> The reduction stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts.
There is a good methodological discussion on the merits of this change, published back in May by the BEA [0].
> "At the same time, the inclusion of capital gains dividends, which flow to households, biases upward the estimates of personal income and saving from current production for the household sector.
> Under the new treatment, BEA will remove income from capital gains from dividends paid by REITs (and, for consistency, from dividends paid by other corporate real estate businesses). This change will generally result in downward revisions to REIT dividends paid and offsetting upward revisions to undistributed profits of REITs, and thus business saving. This change will lead to similar downward revisions to dividends received by shareholders (households), to personal income, and to personal saving."
> The reduction stems from an accounting adjustment that lowered personal income from mutual funds and real estate investment trusts.
This is adjusting the inflows not the outflows of rich people (and thus low marginal propensity to spend) people. So while every revision teaches us more things, this doesn't isn't really hitting "where the action is".
Remember that in macroeconomics, saving is the break, and spending is the gas.
By most metrics used to measure economic success the economy as a whole is most "healthy" (aka productive) with little if any saving going on.
Obviously that isn't true on smaller scales, living paycheck to paycheck isn't considered a good thing.
It just means it is nuanced to discuss these problems from a Macroeconomic perspective. On the one hand saving a little is good for individuals on the other spending is better for the "economy".
I think they mean that traditional economic wisdom is that high savings slows economic growth while high spending accelerates it.
So, from the perspective of economic growth, we want people to spend as much as possible, not save.
Beyond the money itself that is spent that spurs growth, you also can add on the fact that people with minimal savings are forced to work to survive. People with lots of savings are more inclined to lounge around and be unproductive.
Of course, one could also argue that people with minimal savings are less creative, because they're in constant survival mode and grinding out the style of work they've always done.
That feels like a perversion of the credit industry. We can clarify that we want people to have as much excess income as possible, spending a fair percentage of it. If they're spending more than a sustainable amount, they are incurring excess and efficiencies and/or deficit spending which will have a suppressive effect on spending over the long term.
Spending $5 on coffee is an economic transaction that lets that business use money to pay their employees, service their infrastructure, or re-invest in a new brewer; business to business transactions.
Holding that $5 prevents any business to business transactions and possibly causes the company to constrict employees economy mobility or requires laying people off.
By making the 1% richer through reduced taxation is actually economically harmful in the long run and reduces economic mobility. Same as politicians supporting budget cuts.
"Holding that $5" means invested in ownership of the busines, investing in its future (including better machines, more locations, more employees), and incentives all around to keep it productive and healthy.
If money simply rotates between customer and employee, that business never existed in the first place - because somebody had to invest in the first machine, coffee, location, etc.
> "Holding that $5" means invested in ownership of the busines, investing in its future (including better machines, more locations, more employees), and incentives all around to keep it productive and healthy.
1) That's not what the parent meant by "holding that $5." They didn't mean investing it, they meant electing not to spend it. It isn't used to buy coffee, not is it put in the bank, it is put under the mattress (per say).
2) That is not how modern investing works. If you invest $5 into a company, that company does not get $5 to grow their business. Modern investing is quite different than the idea many of us were taught as a kid. Angel and seed investing are more related to this concept you are implying, but not the type of investing most people do: i.e. buying something on the NYSE. That kind of investing has extremely different metrics for success that do not necessarily rely on generating better products or even a "better business." (different metrics are often used to define this -- state yours and you'll start a hot thread -- so quotes)
I think several of us in here were responding to @yndoendo's view of economics. The "coffee shop" was just their chosen example and we were not trying for an exhaustive treaty on economics.
I don't have statistics on how much money is "under the mattress". I expect little enough that I don't need it. All the more so when our oh-so diligent govt mostly doesn't care either and navigates based on "money supply" actually in circulation. Happy to be corrected if someone has data.
"Spending $5" is the gas and "Holding $5" are bases of economic flow. Real world needs both.
