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'Playing Catch-Up in the Game of Life'

American millennials are approaching middle age in worse financial shape than every living generation ahead of them, lagging behind baby boomers and Generation X despite a decade of economic growth and falling unemployment.

Americans born between 1981 and 1996 have failed to match every other generation of young adults born since the Great Depression. They have less wealth, less property, lower marriage rates and fewer children, according to new data that compare generations at similar ages.

Millennials helped drive the number of U.S. births to their lowest levels in 32 years. That means fewer workers in the future to support Social Security and other public programs for the ballooning population of retirees. 

Falling Behind

As it approaches middle age, the millennial generation (born 1981-96) lags behind previous generations in building assets as it pays down student debt and defers marriage and homeownership.

Social Security last month estimated that in 2035, after nearly all baby boomers retire, there will be 2.2 workers per beneficiary. Last year, there were 2.8. The current birthrate of around 1.8 children per woman is expected to create a Social Security deficit of nearly $2 trillion over the next 75 years.

“We’ll have to rethink a lot of things about taxation and how social programs are funded if fertility is really on a more permanent decline,” said Anqi Chen, assistant director of savings research at the Center for Retirement Research at Boston College.

Growth in property values and the stock market this past decade helped older households regain ground since the recession. Millennials, though, have made little headway.

“If I can’t afford a home, I definitely can’t afford kids,” said Joy Brown, 32 years old. She is a renter who is single and earns $75,000 a year. She also owes $102,000 in student loans and $10,000 in credit-card debt.

A generation apart

“Their economic fundamentals are fundamentally different,” said Christopher Kurz, an economist at the Federal Reserve.

Mr. Kurz and his colleagues last year analyzed income, debt, asset and consumption data to figure out how millennials compared at similar ages with Generation X, people born between 1965 and 1980, as well as baby boomers, those born from 1946 to 1964.

They found that millennial households had an average net worth of about $92,000 in 2016, nearly 40% less than Gen X households in 2001, adjusted for inflation, and about 20% less than baby boomer households in 1989.

One explanation for their slow progress is bad luck. Economists have found that entering the workforce during a downturn yields lower earnings for life.

Different Priorities

Fewer millennials are reaching many of life’s milestones than those in previous generations.

Median household income last year was about $105,300 for millennials with a bachelor’s degree or higher, more than twice that of households headed by high-school graduates, according to the Pew Research Center.

Many millennials couldn’t afford to buy houses or invest in the stock market early enough to profit from the sharp escalation of prices over the past decade, said William Emmons, an economist at the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis.

About one third of millennials owned homes in 2016, compared with half of Gen Xers at similar ages in 2001, and just under half of baby boomers in 1989, according to Mr. Kurz’s findings. Even if millennials close the gap as they age, “asset prices are so high,” Mr. Emmons said, that their expected return on real estate is lower.

The regional Fed bank concluded that people born in the 1980s are at risk of becoming America’s lost generation, Mr. Emmons said, men and women who feel an almost insurmountable burden to catch up financially.

For richer, for poorer

Millennials, as a group, are better educated than any generation before them. About four in 10 ages 25 to 37 hold at least a bachelor’s degree compared with about a quarter of baby boomers, and three in 10 Gen Xers when they were the same age.

Those college diplomas have come at a high price. The average student-loan balance for millennials in 2017 was $10,600, more than twice the average owed by Gen X in 2004, according to Mr. Kurz and his Fed colleagues.

As millennials approach middle age, more are asking for help from their employers. Ford Motor Co. two years ago expanded its financial-planning services after internal surveys found that the top monetary concern of millennials was saving for retirement. Ford’s planning services include one-on-one reviews of employee investments. All 80,000 U.S. workers are eligible.

“A good number of them are in their 30s and are thinking about longer-term planning,” said Julie Lodge-Jarrett, chief talent officer at the Dearborn, Mich., auto maker. “While they want to save, and they inherently get the importance of saving and planning, they don’t know how to do it.”

One other bright spot: Millennials are entering their prime earning years just as baby boomers retire. That should fuel demand for their skills and lift their earnings. “The job market is so much better, so much stronger than it was 10 years ago,” said Mr. Emmons, of the St. Louis Fed. “That’s a huge benefit.”

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