The evolution of wealth over the
life cycle

By Amélie Lafrance and Sébastien LaRochelle-Côté

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This study uses a series of cross-sectional surveys to estimate the wealth accumulation process from the young adult years (ages 28 to 34) to the near-retirement period (ages 56 to 62) for three successive cohorts of Canadians who entered adulthood in 1977, 1984 and 1999.

Net worth—assets less liabilities—is a primary indicator of household wealth. The median net worth trajectories changed little across cohorts as people approaching retirement held more than $200,000 per adult in net worth, primarily in the form of housing wealth and pension savings.

The process of wealth accumulation differed across cohorts. More recent cohorts had much higher assets and debts, which also affected financial ratios across cohorts. For instance, the median debt-to-assets ratio among people in their late 30s was 39% in 2005, compared to 25% among similarly aged individuals two decades earlier.

Although the wealth accumulation process generally became more unequal among recent generations of Canadians, the results differed by age group. Among young adults age 28 to 34, median net worth declined primarily because those in the bottom half of the distribution held less wealth than their counterparts in earlier cohorts. Among those in their late 30s, net worth grew among those near the top of the distribution, but did not change among those at the bottom.

The findings reflect trends in home ownership. Among young adults, home ownership rates increased at the top of the distribution, and declined among those near the bottom. Among adults in their 30s, however, home ownership rates remained relatively stable over recent decades.