The extraordinary rise in the wealth of older American households

I think that’s what the paper was trying to express: That the older cohort got more leverage from the increase in housing prices because they had more invested when prices shot up.

> Summary and Concluding Remarks

> The paper focuses on the slippage in the net worth ratio among households under age 35 relative to all households between 1983 and 2022 and its phenomenal rise among households aged 75 and over. Based on differential leverage between the two groups (the much higher debt- net worth ratio among younger families compared to older ones), we would have expected exactly the opposite – namely, that the net worth of younger households should have risen relative to older ones. Indeed, the average real rate of return on net worth of the youngest age group over years 1983-2022 was 5.67 percent while that of the oldest was 3.29 percent. What factors explain these seemingly perverse results?

> The first is increasing net home equity for the elderly. The increase in the ratio of mean net home equity to the overall level over 1983- 2022 explains a substantial 38.3 percent of the relative gain in net worth of the 75 and over age group but very little for that of the youngest group. The second is surging mortgage debt among the youngest households. This explains 297 percent (.160/.054), of the actual decline in the group’s mean net worth ratio – that, is almost three times the actual decline. Its relative decline also accounts for a significant 35.2 percent of the increase in the oldest group’s mean net worth ratio. However, it should be stressed that these results are not additive across the various factors considered in the analysis

> Third, the homeownership rate might well be close to a “smoking gun” for the oldest age group. It shoots up by 11.5 percentage points for this group, and the group’s relative wealth holdings expand by a sizeable 50.4 percent. Likewise, relative to the overall average homeownership rate, that of the oldest enlarges by 8.9 percentage points from 6.0 to 14.9 percent. The fourth is the fantastic growth in stock holdings among the oldest age group, which could constitute another smoking gun. The value of the group’s stock portfolio relative to the overall average skyrockets from 0.56 to 3.47, which accords with the sharp increase in its relative net worth, and accounts for a staggering 269 percent of its gain in net worth relative to the overall average.

> Fifth, among the youngest age group, despite dire press reports, educational loans fail to appear as a significant factor. As a fraction of overall mean student debt, it actually fell from 2.45 in 2007 (the first date of available data) to 1.66 in 2022, so that the trend is contrary to that of the group’s relative net worth. Moreover, subtracting the change in the group’s mean educational debt over 2007- 2022 from its 2007 net worth ratio lowers the group’s mean net worth ratio by a rather trivial 0.006. 24 References Bricker, Jesse, Jacob Krimmel, Alice Henri

They're causal -- old people predominantly aren't buying new homes or investing in new equities, they collected those assets during their working years when they were cheap, and both of those asset classes have appreciated an extraordinary amount since the middle of their working careers.

>without lowering the costs associated with being old

Not exactly accurate. The costs of being old at the same QoL and for the same lifespan as a 65+ person in 1935 is probably cheaper than it's ever been.

The problem is we're living much longer and our QoL is higher and "healthcare" to achieve that is stupendously expensive.

But also it's insurance for the many older people who didn't benefit from any of the accumulated gains their age peers made over their lifetimes.

It should be strengthened and available to everyone.

One day you will be old and get to benefit from that wealth transfer

The point of social security is not to prop up average wealth, but a guarantee to prop up the poorest individuals.

It's a textbook example of the classic political problem (and I don't just mean in democracies, every system is vulnerable to this) where subsidies and handouts are extremely sticky and almost impossible to get rid of, even when the underlying condition has changed and the original motivation for the subsidies no longer applies. Social Security made sense in a world where you had a 10:1 worker-to-dependent ratio and people rarely lived for very long after retirement.

But right now it's exactly the opposite: the dependency ratio is cratering, people can live on SS for decades, and the Boomers are hugely rich while their grandchildren can't afford a house. We desperately need to completely invert Social Security and instead have massive wealth transfers from the old to the young. But that's politically quite impossible, so this perverse situation remains.

Except all the money taken from my check each and every payday. So yeah, wealth transfer...

While you're not wrong, focusing on social security instead of the massive bankster handouts for the past 40 years is fighting over scraps and really distracts from discussing the actual problem of monetary inflation driven wealth centralization. Nobody is getting rich from social security - it basically covers living expenses, if you're lucky. And the 15% income tax isn't responsible for destroying personal financial situations - rather it's the extreme asset inflation and corresponding rampant hyperfinancialization (eg ballooning rent, insurance) that have made so many people effectively poor.

Social Security is a progressive tax. Workers with lower wages get a relatively larger portion compared to the workers that had a higher paycheck.

> What's to be done? I really ask: What's to be done about it?

There's a document that gets posted every so often here called The Return Rate on Everything. In it, it says that the returns on capital outweigh economic growth, meaning capital gets more concentrated, at all times except during war.

So the answer to your question would seem to be 'war'.

> What's to be done? I really ask: What's to be done about it?

property/estate taxes which will be directed to safety nets for youth: medical insurance, education, childcare, foodstamp and 1br with public transit to business centers. This will propel access to opportunities for youth by XX times, and also crash housing market and cool down stock market.

So we need the old transfer some wealth to the young. The old mostly have assets like stocks and houses. The young can’t earn enough to accrue assets.

So tax the wealthy / old higher. Increase social safety nets. Increase wages. Give all employees equity. Stop share buy backs. Force CEO to median / lowest employee comp maximums. Break up monopolies. Make school cheap / free. Build more housing. Stop monocropping.

I can go on and on with ideas but I think the political will / capture prevents this so I guess we’ll just topple over instead.

Removing the step-up in cost basis at death and actually taxing estates would help quite a bit. Unfortunately the wealthy write the rules so don’t expect either of those to change.

That doesn't seem unreasonable to me. Any middle-class boomer who was planning to retire and paid off their mortgage can expect to be in the 7 digits of net worth.

Net worth is a weird number for many people to interpret because it is pretty intangible -- most can't cash it out.

Not sure what "a lower median net worth at the 99th percentile" means (median is net worth level at the 50th percentile), but 1 in 100 American households (not individuals) indeed have over $13 million net worth: https://fred.stlouisfed.org/series/WFRBL99T999309

This threshold has about doubled since 2010, which should not be too surprising as house prices more than doubled and the S&P500 increased six fold in the last 15 years.