Young baby boomers build wealth slowly and steadily, study shows

July 26, 1999

COLUMBUS, Ohio -- Forget the stories of average people becoming overnight stock-market millionaires. A new nationwide study found most young baby boomers are accumulating wealth the old-fashioned way: slowly and steadily.

The study followed 6,810 adults for 10 years beginning when they were in their 20s. Results showed that the typical individual increased his or her net wealth by $2,394 each year. And while most people were building at least some assets, the study found 13 percent of participants had no wealth or were in debt by the time they were in their 30s.

"There may be a few people becoming rich quickly, but the data show that doesn't happen to most of us," said Jay Zagorsky, author of the study and a research scientist at Ohio State University's Center for Human Resource Research.

"In most cases, wealth holdings plod along steadily, growing a little bit each year."

The study, which appears in the current issue of the journal Review of Income and Wealth, is based on data from the National Longitudinal Survey of Youth. The NLSY is a nationwide survey, conducted by Ohio State for the U.S. Bureau of Labor Statistics, which follows a group of people over time, visiting each participant annually or biennially. In this study, Zagorsky examined wealth-related questions asked of one group of participants in the NLSY between 1985 and 1996. At the beginning of the period covered by this study, participants were in their early to late 20s. By the end of the study, they were in their 30s.

Zagorsky was interested in measuring net wealth -- holdings such as cash, homes, cars, stocks and bonds -- minus any debt the individuals might have. He found that the number of young baby boomers who had accumulated at least some wealth increased from 80 percent when they were in their 20s to 87 percent when they were in their 30s.

"We counted anyone who had even $1 more in assets than debts to have wealth -- so it's troubling that 13 percent of participants couldn't meet even that threshold by the time they were in their 30s," Zagorsky said.

"If this trend continues, many individuals will have few assets upon retiring and will have to rely completely on government programs such as Social Security to support themselves."

Other findings of the study: As expected, the median assets of baby boomers grew steadily with age. Median assets ranged from a low of about $1,500 for 28-year-olds in 1985 to a high of approximately $50,000 for 35-year-olds in 1996. The number of young baby boomers with houses tripled during the course of the study, from 21 percent when they were in their 20s to about 63 percent when they were in their 30s.

The survey asked participants about retirement savings accounts like IRAs and 401Ks only during the 1994 and 1996 interviews. However, these holdings grew rapidly in that short time. For example, the number of people holding 401Ks grew from 30 percent in 1994 to 35 percent in 1996.

Zagorsky said he was surprised by the number of respondents who listed their own business among assets. In 1996, when respondents were in their 30s, 13 percent said they had their own business. Most of these were small ventures that provided the median business owner less than one-third of his or her yearly income, Zagorsky said. Still, it showed a strong entrepreneurial trend.

The study found that unmarried men generally held more wealth than unmarried females. However, married females generally held more wealth than married males. The reason is that respondents gave combined wealth data for both themselves and their spouses. Women generally had spouses older than themselves, while men had spouses younger than themselves. So women generally have spouses who have had more time to save and have built up greater assets.

As baby boomers age, they shift more of their holdings from illiquid assets to liquid assets. The percentage of young adults' wealth tied up in illiquid assets fell from 66 percent when they were in their 20s to 41 percent when they were in their 30s. This is good news, Zagorsky said, because it means boomers have more liquid assets available to convert into cash during financial emergencies.

Zagorsky said studies such as this are important because researchers know little about how young people begin building wealth. "Most studies have focused on the very rich or the elderly, groups who have finished accumulating the majority of their wealth," he said. "By focusing on young people, we can begin to see how different individuals build wealth over time."
Jay Zagorsky, 617-713-4447;
Written by Jeff Grabmeier, 614-292-8457;

Ohio State University

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