"Spending $5 on coffee ... lets that business ... re-invest ..." means I'm giving them $5 and they are choosing to hold or they reached their tipping point of saving and can initiate a re-investment. That $5 could be used as simple as replacing a broken electrical outlet cover or fund constructing a drive-though. Could also go to funding the employee pizza party to invest in employee satisfaction.
Just like cars, some business investments are fully paid off and are now just there for utility. Only need operations and maintenance costs. Investment does not mean you need to by another car or build another location.
Is that a more clear?
Everyone stepping on the brakes means no one is going any where. Just like everyone stepping on the gas means no one is going any where. Wouldn't the 2007-2008 financial crisis be a good example of both? Didn't too many people overspending, which originally looked good on paper, turned out to become a head on collision causing too many stepping on the brakes because they could not afford the gas?
Sorry @yndoendo, I have a hard time making sense of this follow-up.
Your previous post contrasted spending $5 on coffee as letting that business operate, versus holding the $5 as not allowing that.
I pointed out that there is no such thing as merely withholding the $5. That is, in the real economy, the $5 that is not spent in day to day operation is instead invested. The choice is not between buying the coffee and doing nothing. The choice is between buying the coffee and leaving the $5 either for you or for someone else to invest (through your bank). Either way it's getting invested. THAT $5 is what created a coffee house in the first place. I was pointing out the fallacy of these $5 being somehow idle and out of the game. Sure a little money is out of the game (perhaps under a mattress) but not much.
I agree with gas vs brakes analogies in the economy. Even if I have a hard time with yours. Economic policy and overall mood can push people to spend more or save more (which gets invested). That investment activity can be very productive or not very. In extreme cases it's really but really not productive - just the best that people can think of. In some cases it's a bubble which seems like a good, productive idea at the time - and then isn't. Sure. And all economies need both spending and at least long term investing.
You introduce something new in this response (I think) "some business investments are fully paid off and are now just there for utility." I don't think that's correct. Money / capital has an opportunity cost. Either that business produces now (dividends or value increases) or it's held in the hope that soon it will, or it's sold to someone who thinks they can do better and the money redeployed somewhere else. More so if it's actively losing money. Holding the business is an active management decision for that capital at each moment. Even when that decision is "no change, carry on". "Paid off" would be about what happened 20 years ago and usually never even gets looked at. It's rarely relevant. See also "sunk cost fallacy".
> By making the 1% richer through reduced taxation is actually economically harmful in the long run and reduces economic mobility. Same as politicians supporting budget cuts.
This is assuming zero govt. corruption.
Also, the 1% don't save. They invest. Which would have created the coffee shop in the first place.
In the US, coffee shops, bars, fast food franchises, convenience stores, gas stations and such are often considered "easy" investments. I guess in part because they are local small businesses that the would be investor knows well (the local bar) or because the franchiser might provide handholding.
There's really no need to blame the 1% for your coffee shops.
> There's really no need to blame the 1% for your coffee shops.
You think those are the only kind of investments? The local small businesses don't get loans? The local small businesses don't depend on other businesses?
I guess you are not from the US but I really am a fan of better economics and financial education worldwide.
There are no Scrooge McDucks hoarding gold coins in a vault.
> There are no Scrooge McDucks hoarding gold coins in a vault.
The Scrooge McDucks are landowners who disproportionately benefit from low property taxes relative to the security they receive from the rest of taxpayers paying for police/courts/etc. For example, a coffee shop or whatever business built on someone else’s land might as well just be a job you bought for yourself, because the landowner is going to come for the extra profits at some point.
The US does allow for copyright/IP though, which adds an additional asset to rent seek from.
What's your suggestion to eliminate landlords from the equation, then? CCP-style regulations where there is no citizen landownership? Only the government is allowed to own land? Property owners should be forced to operate as nonprofits and maintain the property, but donate all profits to taxes?
Getting rid of 1031 would be a good start. But contrary to what most people/economists falsely proclaim, land value taxes are actually a regressive, punitive tax to those who commit the grave sin of living in an area that other people decide to gentrify. A complete non-solution to the problem.
