Millennials’ Retirement Outlook Shows Potential Improvement as Housing Wealth Rises

Despite previously lagging behind older generations in wealth holdings, largely due to high levels of student debt, Millennials have shown a “dramatic reversal” in overall wealth since 2022, according to a new paper by the Center for Retirement Research at Boston College.

The increase in median net worth for Millennials is largely due to an increase in housing wealth, the CRR found, reflecting the significant increase in house prices that occurred during the pandemic.

The low wealth of Millennials, those born between 1981 and 1996, has been a source of concern, given that they will live longer and need to support more years of retirement than previous generations. With the increase in Social Security’s full retirement age to 67, Millennials will also receive fewer benefits relative to pre-retirement income than earlier cohorts, according to the CRR.

In 2019, before the COVID-19 pandemic, Millennials between the ages of 28 and 38 had a median net wealth-to-income ratio of 56%, which lagged behind Generation Xers and Baby Boomers at the time. By 2022, the pattern had reversed, and Millennials, then between the ages of 31 and 41, saw a median net wealth-to-income ratio of 136%, according to the Federal Reserve’s “Survey of Consumer Finances.”

Most of the median wealth gain for Millennials came through housing wealth, which saw a net increase of $45,567 between 2019 and 2022.

Alicia Munnell, director of the Center for Retirement Research at Boston College and one of the authors of the paper, explains that Millennials were old enough to own houses when the pandemic hit, and when housing prices took off, it had a huge effect on the cohort’s wealth-to-income ratios.

“Millennials also were well-positioned to enjoy the gains of the stock market because they tend to invest more in stocks, they’re more likely to have two earners [in their households and] they’re more likely to have fewer kids,” Munnell says. “So that whole package together made their total wealth-to-income [ratio] look much better than earlier cohorts.”

By comparison, Munnell says when Gen Xers were the age Millennials are now, they were in the midst of the Great Recession (2007 to 2009), so they did not experience the same kind of housing and wealth growth.

The CRR also found that the wealth holdings among Millennials were not just concentrated among the wealthy but, rather, occurred across the whole wealth distribution, showing that Millennials in each wealth group are better off.

However, the CRR argued that when it comes to retirement savings, it remains unclear how to assess housing wealth. Even though home equity is an illiquid asset, few people take advantage of this asset to support their consumption in retirement. Instead, many tend to hold their housing equity in reserve to cover any long-term care needs toward the end of life or pass down their housing wealth to their children.

In addition, the CRR noted that current home prices are about 16% above their trend over the last 30 years, so it is possible prices will revert back to the trend over time.

Millennials also still face more student loan debt than Gen Xers or Baby Boomers. According to the Census Bureau’s Current Population Survey, 38% of Millennials had student loans as of 2023, with a median amount of $13,006.

Despite the high levels of student debt and the rough start Millennials had by starting their careers during the Great Recession, Munnell says this cohort is showing clear improvement. Whether this will translate to better retirement savings, however, remains unclear.