Opening Remarks by Dr. Jon C. Phillips for “Can We Afford the American Dream?” Panel at American Identity Summit

Editor’s note: Below is the text of the opening remarks by Dr. Jon C. Phillips during the American Identity Summit’s third panel, titled “Can We Afford the American Dream?”

Dr. Jon C. Phillips is Chair of the Agribusiness and Food Industry Management/Agricultural Science Department and Professor of Agribusiness at Cal Poly Pomona University. He has earned a Doctor of Philosophy in Agricultural Economics from Michigan State University. He began his faculty career at Cal Poly Pomona in 2002 and successfully led a Program Review of the B.S. in Agribusiness and Food Industry Management in 2019. Dr. Phillips has taught most of the classes in the Agribusiness and Food Industry Management program and has advised several graduate students. He has published five peer reviewed journal articles. Dr. Phillips has made more than 50 selected paper or poster presentations at disciplinary conferences. He has addressed dozens of international delegations and has made scholarly presentations in Canada, China, Mexico, Uruguay, as well as throughout the U.S.

The title of this panel is “Can We Afford the American Dream?” When you think about the American Dream, what pops into your mind first? For me, it is homeownership — owning your own home. I’m not referring to condominiums, nor to a trailer or double-wide in a mobile home park where you must pay lot rent. I’m talking about your own house. Four permanent walls, so this doesn’t include tents. Hopefully with windows, sitting on land that you own. That’s what homeownership means to me. For that reason, the first topic I will address is the affordability of homeownership.

Beyond that, there are alternative interpretations of the American Dream. For example, if you work hard and apply yourself, you will be able to retire and not be destitute poor. I mean that you have a place to live and can afford electricity, heat, air conditioning, and medical care. You are also able to eat human food, not something intended for pets. That’s a low bar. I bet most of us are aiming for a “comfortable” retirement, the definition of which will vary from person to person. You may think “comfortable” means golfing 3 times/week and extensive international travel. In contrast, I am happy to buy my clothes at the thrift store. Regardless, the outlook for retirement in America will be my second topic.

There is a third, broader way to look at the American Dream. We are familiar with our own experiences and lifestyles throughout our lives. For those of us who have children, there is hope and perhaps an expectation that their lives will be better than ours. This is assuming that our kids don’t self-destruct through alcohol, drugs, gang or cult membership, crime, gambling addiction, or other patterns of bad choices. You may think I’m joking, but issues like this happen more frequently than you may think…occasionally even in the best families. I can’t tell you how many biographies of highly successful people like CEOs of major corporations who had a child who passed away in their early adulthood due to preventable factors. Be that as it may, a comparison of intergenerational wellbeing will be my third topic.

Okay, so back to the first topic: homeownership. I’ll give an example of how affordable a house is for a 2025 college grad. Bankrate.com lists average starting salaries for five types of degrees and “social sciences” is in the middle of them, that is, third out of the five academic major types. So, let’s examine a 2025 college graduate in the social sciences.

Bankrate.com lists the average starting salary for these graduates as $67,316, which breaks down to $5,610 per month. After federal income tax and FICA, it is $4,516 per month. Most states and some municipalities have their own income tax. For the sake of simplicity, let’s just say the net pay after taxes will be $4,516 per month maximum, but probably somewhat less.

According to the Motley Fool, the median home sales price in the United States was $416,900 in the first quarter of 2025. The standard down payment on a house is 20% of the sales price. Buyers typically pay less than 20%, and the National Association of Realtors recently reported a median down payment of $71,442. If you are netting $4,500 per month, how long will it take to save $71,000? Keep in mind the average rent of a studio apartment is $1,677 in the United States, according to Apartments.com. Let’s not forget our example is a college graduate, so we can be reasonably confident that they will have a student loan payment, too. EducationData.com reports an average student loan payment of $503/month. Subtracting the studio apartment rent and student loan payment from our $4,500 monthly net income gives us $2,336.