Precisely why the LVT is inherently flawed and regressive, and prone to abuse and exploitation by the rich and powerful, instead of being dictated by the aggregate market demand of regular citizens.
>Empirical data from the US and France, however, indicates that ownership of land value (in absolute terms) is negatively correlated to the social welfare weight. Middle income households would pay relatively more land value taxes than high income households, but less in absolute terms.
Unfortunately, the "relatively more" aspect (to one's income) is what matters.
LVT is predicated on this idea landowners will be forced to "make efficient" land for common good, as an empty lot is taxed the same as the skyscraper. In practice, this just makes desirable areas unaffordable for the middle class and completely forces out the lower class. e.g. it _makes explicit_ into the tax laws, what is already happening in practice with property tax.
property taxes in a desirable area say "sorry you're poor and your house isn't nice, but you pay less tax than your rich neighbor". LVT says "don't let the door hit you on your poor ass on your way out, but if you want to stay you can pay the same tax as Mr Moneybags next door".
Not to mention the irony that LVT actually decreases the value of the land.
>If buyers know that they’ll have to pay £10,000 in tax on a piece of land they valued at £100,000, they’ll only be willing to pay £90,000 for that land. The tax lowers the returns from land ownership which is reflected in the value of the land. The current owners of land are the ones who bear the full cost of future tax bills.
Again this disproportionately affects the middle class landowner and unceremoniously kicks the lower-class former-landowner who inherited the property out of the landowner class.
LVT is ultimately the billionaire's dream. It's a dressed up neo-Eminent Domain, pretending to be progressive while being punitive to those without means.
Worst of all* is the suggestion LVT it discourages land speculation - it actually does the exact opposite. It severely exacerbates speculation, akin to how people scalp concert tickets or limited edition Jordan shoes today.
*there's also countless issues with trusting the government to evaluate the land; the issue of value vs. area; subjectivness of varying types of land value from agricultural farmland vs. industrial land vs. service-oriented vs. transport/logistics vs. inherent value from resources, but "make the poor family living in a shack pay the same tax as the rich guy who build a skyscraper" is sufficiently flawed without going in depth into those issues.
Investment is a loaded phrase because it can mean a lot.
Where are the 1% most likely going to invest to maximize profits? More likely with stocks or areas with a higher yield. Sticking with coffee, very unlikely that they will invest in the shop down the road. More likely in Starbucks. Yet franchises actually slowly siphon out the local economy. Unless there is a means to bring wealth back in the community, it will slowly die.
When was the last time you saw Starbucks investing in the community, such as helping finance / sponsor the local boys and girls baseball teams? Would it be more likely that local coffee house or business will be doing just that versus Tesla? Is that not an economical investment, one in the community, where the local food truck can benefit from those local baseball games?
This weekend I dined at a restaurant where the bartender was living out of his car for a portion of his life. Talking with him I also found out, he is going to school for botany. Turns out he taught himself how to grow and maintain exotic plants. Going there and tipping is an investment in him and those around him in my community. A social economic investment as such is very unlike going to be from 1% wealthy that are looking an a pure financial gain.
An unbalanced economy where the wealth are very top heavy prevents local investments. For example, lets say the taxation is cut for them and thus needs to cut funding for Mental Health Facilities. That reduced the probability to invest in people that could be assisted in becoming a more stable part of society. Doesn't a dramatic cut in education speeding reduce the ability for a more talent pool of people in the community? This type of investment must be long term and equivalent to R&D in a company. It does not pay off right away but done the road it has a high potential.
Economic abuse can be exacerbated by large economic inequality. Take a bank, turns out that there are 100 deposits in the bank to fund the loans departments. One person's account contains 90% of all funds. Now that one person closes their account and the bank becomes defunct and all others loose. With enough wealth people can concluding to make this happen. Lets conclude to invest in a bank, that has stock in the market, though deposits. We become over 60% of the loan department. We wait a while and then start shorting the bank stock. Pull our money out and make money on other people misery. Where a well balanced economy would prevent this ability and create a more long term stable economy.
