Boomers Rode the American Dream; While Younger Generations are Sinking

The American Dream: a vision of a house, a steady job, and a comfortable life. For previous generations, this dream was a tangible reality. But for Millennials and Gen Z, it seems more like a mirage on the horizon.

Here’s the reasons behind this wealth shift.

The Historical Backdrop

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The dream of a comfortable lifestyle is becoming increasingly elusive for many young adults. Here’s a snapshot of how the cost of living has evolved over the years:

  • Housing: In 1972, the median price of a home was approximately $189,500 (adjusted to 2022 dollars). Fast forward to 2022, and this price has surged to $440,300. This 132% increase in home prices, coupled with stagnant wages and rising inflation, has made homeownership a distant dream for many. The situation is exacerbated in metropolitan areas like Los Angeles and San Jose, where median home prices have reached $918,600 and $1.46 million, respectively.
  • Education: College expenses have also seen a significant hike. Adjusted for inflation, a public four-year college cost around $10,000 in the 1971-72 academic year. By 2021-22, this cost had ballooned to $24,600. Private nonprofit four-year colleges saw a jump from $20,700 to $56,100 over the same period. This surge in educational expenses has left many graduates grappling with student debt, which currently stands at a staggering $1.75 trillion.
  • Healthcare: Out-of-pocket medical expenses have risen from an equivalent of $915 in 1972 to $1,350 in 2020. Rising healthcare costs have forced approximately 40% of Americans to either skip treatments or borrow money.
  • Transportation: The cost of a new car has also seen a significant increase. In 1972, the average price of a new car, adjusted to current dollars, was about $26,100. By 2022, this had risen to $48,200, marking an 85% increase.
  • Leisure: Even leisure activities haven’t been spared. A three-night/four-day stay at Disney World for a family of four cost roughly $1,170 in 1972 (adjusted for inflation). In 2022, the same experience costs about $2,670.

These escalating costs, combined with stagnant wages and other economic challenges, have put immense financial pressure on younger generations, making the aspirations of their predecessors seem like a distant dream.

The Income vs. Wealth Conundrum

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At first glance, it might seem like today’s youth are pocketing more cash than the generations before them. But dive a little deeper, and you’ll find a different story. Today’s young adults are wrestling with hefty student loans, skyrocketing housing prices, and the ever-climbing cost of just… living.

Flashback to the 1960s: a time when a dollar an hour could not only get you by but also put a roof over your head. Fast forward to today, and that dream of owning a home feels more like chasing a mirage for many, thanks to stagnant wages and ballooning costs.

Now, let’s take a trip down memory lane. From the end of World War II up to the 1970s, the economic pie was growing, and everyone got a decent slice. But come the 1970s, the music changed. The economy’s rhythm slowed, and the gap between the rich and the rest began to stretch. While many saw their income growth stall, the top-tier folks continued to watch their bank balances swell, echoing the vast divides of the “Roaring Twenties.”

And when we talk about wealth? Oh boy, that’s a whole different ball game. Picture this: the richest 1% saw their piece of the wealth pie grow from 30% in 1989 to a whopping 39% in 2016. Meanwhile, the bottom 90%? Their slice shrunk from 33% to a mere 23%.

But here’s the twist: it’s not just about cold hard cash. Things like government health insurance might make life a bit sweeter, but they don’t put dinner on the table or a shirt on your back.

All these layers paint a complex picture of the financial hurdles today’s generations face, showing that they’re running a race with a very different set of rules than those who ran before them.

Escalating Living Expenses

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Remember the good ol’ days when a dollar felt like a dollar? Well, times have changed, and not necessarily for the better. Let’s dive into the financial whirlwind that’s been spinning from the days of the Baby Boomers to our Gen Z folks.

