Generation X’s average net worth and the obstacles they face to create wealth

Each generation faces their own unique set of obstacles when it comes to creating wealth and increasing their net worth – Generation X is no different. Dubbed the “lost generation,” this population group is sandwiched between two of the largest and most important generations: millennials and baby boomers.

Average net worth of generation X

Generation X, or Gen X, is made up of individuals born between 1965 and 1980. The oldest members of this generation are in their 50s and are at the end of their careers, while the youngest are just over 40 and they are entering their prime earning years.

According to the Federal Reserve’s 2019 Consumer Finance Survey, Americans between the ages of 42 and 57 have an average net worth of between $ 436,200 and $ 1.1 million.

What makes this generation unique is that their average age makes them both old enough to be financially responsible for elderly parents, and young enough to still support young children. For many in Generation X, this posed a unique set of challenges in relation to building and maintaining their net worth.

How does Gen X’s net worth compare to that of other generations?

Compared to other generations, the average net worth of the Gen Xer is in the higher end. Having had more time in the workforce than younger generations means they have been able to reach higher income levels, while also having time on their side in the investment game. Average net worth also tends to decline among retirees who are older than Generation X and have started living off their retirement savings and investment income.

Where this generation is insufficient is retirement savings, partly due to rising inflation and the cost of living.

According to recent research by State Street Global Advisors, this generation is more concerned about the effects inflation, the stock market and the economy may have on their personal financial situation. A study by the Transamerica Center for Retirement Studies found that only 22% of Generation X workers are “very” confident that they can fully retire with a comfortable lifestyle and only 28% “strongly agree” on the fact. they are building a fairly large retirement egg nest. Nearly 80% are concerned that social security will not be available to them once they reach retirement age.

Median annual earnings of generation X

On average, Generation X between the ages of 45 and 54 earned the highest median income in 2021 at $ 97,089. Generation X youth under the age of 45 had a median income of $ 90,312, while the older generation members (those aged 54 to 57) had a median income of $ 75,842. Nearly six-figure income is much higher than some of the younger generation, but Gen X takes away most of any generation’s debt, severely damaging their ability to grow their net worth.

What shaped Gen X’s net worth and financial future?

Generation X’s finances and long-term wealth have been impacted by numerous events over the past few decades. Some of the most notable include:

The dotcom bubble

In the late 1990s, when Generation X members made up a large part of the workforce, an overvaluation of early tech companies fueled by speculation about their success led to a bubble burst. Many young tech companies started failing after promising too much and delivering insufficient results. This has led to a series of losses for investors and job losses for those in the startup tech space.

The Great Recession

From 2007 to 2010, members of Generation X felt the impact of a weakened economy in more ways than one. The median net worth of Generation X households decreased 38% from $ 63,400 to $ 39,200, according to Pew Research. Generation X homeowners also saw the sharpest drop in equity during this period, as well as a loss of financial holdings due to plummeting stock prices.

The COVID-19 pandemic

As the COVID-19 pandemic has disrupted the world and the job market, many of Generation X have found themselves changing careers, leaving the workforce to care for their parents or guide their children through distance learning. A study by Prudential found that 26% of respondents had an income disruption (including leave and reduced pay or working time) and nearly one in five saw family income fall by half or more in the first few years. months of the pandemic. Among Generation X members, 22% reported family income decreased by 50% or more.

3 ways Generation X users can build their net worth

It is never too late to start making solid financial choices that can prepare you for a more stable future in your later years. For Generation X users hoping to correct and enhance their wealth creation, they can use some of the following tips to do so:

  1. Avoid lifestyle creep. In your higher earning years, you may be tempted to spend more on your lifestyle than when you were at the beginning of your career. Practicing a little moderation in this area could help you save and invest more for later. “As income rises, some 40-year-olds are tempted to try to ‘keep up with the Joneses’ by moving into a bigger house, joining a country club, driving exotic cars or going on an expensive vacation,” says Paul Deer. CFP at Personal Capital. “It’s okay to enjoy the fruits of your labor, but keeping expenses like these in check will go a long way in building a net worth during this stage of life.”
  2. Pay off the outstanding debt. Debt, especially high-interest debt, can make saving and investing difficult. Make a plan for how you intend to address any debt balances that are weighing on your monthly budget. Choose a strategy you can stick to that takes into account the type of debt you have, your interest rates, and your money goals.
  3. Protect your future nest egg. You can’t predict when you might encounter some sort of medical emergency, and health treatments can be expensive. “Even if old age seems a long way off, now is the time to set up your long-term care plan,” says Molly Ward, financial advisor for Equitable Advisors, based in Texas. “70% of people are likely to trigger a long-term care event. Make sure you are adequately covered before it is too late to qualify [this] insurance … it might be cheaper to get this coverage right now.

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