Fraud is part of every Government and society. Some people just want to make as much money as possible as soon as possible. No matter how big or small the community is. Decent firewalls need to be put into place to prevent it and forensic accounts needs to be deployed to find it. Fraud is crime, is it not? Where does most crime take place? Probability states in larger populations such as California and Texas versus smaller ones such as Maine and Wyoming. Based of probability, wouldn't most fraud be from the more affluent individuals?
Look at Toyota vs Ferrari. Ferrari is priced for the rich and has the highest margin per vehicle between the two. Toyota is priced for the non-rich, produces the most cars, employees more people directly, and has more manufactures. Toyota is more of a driving force for the economy though initial sales and second hand market than Ferrari. Driving force of any economy is not dictated by the wealthy but by everyone else. Coffee is no different. 1% cannot economically support that coffee shop, it is the community with spending power that can.
(Adding to your comment) This is one of the paradoxes of depressions and downturns, as well as an important economic factor for preventing the rich from becoming "too" rich (ill-defined term). Capitalism highly depends on the flow of money. Even a completely neutral business (for every dollar it takes in it spends: buying products, salaries, taxes, etc) is a benefit to the economic society. In this manner, during depression you actually want to stimulate spending, because what's happened is that a depression is a significant slowdown in that flow, among other things. The value is in the transactional nature of capital, not the capital/cash/goods itself. This is why we have inflation, on purpose, because it encourages people to spend now rather than later (where your dollars will be worth less). The super rich being super rich is problematic not because they have lots of money, it is because they are unable to spend that money and so essentially they are removing that capital from the economic river (per say). The irony of this is that by doing so they themselves also suffer (just not as much) because of reduced public goods (infrastructure, health, environment, etc) as well as reduced innovation and development. You want all the capital in the game to make the system more efficient (in fact, there's even multiplier tricks that banks do). We have a system of mercantilism/commercialism: the system benefits from trading.
When it comes to talking about the wealthy I like to frame the problem a bit differently. Instead of focusing on the ceiling, it is better to focus on the floor. I don't care if there is an unbounded ceiling (that would be preferable if possible) but I do care about a bounded floor. There are many ethical reasons to care about the poor, but understanding capitalist economics as a river flowing, poor people are also sinks (like the rich). They too are not able to effectively spend money, or even generate capital in the first place (remember, this is a positive sum game where the point is to generate more capital[0] year over year). We don't actually want poor people, and we don't actually want less people. So the best solution is to make these people not poor. I don't know if the answer is through UBI or actually addressing the complex issues within our society that prevent people from climbing economic ladders[1]. Unless you believe that poor people are genetically different (no evidence) or that they're "too far gone" (extremely weak evidence and doesn't argue against fixing the new generation), then it makes sense to help these people out. After all, the government's role in economics (it is a player) is to prevent these types of pooling and to promote competition. It is really an extension of the ideas behind why we monopoly bust. Not because monopolies are always bad (sometimes they are good. Damn network effect), but because the power is abused in such a way that capital resources pool into a system that prevents the economic growth of the society as a whole.
The huge irony is that part about how helping the poor helps the rich. I'll put it this way: a king a few hundred years ago lived a worse life than many middle class people. They did not have plumbing or working toilets, as good of health care, could not travel around the world in hours, and honestly most probably did not have as good quality of food (new cooking techniques, accesses to new spices, access to goods throughout the year, overall variety, etc). These are not things you can directly "buy" but rather you have to let the chaotic nature of the system create these things. You kinda just got to throw money into the wishing well and wait for it to happen, but it happens faster when more people are not struggling economically. They can still be extravagantly wealthy while advancing this too. Let's be real, there's no way the top 50 richest people can spend their money in their lifetimes.[2] The truth is that going for the "high...
