‘Phantom wealth': Millennials are richer at their age than their parents were — but here's why they're haunted by the idea it could just as easily go away

Millennials are doing better than you think

By the first quarter of 2024, U.S. millennials held 9.4% of the nation’s wealth — a growing share fueled by homeownership (for older millennials) and 401(k) accounts. The combined wealth of millennials and older Gen Zers surged to $14.21 trillion as of early 2024, up from $4.5 trillion just four years ago.

Though it’s worth noting, it’s mainly the top 10% of high-earning millennials that are better off, holding 20% more wealth than the top-earning baby boomers did when they were in the same phase of life.

Homeownership has proven especially effective for the growth in wealth. While millennials may have been slower to enter the housing market than their parents, largely due to the fallout from the 2008 financial crisis and high student loan debt, those who bought homes roughly ten years ago are now benefiting from spiking appreciation in home values. According to the Federal Reserve Bank of Dallas, U.S. house prices appreciated 94.5% from the first quarter of 2013 to the second quarter of 2022.

Retirement savings plans have helped, too, with many millennials contributing to their 401(k)s early in their careers. They were, after all, the first generation to have the option of automatic enrollment in workplace retirement plans.

The average retirement savings balance for millennials is $62,000, according to a Fidelity report, but many have considerably more depending on their income, age and employment history.

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Why millennials are haunted by ‘phantom wealth’

Why then, do so many millennials feel uneasy?

The concept of "phantom wealth" captures the psychological disconnect between having wealth on paper and feeling financially secure. Illiquid assets like real estate and retirement accounts may not seem real since they can’t be easily accessed or spent in the short term.

Millennials have also lived through significant economic upheaval, which has shaped their view of wealth. Many came of age during the Great Recession, watching as home values plummeted and jobs disappeared. This has made them acutely aware of the fragility of markets, even as they’ve invested in real estate and stocks.

The economic disruptions caused by the COVID-19 pandemic only deepened these fears, as volatility in housing prices and stock markets reignited concerns about financial security.

Keep calm and stay invested

Barring massive market meltdowns, the same factors stoking millennial wealth are likely to help turn feelings of “phantom wealth” into real, long-term viability.

Real estate remains a powerful portfolio tool, whether you occupy a home or choose to invest in commercial real estate instead. Over time, homes tend to appreciate in value, and paying down a mortgage builds equity that can be tapped later in life through strategies like home equity loans.

For millennials who purchased a home within their means and plan to hold onto it for the long term, real estate can offer a solid foundation of wealth that grows over time.

The same is true for 401(k) or Roth IRA plans. Even though millennials can’t tap their retirement savings without penalties until they reach retirement age, dividends and compound interest mean the value of these accounts grows with each passing year.

Employer matching contributions and tax-deferred growth amplify the benefits, making 401(k)s a crucial component of millennials’ long-term wealth strategy.