Hard Times: New Research Shows Boomer Generation Experienced More Financial Hardship Than Millennials

Which generation has had it worst financially?

You may be surprised by the answer.

Our study reveals significant generational financial divides, with Baby Boomers experiencing the most severe financial hardship, contrary to popular belief.

Going Deeper: Baby Boomers have had it worst, mainly due to high student loan debt, a substantial decline in purchasing power during their prime years, and the impact of economic events such as high inflation rates and the subsequent rise in interest rates.

What about Millennials? Millennials, however, have been close behind, grappling with soaring costs of college and housing. Compared with relatively stagnant incomes, the rapid increase in these costs presents significant challenges for this generation.

Key Takeaways

• Baby Boomers have experienced the most severe financial hardship of all the generations analyzed. Based on our proprietary scoring, Baby Boomers barely beat out Millennials regarding financial hardship. Some people may be surprised that Baby Boomers ranked as having experienced the worst financial difficulties, but that’s likely due to the childhoods of Baby Boomers being a prosperous time during the post-WWII economic boom. Their adulthoods were not good.
• Baby Boomers also carry the highest average student loan debt per borrower, at $45,138. Surprising? This is likely due to Baby Boomer parents covering the student loan debt of their children because, when Boomers went to college, the average cost of tuition and fees for a four-year college ranged from $5,053 to $7,726 per year — and that’s in inflation-adjusted 2021-2022 dollars!
• Gen Z faces the highest cost of college tuition of all generations. Incredibly, in figures adjusted to 2021-2022 dollars, the average cost of tuition and required fees at a four-year institution rose from $5,053 in the academic year 1963-1964 to $17,251 in 2021-2022 — equivalent to an increase of 241%.
• Millennials have had tough financial challenges, but they’ve also been big earners. The median income of Millennials aged 25-to-34 in 2021 dollars is $39,545 - the highest among all generations we analyzed.
• The generation with the worst personal savings rate at ages 25 to 34 was Gen X (born in the year 1973), which experienced an average personal savings rate of only 4.7% from 1998 to 2007.
• Gen X has been bad at saving money - but the Silent Generation hasn’t been. The Silent Generation had the best average personal savings rate of all generations analyzed at 11.4%. They also have the highest median net worth at $254,800.

Tuition keeps rising - and many Boomers are footing the bill

While Baby Boomers ranked the worst in our study, it’s worth looking at some of the key findings:

Millennials ranked No. 2 in facing the most severe financial hardship, and college costs were a significant factor.

But the reason millennials didn’t rank #1 may also be because of tuition costs. Baby Boomers likely took the top spot because they have taken on some of the student debt load of younger generations, such as millennials.

A recent AARP survey revealed that 77% of Baby Boomers have taken out student loans for someone else and did it for their children’s education. Even 7% of Baby Boomers surveyed took out student loans for their grandchildren.

These loans sometimes are through the federal Parent PLUS loans - and from 2015 to 2016, 10% of undergrad students had parents pay for their education via Parent PLUS.

Millennials hold 30.4% of national student loan debt - the highest of all generations. But perhaps because of parents paying for their kid’s education, Boomers have the highest average student debt balance at $45,136 per borrower.

Housing costs outpacing income, especially since the ‘80s

The cost of housing has risen substantially, even just from the 1980s. According to the Consumer Expenditure Survey by the Bureau of Labor Statistics (BLS) 1984, householders aged 25 to 54 spent an average of $7,986 per year in housing expenses — equal to $20,827 in 2021 dollars. That same age group, in 2021, spent an average of $25,164 in housing expenditures. The chart below gives a good glimpse of the growth in home values versus the increase in household incomes, in 2021 dollars, since 1920:

As seen in the above chart, one of the most startling developments is the growing gap between American household incomes and home values.

After the volatile years of the prosperous Roaring ‘20s and the subsequent Great Depression, real household incomes grew steadily from 1940 to 1970 — this was the era of recovery and then boom after WWII — as did home values.

Stagnating Median Income Not Keeping up with Substantial Cost Categories

1970 marks a critical turning point in the history of American incomes: Real household income from 1970 to 2021 has barely increased, from approximately $60,968 in 1970 (2021 dollars) to $69,021 in 2021. This is an increase of 12.4%. By contrast, from 1960 to 1970 alone, real median household income rose faster: From $51,448 in 1960 to $60,968 in 1970, an increase of 16.9%.

From 1970 onward, income growth has been tepid, yet home values grew by leaps and bounds. In 1970, the median home value adjusted to 2021 dollars was $118,724, just under double the median household income for that year. But by 2021, the median home value of $244,900 was three-and-a-half times the median household income of $69,021. The increase in the median home value from 1970 to 2021 was a staggering 69.4%.

The relentless pressure of rent increases

The rising cost of rent is a major financial pressure on younger generations, who tend to be renters rather than homeowners. The cost of median gross rent per month, sourced from the Census Bureau, even when adjusted to 2021 dollars, has increased relentlessly upward since 1950:

Similar to the trend in home values over the years, the actual cost of rent has been on a seemingly inexorable rise since about 1950. Whereas real household incomes have more or less stagnated from 1970 to 2021, median gross rent has continued to climb.