Nobody "needs" to "spend" anything. And nobody bathes in a pool of ducats either. When a family or a person owns, say, 20% of a luxury goods company, that "money" is not available for anything else (like say, buying islands). It is displacing an equal amount of other money that you are then free to invest in a local coffee shop. Perhaps even found a luxury goods company yourself. All that ownership is not dead money. It's held productively. Keeping thousands of skilled workers producing billions of dollars' worth of, erm, gold-pressed trinkets. Basically none of any of the various amounts of money spread around these five lines is dead. And the little that is dead - is irrelevant to you or me (because when divided by the world's population, it comes down to a few coffees.)
There's definitely far more nuance to both our comments. But the underlying principle is true that capital needs to be moving. You're right that investment capitals do flow but they do so differently than say "cash in hand." The amount that these help the economy is quite different and tbh well beyond my expertise as this requires far more nuance than I have the care to learn about, as there are other priorities.
Yep, even if the top quintile (top 20%) eventually invest they spend very slowly compared to the other economic quintiles. The supposed "investments" are often just shuffling things between themselves, financial instruments, but also art, luxury goods and other items that don't truly drive economic activity. The bottom quintile's money multiplier was almost 11 times over the next twelves months in the 1980s. The top cohort then had a spending multiplier of only 0.4 times over the twelve months after they get it. They don't spend or 'invest' all their money even once in the year. The way the economy and especially the distribution of wealth and income since the Regan and later tax cuts has shown clearly those tax cuts haven't helped anyone beyond a small donor class.
If the economy is a car then people saving extra is the equivalent of hitting the brake pedal and people spending more is the equivalent of hitting the accelerator (or gas) pedal.
So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s
> So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s
I don't really understand how increasing corporate tax could encourage corporate spending. It seems to me the opposite is the obvious mechanism. The more money that goes to the government, the less money a corporation has to put into the economy. If the corporation is in a "save" mode, they're more likely to spend less if they are taxed more than they are to continue the same spending and save less.
Maybe that's not what you're saying or maybe the effect is different than I'd expect (economics is weird sometimes) but I don't get your point there.
IANAA, but my understanding is that corporate profits are taxed, but there are many deductions available for business expenses. If you tax profits more, businesses would be less inclined to take profits, and more inclined to reinvest that in additional steps to expand the business (e.g. buying more equipment). These expenses have a multiplier expense, increasing money velocity and "pushing the gas pedal" on the economy.
Ah, I guess that makes sense but I still don't see how taking more deductions (spending) could lead to the goal of saving unless that spending was and investment like real estate.
Whoops I think I was lost in the context. I was mostly remarking on this dynamic in terms of businesses, not individuals. The dynamic doesn't work exactly for individuals (because individuals don't have "profit"), but tax incentives still rule the day in the individual side too (e.g. 1031 exchanges, 401ks, mortgage interest deduction, cap gains deductions on real estate, etc).
I think you get my point exactly but you disagree with it. That's fine. But companies are sitting on cash reserves of trillions of dollars. Do you think that a profitable company sitting on its profits is a brake on economic growth?
Right now companies are saving up profits in their bank balances. I think if you increase the tax they pay then those balances will grow more slowly and the tax money will flow into the economy via the public sector. You think the companies will spend less but I'm not sure why companies would scale back operations?
Interesting, how does `Americans stashed away an average 8.3%` compare to the often stated ~50% have no emergency fund/savings. Does that mean those saving money are on average saving %16 of their income? Makes sense from a general bell curve/inequity point of view but just looking for some thoughts.
The usual advice is to save at least 10%. First, that goes into your emergency fund. Once that is adequate, start investing for longer term goals/retirement.
This requires you to have the discipline to not spend your emergency fund on Christmas shopping. It's for emergencies.
While it's true that the financial discipline needed to protect an emergency fund isn't as prevalent as it should be, it's important to remember that an emergency fund only lasts if you don't experience an emergency. From 2017-2022 we had a pandemic that caused an enormous number of personal emergencies; between layoffs, inflation, disease, death, and all of the associated costs it's safe to say that a lot of people may have wiped out their emergency fund just trying to survive.
It would be more accurate to say that government mismanagement of and irrational overreaction to the pandemic caused most of the financial emergencies.
