“Phantom wealth” has a home for millennials, the pension rich and the cash poor

Now imagine two big differences: one of the friends bought a house in 2019; the other is still renting. The owner was automatically enrolled in her company’s 401(k) program at her first job out of college; the other only recently started contributing to a 401(k).

One of those friends has millennial “phantom wealth”—property wealth and a 401(k) that is, for now, only on paper. It doesn’t always do them sense rich because they can’t actually access the money to spend it. But they are way ahead of their friend who still rents and opened a retirement account later in life.

The Wall Street Journal reports that millennials, especially older millennials, are doing surprisingly well financially after years of gloomy predictions about the generation. Compared to baby boomers when they were the same age, older millennials are wealthier, they report.

But the main driver of this is what the Journal calls “phantom wealth,” that illiquid wealth earned through real estate gains and growing retirement savings.

It’s a similar conclusion to what my colleague Juliana Kaplan recently discovered: Millennials are doing well financially. (Wait—I’ll get to the caveats in a second.) That’s due to a mix of factors like student loan repayment breaks and forgiveness, rising home prices across much of the country, and a stock market that has rallied in the last few minutes. years.

However, the picture isn’t all rosy: There’s a more drastic disparity among the affluent and the struggling millennials.

The wealth gap between the top 20 percent and the bottom 20 percent of millennials is wider than it was for boomers when they were a similar age, the Journal reported. Black millennials are half as likely to own a home as white millennials (a wider gap than other generations). And because real estate is the biggest driver of millennial wealth, that has a huge effect.

It’s always been maddening for everyone involved to try to make sweeping generalizations about millennials (or any generation). And so many factors (medical costs, student debt, education, white collar vs. blue collar work, race, family wealth, geography, etc.) complicate things.

But this “phantom wealth” in the form of illiquid real estate and retirement savings might be why, right now, it seems very surprising that millennials are doing “better” than boomers did at this age. It certainly doesn’t always feel that way.