The median household income in 1950 was only $37,317 in 2021 dollars, but that year's median rent was just $472 per month and about $5,667 annually. That means the 1950 median household income was more than six times greater than the annual cost of rent.

Compare this to 2021. The median household income in 2021 was $69,021, but the median annual rent cost was $13,956. So, median household incomes in 2021 were less than five times the annual cost of rent. To break it down further, consider this: median household income between 1950 and 2021 rose 59.6%, but the median annual cost of rent rose much faster - 84.5%.

Looking to the Future

The increasing living costs, particularly housing and education, remain a significant concern for younger generations. Ensuring that incomes keep pace with these rising costs is critical. As the American demographic landscape evolves, each generation must be equipped with the tools and resources to navigate their unique financial challenges and foster economic prosperity.

Additional Key Takeaways:

• Baby Boomers experienced a considerable decline in purchasing power during their prime years, 25 to 34. For a Baby Boomer born in 1955 and, thus, was 25 to 34 years old from 1980 to 1989, their purchasing power fell by 33.5%. This was due to the record inflation rates of the late-1970s and early-1980s, which consequently led to a massive hike in interest rates by the Federal Reserve.
• The Silent Generation ranked last in terms of financial hardship — which, in this case, was good. Although they suffered a significant purchasing power decline like Baby Boomers during the high-inflation years of the 1970s and early-1980s, the Silent Generation scored well in terms of their personal savings rate, net worth, and cost of college.

Methodology & Background

Why We Conducted This Study

The financial struggles different American generations have experienced vary dramatically. Understanding what they went through requires thoroughly examining the social, economic, and technological factors shaping their world. And finding out Americans' historical incomes and living costs is quite a daunting task. We’ve done the hard work for you.

So, here at TheCreditReview, we wanted to identify which U.S. generations have faced the worst financial difficulties by analyzing a total of 6 factors that span across several important financial and economic areas, such as personal savings rate, change in purchasing power, incomes, and costs of living. On top of this, we tracked, as far back as possible, the costs of homes, household incomes, rents, and other financial data in American history.

Defining the Generations

But first and foremost, to analyze each generation’s financial experience, we need to define the main American generations still alive today. According to Pew Research’s definitions, they break down as follows (with “median birth year” added by us):

• Silent Generation: Born 1928-1945 – Median birth year: 1937
• Baby Boomers: Born 1946-1964 – Median birth year: 1955
• Gen X: Born 1965-1980 – Median birth year: 1973
• Millennials: Born 1981-1996 – Median birth year: 1989
• Gen Z: 1997-2012 – Median birth year: 2005

Looking at these generations, it is pointless to try and rank their financial hardship by simply the number of recessions they’ve faced: That would completely disfavor the Silent Generation because, as the oldest generation, they’ve naturally experienced the most recessions; and work in favor of Gen Z, which only experienced the tiny pandemic-induced downturn in 2020 during their young professional years, according to the NBER. As a result, a better method for figuring out which generation has faced the most severe financial hardships is required.

So, here at TheCreditReview, we wanted to identify which U.S. generations have faced the worst financial challenges by analyzing a total of 6 factors that span across several important financial and economic areas, such as personal savings rate, change in purchasing power, incomes, and costs of living. On top of this, we tracked, as far back as possible, the costs of homes, household incomes, rents, and other financial data in American history.

Methodology

To find the generation that experienced the most severe financial hardship, we analyzed each generation in terms of 6 scoring factors:

1. Change in purchasing power over each generation’s “median birth year” from when they age from 25 years old to 34 years old. Based on annual average CPI with the base period 1957-1959 = 100. Sourced from Bureau of Labor Statistics (BLS) CPI for All Urban Consumers (CPI-U), 1913 to 2023.
2. Personal saving rate, which is personal saving as a percentage of disposable personal income (DPI). Sourced from Bureau of Economic Analysis (BEA).
3. Median net worth, sourced from the Federal Reserve.
4. Average undergraduate tuition and required fees, Selected academic years, 1963-64 through 2021-22, all in constant 2021-2022 dollars. Sourced from National Center for Education Statistics (NCES).
5. Student loan debt per borrower by generation. Sourced from EducationData.org, “Student Loan Debt by Generation.”
6. Median individual income for those ages 25 to 34, 1947-2021, sourced from Census Bureau. Adjusted to 2021 dollars.

We also included data points for the starting year of each decade from 1920 to 2021 to provide greater context and information about Americans’ financial circumstances over the last 100 years:

• Median household income from 1920 to 2021, sourced from multiple reports by Census Bureau. Adjusted to 2021 dollars. For 1920, 1930, 1940, 1950, and 1960, the Census Bureau did not have the category “household income” yet, so median family income was used for those years to approximate household income. From 1970 onward, median household income was used.
• Median gross rent, 1920 to 2021, sourced from the U.S. Department of Labor and Census Bureau. Adjusted to 2021 dollars.
• Median home value, 1920 to 2021, sourced from multiple reports by Census Bureau. Adjusted to 2021 dollars.