at Mintel.
“They realized they can lose their stuff to forces outside their
control,” he said. “But nobody can take their memories from them.”
Phantom wealth
Overall, millennials hold about 9% of U.S. households’ wealth. That
might seem small, but net worths tend to swell with age, meaning that
increases work out to bigger percentage gains for younger generations
that have yet to build up significant wealth.
Roughly 66% of Americans aged 30 to 44 said in 2023 they were doing at
least OK financially, up from 55% a decade earlier, according to a Fed
survey.
For many, success feels fragile.
On paper, Becky Wang and Christian Hutchinson of Grosse Pointe Shores,
Mich., are thriving. The married couple, both 40, have stable jobs, a
sub-4% mortgage and nine rental properties.
“My wife and I are much more scared of failure in 2024 than 2014,”
Hutchinson said. “Once you have something to lose, you get soft oftentimes.”

The Dramatic Turnaround in Millennials’ Finances
© Sylvia Jarrus for WSJ
Hutchinson, a business analyst, was born in Detroit and watched the area
shed jobs as he grew up. Wang moved there in adulthood after emigrating
from China at 14, and her awareness of how quickly luck can turn comes
from treating cancer patients as a nurse.
The couple started scooping up rental properties in 2013, when prices
were low around the time the city of Detroit filed for bankruptcy. To
diversify, they are contemplating buying a laundromat or an online
retail business. Both also want to have side gigs.
“Deep down, we kind of fear that one day things can fall apart,” Wang said.
That feeling isn’t uncommon in their generation, according to Taylor
Leary, a financial planner in Greenwood Village, Colo., whose practice
focuses on millennials.
Gains in the value of a home or 401(k) can feel like phantom wealth
because they are illiquid and have no bearing on day-to-day cash flow.
Meanwhile, millennials are experiencing the weight of big-ticket items
such as daycare.
They may also have memories of a parent losing a job during the 2007-09
recession, graduating college in a tough job market or, more recently,
fumbling through the uncertainty of the Covid-19 pandemic.
“It’s almost like many millennials are looking over their shoulder
waiting for something to happen,” said Leary.

The Dramatic Turnaround in Millennials’ Finances
© Sylvia Jarrus for WSJ
Growing gaps
As successful as this generation has been overall, wealth inequality has
widened among millennials compared with their predecessors.
The gap between the 80th percentile of wealth and the 20th percentile of
wealth for millennials was about $343,000 in 2022, according to the St.
Louis Fed. Adjusting for inflation, that gap was about $286,000 for
Boomers when they were a similar age in 1989.
One explanation is that the payoffs for white-collar work grew during
that period, while those for working-class jobs stagnated, according to
a 2023 study in the American Journal of Sociology. Another crucial
divide: homeownership.
Older millennials’ homeownership rate recently caught up with that of
previous generations, rising to around 60% between 2019 and 2022,
according to the St. Louis Fed. Meanwhile, only about 39% of Americans
born in the 1990s owned a home in 2022.
Black millennials are half as likely to own a home as white millennials,
the largest gap of any generation, according to Redfin. Low-income
Americans are also losing out. About 8% of new mortgages went to
low-income buyers ages 25 to 34 in 2023, down from 9% in 2020, Redfin found.
Saving for a home and retirement feels like a far-off goal for many,
especially millennials who aren’t high earners. It takes an annual
household income of at least $100,000 to afford the median-priced home
in nearly half of all metro areas, according to Harvard University’s
Joint Center for Housing Studies. A job loss or medical bills can
postpone the ability to save and buy a home even longer.
Deanna Fuller, 40, and her husband Marc Fuller, 42, both make more money
than they did before the pandemic, but their budget remains tight thanks
to inflation.

The Dramatic Turnaround in Millennials’ Finances
© Lindsay D’Addato for WSJ
The Salt Lake City, Utah, couple earns about $89,000 a year from her
work in the back office of a financial-services firm and his job in a
warehouse distribution center. After $1,300 in rent for their
800-square-foot apartment and other expenses such as food and
transportation, they’re able to save about $200 a month.
Medical bills wiped out most of their savings, she said, and they
haven’t been able to stock much away in retirement accounts.
After recent pay raises, the Fullers’ first priority is to build on the
roughly $3,000 they have saved for emergencies and then save for a down
payment.
“Maybe we’ll be able to buy a house when we’re 50,” Deanna Fuller said.
Strong foundation
Many who bought homes before the pandemic are sitting pretty, even with
rising insurance premiums and property taxes in some parts of the U.S.
“One of the biggest wealth divides, especially for millennials, is did
you buy a house in 2020 or before, or after? Or not at all?” said Jean
Twenge, a psychology professor at San Diego State University who has
been studying generational differences for decades and wrote several
books on the subject.
Existing home prices are up 19% adjusted for inflation nationwide since
June 2020, according to the National Association of Realtors. The
average home equity among owners with mortgages increased $122,900 over
the past four years, according to CoreLogic.
Some millennials attribute their good housing fortune to careful
financial planning. Others chalk it up to luck.
Justin Moorhead, 37, and his wife, Natalie Sheppard, 38, bought their
1,500-square-foot A-frame Nashville home for around $215,000 in 2016.
They had been renting a two-bedroom, 900-square-foot apartment when
their rescue dog Scarlett started loudly barking anytime she saw other
dogs in the complex’s hallways. They wanted to give the 45-pound
collie-mix more room to play and calculated their monthly mortgage
payment would be less than their rent.

The Dramatic Turnaround in Millennials’ Finances
© Jessie Watts
Their house is worth about $500,000 today, and they owe around $165,000
on their roughly 4% mortgage.
“It’s not lost on us that we made the best financial decision of our
lives so far just because we wanted a lawn for our dog,” said Moorhead.
Good timing
While soaring home prices play a large role in prosperous millennials’
finances, there are other factors working in their favor—high among them
the rising value of retirement funds.
Millennials had an average 401(k) account balance of $59,800 in the
first quarter of 2024 compared with $27,600 in 2019, according to Fidelity.
Good timing helped here, too.
Millennials were the first generation to have access to automatic
enrollment in workplace plans during their early working years, said
Matt Brancato, chief client officer in Vanguard Institutional Investor
Group.
In 2006, 57% of employees aged 25 to 40 were enrolled in workplace
retirement plans in which Vanguard was the record-keeper. In 2022, 83%
were enrolled.
Vanguard estimates older millennials with median incomes will be able to
replace almost 60% of their preretirement income with Social Security
and savings from 401(k)s, individual retirement accounts and other
sources. The youngest Boomers with median earnings are, by contrast,
likely to replace about half of their paychecks in retirement.
Adam Chen and Margeaux Anderson started contributing to 401(k) plans in
their early 20s. The Denver couple has switched jobs several times in
the technology field and now have about $800,000 invested, mostly in
their 401(k)s.
Chen, 40, and Anderson, 34, like to live below their means. They grow
their own lettuce, cook at home frequently and prefer free activities
such as hiking.
“We don’t want to have to work forever,” Chen said.

The Dramatic Turnaround in Millennials’ Finances
© Arin Yoon for WSJ
Write to Joe Pinsker at joe.pinsker-at-wsj.com and Veronica Dagher at
Veronica.Dagher-at-wsj.com

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