Our emergency fund is more of a "shit happens" fund. Shit happens every year. $2k to fix the car. $10k to fix the leaky roof. $4k in emergency dental work. And that was just this year.
Yeah. ~$10k in costs and repairs after a flooded basement on January 1st this year, ~$5k to get a new roof (I'm guessing, we were going to do that after the flooded basement is done, and that's still in progress). >$15k for implants/new bridge I've been saving up for for two years (while my uncovered teeth have been slowly decaying over there), and now I discovered I might have to get my other bridge replaced if there's any issues with a root canal I'm getting tomorrow, so possibly another sudden $5k+ I didn't expect.
Also we somehow owed over $6000 in taxes this year despite me increasing how much money was set aside each paycheck by $250 per paycheck after the same thing happened the previous year.
We still have an emergency savings, but wow is life working hard to keep depleting it. There's a chance I might have to liquidate some investments to pay for everything this year.
You mentioned a basement so I assume you don't live in California. My neighbor here had his roof replaced with among the lowest quality options and it costed him $25k - around here $5k wouldn't get you much.
I'm hoping insurance covers a decent amount of it. We've had a lot of strong storms in the area the past couple of years. I know neighbors on my street that haven't paid that much to get their roof replaced. And yeah, I'm in the Midwest, not California.
If insurance doesn't cover it, I'm expecting to pay over $10k for the roof.
It only flooded because the floater sensor in the sump pump got stuck one time, so it didn't realize it needed to suck up the water, it wouldn't have flooded otherwise.
We rented a dumpster and tossed most of what was in the basement (various things were on shelves or in the elevated crawlspace and didn't need to be tossed, like my old NES games), ripped out the carpet, and hired a mold remediation company that ripped out the bottom two feet of our drywall. And we will replace the sump pump soonish, although it hasn't had a problem since.
It's fine down there now. Wasn't cheap to get it to that point, though. Especially since our insurance company doesn't cover sump pump failures unless you have a specific rider, which apparently we didn't have.
Still might not be good enough for you, and that's fine. But I suspect you wouldn't notice if you went down there and didn't know it had once flooded beforehand. About the only telltale thing down there is a bump here and there where the seam of the bottom two feet of the new drywall is.
Not to mention, if you live in an older house, and has a basement, there's a very high chance that at least one time in the past the basement had some standing water. If that's not acceptable, best to only buy new construction.
Yeah, something like that. I think there’s a very bimodal distribution here. A lot of people save absolutely nothing. Some of those have no choice in the matter but many do but lack the discipline, motivation, and/or desire to do so.
Anyone who finds it important and has the means to do so is—in general—likely saving more than a token amount. 10% is a good start and enough to be noticeably worth the effort. And then of course you have the FI/RE crowd who (while rarer) push their savings to anywhere from 30–50%, or even higher.
Right. I work somewhere that has a lot of seasonal overturn and the number of people who live check to check while displaying astonishing conspicuous consumption is very high. Guys who walk around with a new Galaxy Fold 5 and drive a caddy who freak out if their check is a day late.
Right, those studies and surveys often have very limited and meaningless definitions of "savings". Sometimes they only count cash in a bank account. But ultimately it's net worth that really matters, perhaps with some adjustment for liquidity.
Absolutely a bimodal distribution. I wonder how it lines up with income? Anecdotally, my wife and I are high earners but we really haven't changed much in our lifestyle between early in our careers and now. Same house, same paid off cars, etc... A large percentage of our income shuttles into emergency fund, 401ks, backdoor roth, HSA, SEP IRA, and then DCA'd into traditional investments. I honestly don't even think about my spending or savings, we're well within our means and it just happens.
We have friends and acquaintances in the same income bracket and many are leveraged to the gills, don't fund their 401k, don't have any emergency savings, etc... Hell, they're often using margin for risky investments.
In my experience it isn't that people lack motivation (the others are spot on), but that they have no idea what a lot is. I had one friend brag to me that after 2 years of contributing to his 401k he had $13k - which sounds like a lot of money, but realistically he should have had more like 300k to be on track for a good retirement.