  • The Shrinking Value of a Buck: Imagine this – Gen Z’s dollar today has about as much muscle as a wet noodle, with 86% less purchasing power than the dollars Baby Boomers were flashing in their twenties. Sure, wages have gone up since 1970, but the cost of, well, everything has skyrocketed even more. It’s like running on a treadmill – moving a lot but not really getting anywhere.
  • Home Sweet…Rental?: (more on this in the next section) Dreaming of that white picket fence? Better dream fast. Today’s median home price is a whopping $370,600. Adjust that for inflation from the 1970s, and it’s nearly double. And why? One reason is our dear Baby Boomers, many of whom are choosing to age in place, causing a housing squeeze. So, more of us are renting, and guess what? That’s getting pricier too.
  • The College Cash Crunch: Remember when college was the golden ticket to success? Well, the ticket’s still golden, but it’s also super expensive. Tuition has shot up like a rocket since the 1970s – 310% for public schools and 245% for private. And the result? A staggering $1.7 trillion student loan debt in 2022. Ouch.
  • Feeling the Pinch at the Pump: If you thought filling up your car was pricey, you’re spot on. Gas prices have zoomed up, with Gen Z and millennials shelling out about 60% more than what the Boomers did back in their heyday. Global events, like geopolitical tensions and pandemic aftermaths, haven’t helped either.

The Homeownership Hurdle

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While homeownership was once a hallmark of the American dream, it’s now a fading hope for many Millennials and Gen Z. Despite wages not keeping pace, median home prices have skyrocketed since the mid-80s. The home affordability index’s decline further highlights this disparity.

The housing market’s calm in 2023 masks an underlying issue: a shortage of available homes. Factors like rising mortgage rates and a construction worker deficit contribute, but a significant reason is Baby Boomers. They’re not only staying in their homes longer but also buying more properties. By the first quarter of 2023, Boomers held a whopping $18 trillion in real estate assets, dwarfing the $5 trillion held by Millennials.

Boomers have long dominated the housing market. They had the advantage of buying homes early, amassing significant equity. By age 25, nearly a third of them owned homes. In contrast, only 27% of Gen Xers and 28% of Millennials reached this milestone by the same age. While 30% of Gen Z owned homes by 25 in 2022, a notable 40% had financial help from their Boomer parents.

The Boomers aren’t just holding onto their homes; they’re buying more. From 2022 to 2023, many purchased additional properties for various reasons, from seasonal living to investments. Their financial strength often allows them to outbid younger buyers, further squeezing the market for first-time homeowners.

In essence, the limited supply, especially of starter homes, is making it tougher for younger generations to break into the housing market.

The Debt Quagmire

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Debt, a quintessential American experience, has morphed dramatically across generations. For many, the hope is that as they age, their debt will wane as their income flourishes. Yet, the reality is often starkly different. Debt doesn’t just fade; it transforms, sometimes even intensifying.

Gen Xers, those between 41 to 56 years, find themselves most ensnared in debt’s grip. They shoulder the heaviest non-mortgage debt, with a median balance of $37,524. While credit card debt is a common thread for all, Gen Xers also grapple with substantial auto and student loans. Interestingly, while more millennials have student debt, Gen Xers owe more, with a median balance of $34,314.

Millennials, on the other hand, are emblematic of the student debt crisis. A significant 37.5% of them are weighed down by student loans, with an average balance of $23,518. This debt profoundly influences their financial choices and aspirations.

Gen Z, the youngest adults, are already wading into debt waters. About 85.2% have non-mortgage debt, with median balances of $9,176. While many are still in academia, they’re more likely to accumulate credit card or auto loan debt than student loans. Yet, the specter of the student debt crisis looms, shaping their borrowing attitudes.

Surprisingly, even the affluent baby boomers haven’t sidestepped debt. Around 92.9% still juggle non-mortgage debts, with balances that hover between millennials and Gen Xers. Their financial obligations span credit cards, auto loans, and even student loans.

In sum, while debt binds all generations, its nature and ramifications differ. The financial hurdles millennials and Gen Z face are distinct from the challenges the baby boomers encountered, making the path to financial freedom more intricate and elusive.