I’m assuming that this college graduate is highly focused on purchasing a home, so they won’t have a car. Instead, they will be riding public transportation with an abundance of mentally ill folks. Okay, there will probably be a few other small but mandatory bills like renters’ insurance, utilities, and employee contribution to medical insurance. I haven’t mentioned necessities like food and clothing. You probably get where I’m going with this, and that is, if our college graduate is living an austere lifestyle, they will be able to save $300/month, maximum. Let’s assume a return on the savings of 5%, which is between historical rates for CDs and the return on the S&P 500, i.e., a conservative approach to investing. Saving $300/month at 5% will build to a balance of $71,000 in 165 months, or just under 14 years. Homeownership is highly unlikely for this individual.

You may be thinking they will make a starting salary of $4,516, but this will undoubtedly increase over the years and consequently, they can save more per month. That may be true, but the price of homes will increase concurrently. Again, according to Motley Fool, it took 11 years for the average home price to increase from $200K to $300K, and then just 6 years to increase from $300K to $400K. This reinforces the near impossibility of an average college graduate’s ability to buy a home. In the interest of time, I’m not going into detail about affording to live in the house after they purchase it. Let me just say that your house payment includes principal, interest, taxes, and insurance. Further, there will inevitably be required maintenance: painting, plumbing, electrical, HVAC, roofing, appliance failures, and the list goes on.

I’d like to add a caveat. They say the 3 most important factors in real estate are location, location, and location. While the median home price in the U.S. is $416,900, it’s only $167,168 in West Virginia. On the other hand, you get what you pay for. Could our college graduate earn a starting salary of $67,316 in West Virginia? I think not. According to the Federal Reserve of St. Louis, the median household income in West Virginia was $55,875 in 2023. That’s household income, so it includes the income of all people in the household, some of whom presumably have decades of work experience.

Let’s move on to the second topic: a comfortable retirement. How much do we need for a comfortable retirement? Americans tend to think we need $1 million, but a study by Northwestern Mutual estimates that in 2025, we need $1.26 million to retire comfortably. This also varies by state. According to GoBankingRates.com, with Social Security, we need $637,873 in the lowest-cost state (West Virginia) up to more than $2.1 million in the most expensive state (Hawaii).

As I alluded to earlier, the amount of retirement savings depends on the lifestyle you need to feel comfortable. Fidelity suggests you save up 10 times your annual income by age 67. Considering I currently only have about 4 times my annual income saved for retirement, I better either hurry up and save more or else delay retirement until I can’t work anymore. Adequate retirement savings is an issue in general for Americans. According to the Fed’s Survey of Consumer Finances, the median retirement savings for Americans between 45 and 54 years old is $185,000 and it’s $200,000 for those from 55–64 years old.

The amount needed for a comfortable retirement also depends on your expected Social Security benefits and other income. According to Bankrate.com, the average Social Security benefit for a retired worker is $1,981/month. While this will certainly help individuals to retire comfortably, the required savings amounts mentioned at the beginning of this section assumed that the retiree will receive Social Security benefits. A Social Security Fact Sheet mentions that 30% of private sector workers have no access to private pension coverage. Among this group, only 16% say they have any retirement savings. Based on these statistics, a comfortable retirement is in doubt for many Americans.

Let’s now address the third and most nebulous aspect of the American Dream: intergenerational wellbeing. Will millennials and Gen Z have a better lifestyle than their parents? We already covered the difficulty facing people trying to buy their first homes. We can expand on that, from an intergenerational perspective.

People looking to purchase their first homes in the 1980s & 1990s had it much easier than people currently in that situation. The median income in 1980 was $22,000 and the median house price was $47,000. A down payment of 20% plus closing costs was $11,000 in 1980, based on these figures. In perspective, the down payment was half the annual salary in 1980. Moving ahead today, the median household income is $85,000, but the median house price is $416,900. So, houses cost roughly 2 times the median income in 1980, while they cost roughly 5 times the median income now. Down payment of 20% of the house’s price plus closing costs is $100,000. This is substantially more than median annual household income today, up from half of median annual household income in 1980.