There is for most people little reason to keep much money in a savings account. They don't earn much interest.
But... there's no way you could possible have 300k after 2 years of contributions to a 401k. If you were maxing it you'd have about 40.
Unless you've made a typo and you mean 20 years? (in which case, now 300k is below maxing out, but slightly closer (although with returns it should be a good bit more))
But... there's no way you could possible have 300k after 2 years of contributions to a 401k.
You’re right…but that’s not what was said. After 2 years, all they had was $13K. But if they’d been contributing for 20 years like they should have been doing (because they’re 40, not fresh out of college), they’d have $300K.
IOW, $13K is nothing to brag about if you’re 35 and working software jobs your whole career. At least that’s how I read it.
He was self employed for a while, and worked for small companies that didn't even offer a 401k before that. So yes he started late which was/is unfortunate for him. That he didn't really have good chances to get on track is understandable, but he is still way behind. He again is working for a small company without 401k options, so I suppose he will retire at 68 with $50k in the 401k and then be surprised there isn't enough money there to last a few months. At least he should get SS like many.
> But... there's no way you could possible have 300k after 2 years of contributions to a 401k. If you were maxing it you'd have about 40.
This is a bit of an aside, but… this isn't quite correct.
Your (combined) individual contribution limit to a Traditional 401(k) and Roth 401(k) is $22,500 for this year. That doesn't include employer contributions. It also doesn't include after-tax contributions. The total combined limit for all contributions from all sources is $66,000 this year. So you could max out your Traditional 401(k), have your employer contribute $4,000, and then contribute an additional $39,500 to the after-tax portion.
The after-tax portion has no advantageous tax treatment whatsoever. It's identical to putting that same amount into a brokerage account… except for one detail. If you employer has a plan which allows for in-service distributions, you can immediately roll over after-tax contributions into the Roth portion of your account. This enables individuals working for companies with very good benefits packages to save an incredible $66,000/yr into tax-advantaged retirement accounts.
So assuming no growth, you can actually legally put $132,000 into a 401(k) in two years.
It is thoroughly fucked up that the majority of Americans who don't work for giant companies with gold-plated benefits packages only have access to $6,500 in tax-advantaged savings through IRAs.
Yeah, I have no idea why the government doesn't just completely scrap all IRA and 401k limits, and just combine them into one total "tax-advantaged account contribution cap" of X dollars (maybe $30K or so, indexed to wage inflation).
OK. So let's say I put all that money in each year. When does it benefit me after I've become homeless and hungry? After rent, food, insurance, medical bills, student loans, and taxes there's nowhere near that kind of money left. Let alone if you're the kind of person that enjoys recreational activities.
That's the point. If someone who is a high-earner started saving at age 38 and by age 40 has $13K in their 401(k), it is still true that they "should have" had $300-400K in their account by that point.
He was not a high earner, so the $300k is more reasonable for him. For a high earning turning 40 today $500k is probably about right to have saved up. If you are a high earner turning 25 today, you will probably need in the range of $800k by 40 - but I have no idea what inflation will do so that is just a guess to get attention and not a real number.
That 50% number is, IIRC a popular misinterpreted statistic. The statistic came from phone interviews asking how people would cover a $1000 emergency expense, where ~45% said they'd pay from savings. This got twisted into "~55% don't have enough savings to pay a $1000 emergency expense".
But, the second most popular option was to pay via credit card, and this does not preclude having the money in savings. Given the popularity of credit cards in the US, this makes sense too. If faced with a sudden large expense, I too would put it on credit and pay it off at the end of the cycle instead of pulling from savings, despite being able to afford the latter.
Similarly, the third most popular option was to pay the bill and cut other expenses, which also doesn't exclude savings and would be a pretty normal thing to do too.
IIRC only ~15% said they'd take a loan or borrow from friends/family.
