What should we make of the millennial wealth comeback?

The financial situation appears to have brightened significantly for America’s millennials – but what does that mean for their retirement?

That’s the question raised by the Center for Retirement Research, which released new findings based on an analysis of the Federal Reserve's 2022 Survey of Consumer Finances.

The think tank’s dive into the survey data, which tracked the economic well-being of those born between 1981 and 1999, reveals millennials have managed to leapfrog previous generations in terms of wealth accumulation, despite the hurdles they faced early in their careers.

Historically, millennials have been handicapped by their high levels of student debt and how they spent part of their prime earning years in a period of economic instability, which featured the dot-com bust and the Great Recession. As a result, they lagged behind earlier cohorts in key financial indicators, particularly in retirement readiness.

However, the latest data show they managed to reverse their standing between 2019 and 2022, with millennials now boasting higher net worth-to-income ratios than their predecessors across the wealth distribution.

One significant driver of young Americans’ surging wealth, according to the CRR’s analysis, was the surge in housing wealth from pre- to post-pandemic, which accounted for 63 percent of the gains.

"While Millennials are still more likely to have student debt and the value of their debt is higher, clearly other factors have more than compensated for that burden," the think tank noted.

Members of generation Y have also made strides in accumulating financial assets. The rise in personal savings, fueled by federal stimulus measures and the pause on student loan payments, has contributed to stronger balance sheets.

Millennials are more likely to invest in equities compared to previous generations, with over 60 percent holding some stocks, primarily in retirement accounts. This contrasts with the 48 percent of Gen Xers and 37 percent of late boomers who invested in stocks at similar ages.

The fact that many Gen Y households have a DINK setup – double-income, no kids – has also been helpful. “Millennials … are more likely to be in two-earner households, have higher household incomes, and fewer kids," the report’s authors said.

While the improvement in millennials' financial health is certainly cause for excitement, the proponents of the research advise caution in assessing what it means for their retirement, particularly on the housing wealth front.

“The house is an illiquid asset, and few people take advantage of their home equity to support their consumption in retirement,” they said. “Moreover, current home prices are about 16 percent above their trend over the last 30 years and may well revert back to the trend over time.”