What we are witnessing in political debates about wealth is also an intergenerational dispute.
Older Americans, who are living longer and working longer than ever before, have most of the wealth in the United States. There’s a reason most of the 1% are over 60 years old, and why most of the top quintile are over 50.
The top 20% of income, considered the upper-class by the IRS, is older because that’s the point at which most people have worked for 30 years (or more), earned extra educational and professional credentials, paid off some debts, and likely own a home. They have retirement accounts and some savings.
Younger people have less total earnings (obviously), often lack post-graduate degrees or special credentials, and rarely own a home (though they might have a brand new home loan, with no equity).
The average at which an heir receives an inheritance is now 51.
As the Los Angeles Times reported, the rich are getting richer… because they are also getting older. They are living longer, amassing more wealth. Their children are inheriting the wealth, or a portion thereof, at older ages, too, sometimes in their 60s and 70s.
The beneficiaries aren’t all that young themselves. The study, which uses Federal Reserve and academic data, shows that from 1989 to 2016, U.S. households inherited more than $8.5 trillion. Over that time, the average age of recipients rose by a decade to 51. More than a quarter of bequests now go to adults 61 or older.
“Instead of diapers and school, inheritances are increasingly going toward medical bills and retirement savings,” Fellowes said.
Even inheritances, then, are part of a dynamic that’s widening the wealth gap between generations. Americans younger than 50 held just 16% of all investable assets in 2016, down from 31% in 1989, according to the Fed’s triennial Survey of Consumer Finances, leaving the rest to households 50 and older.
My wife and I are in our 50s. We have equity in our house. We have retirement funds. We have assets that we did not have when we were in our 30s. That’s just part of life, no matter how “unfair” that seemed to the 30-year-old me.
When we want to “tax the rich” that means taxing people who earned credentials, saved up money, and worked a lot of years. Yes, statistical outliers exist. There are 30-something millionaires and 40-something billionaires, but they are not representative of the median wealthy individuals.
If a couple owns a house, paid for after 30 years, and they happen to live in Los Angeles or San Francisco, is that older couple truly “millionaires” in any meaningful sense? They’d have to sell that house to access the value. They are “wealthy” on paper in the United States, but they are probably not that well-off in a major city.
Remember, wealth is the current market value of the assets a person owns. That urban couple? They own a house. They have retirement funds. They might also have retirement plans. Does that couple deserve to be taxed based on wealth or based on their household income, which is likely middle-class or even lower-middle?
There are a lot of young voters feeling angry and cheated out of their futures. Politicians are playing to that resentment.
What will happen when today’s 20-somethings are 65 and have wealth? Will they recognize that time really does change one’s position and perspective?
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