Interest rates, property taxes, and homeowners’ insurance rates also affect monthly mortgage payments. Taking these into consideration, the median monthly mortgage
payment was $485 per month in 1980, or 26% of gross monthly income. Now, the median monthly mortgage payment is $3,000, or 40% of gross monthly income. To emphasize, monthly mortgage payments increased from 26% of gross monthly income to 40% of gross monthly income. This implies that the young adults of today are worse off regarding the cost of housing than their counterparts were 45 years ago.

The Office of the Chief Actuary of the Social Security Administration publishes a report on the solvency of Social Security each year. The 2024 report gives an estimate of how long the Old Age and Survivors Trust Fund and the Disability Insurance Trust Fund will be able to continue to pay out scheduled benefits. They stated that if these trust funds are combined, they will be able to pay 100% of scheduled benefits until 2035, that is, for 10 more years. At that time, the funds’ surplus will be depleted and expected income to the funds will be sufficient to pay only 83% of the expected fund obligations.

While it is possible that Congress will come up with a fix for this, the situation does not bode well for anyone born after about 1960, who has a life expectancy that will take them past 2035. I just checked my life expectancy, and I can expect to live until about 2046, so this will likely affect me. But it will certainly hit those younger than me much harder.

Here’s what’s behind the projected shortfall. At any given time, there are workers with earnings covered by the Social Security program and there are beneficiaries. The solvency of the program is greater when the ratio of workers paying into the system to the number of beneficiaries is greater. In 1940, for example, there were about 42 workers paying into the system per beneficiary. Today, there are only 2.8 workers contributing for each beneficiary. This number is expected to decline to 2.2 workers per beneficiary by 2037. And by 2050, the ratio is expected to be 2 to 1.

Of course, projections are projections, not necessarily facts. There are assumptions behind these projections. These assumptions relate to fertility rates, labor productivity, labor force participation, average age at retirement, average age when workers start to draw Social Security, and life expectancies.

I’d like to highlight a development regarding propensity to save in the United States. Millennials have developed what has been termed a “soft approach to saving.” They put a priority on experiences in the short term, as well as on their mental health. This is at the expense of saving for long-term goals like a down payment on a house or retirement. All the factors I mentioned contribute to the rate of homeownership and how it varies by age. The National Association of Home Builders reported homeownership rates by age cohort in the United States. As expected, adults less than 35 years old had the lowest homeownership rate. It was just 36.3 percent in Q4 of 2024, down from 38.1% in Q4 of 2023. Homeownership rates steadily increase in the older groups of Americans. The folks 65 and over have the highest rate at 79.5% in Q4 of 2024, up from 79% in Q4 of 2023. While it was a good statistic for the older generation, it illustrates the increasing disparity between them and younger Americans.

What can be done to change the tide and make it easier for Americans to own their own homes? Homes have been getting larger, on average, over the decades…with more bedrooms and more bathrooms. Wi-Fi is considered a necessity, like electricity and water. I grew up with a black-and-white, 13-inch TV. These days, a 70-inch screen is common, and the color and resolution are remarkable. This is not to mention all the streaming services that people subscribe to. I’m pointing out the obvious improvement in average lifestyles over the decades.

If people are willing to settle for smaller homes, then they will be more likely to be able to own one. There is an option of condos, but this doesn’t meet my definition of the American Dream. Another way to increase your capacity to own a home is to forego expensive vacations. You could cancel all your streaming services and check books out from the library. Further, you could encourage your kids to attend state colleges and to rely on work-study rather than loans to finance their college education. Once again, we are back to the tradeoffs that are fundamental to economics. I think we can all agree that early and widespread education in personal financial management is key to helping people achieve their goals, whether it is homeownership or a comfortable retirement. Everyone should know the importance of maxing out the percentage of employer match for defined-contribution retirement plans, for example.

I appreciate the opportunity to participate in the American Identity Summit and specifically the panel on affording the American Dream.