The Higher Education Paradox

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The dream of higher education, once seen as a ticket to a prosperous future, has become a financial burden for many. While the debate around student-loan forgiveness continues, the undeniable reality is that college tuition has skyrocketed over the years.

According to a GoBankingRates report, college costs today are more than double what they were in the 1970s. To put it in perspective, Baby Boomers, attending college between fall 1973 to spring 1977, paid approximately $39,780 in today’s dollars for a four-year public university education. Fast forward to today, and Gen Z is shouldering a staggering cost of $90,875 for a similar education.

This dramatic rise isn’t just limited to public institutions. When we look at private tuition, the numbers are even more alarming. Boomers paid around $80,000 (adjusted for inflation) for their private education. In contrast, Millennials faced a bill of $165,000, and for Gen Z, this number jumps to a jaw-dropping $210,000.

Several factors contribute to this surge in college costs. An increase in financial aid, reduced state funding, the need for more faculty and their corresponding salaries, and the expansion of student services have all played a part. Additionally, the demand for higher education has surged. As the rewards of a college degree became more evident from 1985 onwards, more students sought out higher education, driving up its price.

However, the value proposition of a college degree is now under scrutiny. With rising costs, many are questioning the return on investment. In fact, nearly half of the indebted millennials, still grappling with student loans, believe that college wasn’t worth the cost. The recent shift to remote learning due to the pandemic has further intensified this debate, with some students reconsidering the worth of a pricey education that’s delivered online.

Yet, the increasing number of students enrolling in colleges indicates that, for many, the benefits of a degree still seem to outweigh the costs. But as Joel Anderson, author of the report, points out, the shift towards a service economy means that pursuing a career without that expensive education is becoming tougher than ever.

Gen Z, in particular, faces the dual challenge of needing more money for their education while also navigating a job market where a degree is almost indispensable.

The Illusion of Inheritance

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While Baby Boomers are set to pass down their wealth, this transfer is unlikely to be the panacea for the financial woes of younger generations. A staggering $30 trillion is projected to be inherited by Gen X and Millennials by 2045.

Many wealthy families view sustaining wealth for future generations as their top financial goal, with younger generations placing even more emphasis on this priority. However, the manner in which this wealth is passed down reveals generational disparities.

While 84% of millennials believe it’s crucial to leave an inheritance for their children, only 63% of baby boomers share this sentiment. Interestingly, baby boomers are even less inclined to support inheritance than their silent generation predecessors.

Despite these generational differences in views on inheritance, there’s a consensus on the method of distribution. Nine out of ten wealthy Americans planning to leave an inheritance intend to divide it equally among their heirs. For those who choose an unequal distribution, the larger share typically goes to the child or heir deemed most in need.

Yet, the communication gap persists. Fewer than half of wealthy Americans have discussed estate matters with their parents. Among millennials, 70% claim to have broached the topic with their parents, while only 46% of baby boomers have done the same.

This lack of communication is concerning, especially when considering that baby boomers are not entirely confident about their children’s preparedness to inherit. Only 45% of baby boomers believe their children are ready for inheritance, compared to 51% of wealthy parents overall.

The looming wealth transfer underscores the importance of estate planning and open communication within families. As the landscape of wealth inheritance evolves, it’s crucial for families to navigate these complexities together, ensuring that the next generation is equipped to manage and preserve the legacy they inherit.

Facing the Challenge

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So, what’s the takeaway? While every generation has its challenges, the financial hurdles seem to be getting higher and trickier. But hey, if there’s one thing we know about the younger gens, it’s that they’re resilient.

So, here’s to navigating the rollercoaster and hoping for smoother rides ahead!

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Martha A. Lavallie
Martha A. Lavallie
Author & Editor | + posts

Martha is a journalist with close to a decade of experience in uncovering and reporting on the most compelling stories of our time. Passionate about staying ahead of the curve, she specializes in shedding light on trending topics and captivating global narratives. Her insightful articles have garnered acclaim, making her a trusted voice in today's dynamic media landscape.