> Lawmakers who opposed the bankruptcy bill cited a 2005 study by Himmelstein, Thome,
Warren, and Woolhandler finding that approximately half of bankruptcies were medical-related. Supporters of the bankruptcy bill countered with a court record analysis conducted within the Department of Justice (DOJ). According to the DOJ analysis, over half of the sample (54%) had no medical debt at all, the average medical debt among those with any such debt was under $5,000, and medical debt comprised only 5.5% of the total unsecured debt of the sample.
The source of their statistics, which has a separate section which clearly asks about how much savings people have (granted, in terms relative to their living expenses instead of absolute numbers), rather than pulling 56% out of the statistic about how they would pay for an expense:
https://www.bankrate.com/banking/savings/emergency-savings-r...
This finds that ~22% of Americans don't have emergency savings. Which is still a lot, but certainly not as crazy and eye catching as 56%.
Note that the second link is the 2023 version, CNBC references the 2021 stats, but those don't seem to be accessible anymore (which is a strange arrangement).
I don't know the source for the above stat, but for another frequently-mentioned one, "40% of Americans can't cover a $400 unexpected expense" it looks like the fed accounted for that:
>When faced with a hypothetical expense of $400, 63 percent of all adults in 2022 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as “cash or its equivalent”). The remainder said they would have paid by borrowing or selling something, or said they would not have been able to cover the expense.
That 37% makes sense in that is roughly the percentage of the population where ordinary expenditures match income (per BLS). This has some elasticity though, since the scope of "ordinary" is much larger than "necessary" e.g. spending on luxury cars, food, clothes, etc is included as an ordinary expense even if it is profligate, so there is a latent surplus that is available and people do adjust their ordinary spending when necessary.
Per another Federal Reserve study I saw, the percentage of the population where income does not exceed necessary expenditures -- people with no income surplus, latent or otherwise -- is something like 12%. Which sounds about right and is still a lot of people.
Thanks for the link. Interesting that in the same report they have this snippet on the next page:
...the 2022 SHED included a new question asking what is the largest emergency expense people could handle using only savings. Sixty-eight percent of adults said they could pay an expense of at least $500 using only their current savings (table 12). This is a somewhat larger share than the 63 percent of adults who said they would pay an unexpected $400 expense with cash or the equivalent, suggesting that some people do choose to pay with other methods, even if they have cash savings available to them.
The median US household entering retirement age has saved about $120k-$150k. That is, over 50% of people are more or less 100% reliant on social security to get by in retirement.
The mean US household savings at retirement age is like closer to $500k, because it's overwhelmingly top heavy in the 1%/0.1%/etc of people.
>the often stated ~50% have no emergency fund/savings
Consider that this reporting is/was complete bullshit intended to get clicks. More critically, that headline gobbled up answers like "I would put this expense on a credit card" into "people have no savings to pay for things" when it's extremely common for people to pay for things with a credit card and have 30 days to settle their balances for the month.
Especially in America, savings, investments, income, age-restricted versions of all the above - are all over the map. From near zero to stratospheric - including for example near zero income paired with high investments. On top of it all, the statistics usually ignore pensions - for extra difficulty in comparing anything to anything. In general means and such are pretty irrelevant except maybe to raise alarms in yr to yr comparisons.
We often hear this "all over the map" blamed on the "1%" (that's a lot of people in the US). Not so. A police officer is not expected to be a rich career, but it's one where it's easy to put in lots of high-paid overtime and like in any other job, invest a lot from early on. It's a short career that leaves time for a second one afterwards. It's easy to finish with a high pension in addition to high investment. Obviously not all cops will do that but it's possible. Investing is also well understood by many people so you see teachers ending up with very nice piles. Nothing to do with "1%" or income inequality.
" you see teachers ending up with very nice piles" - wtf are you smoking, teachers are massively under paid. On top of that they have to pay for their own supplies and they're medical keeps being raised. The benefits they once got aren't there anymore. On the other hand cops are way over paid. Put since they protect the properties of the 1%, the elites never complain about them.
Median teacher's pay in the US is roughly the median pay for someone with a college degree in the US. I am not sure how one could get to "massively underpaid" from that. Teaching doesn't stand out as being unusually difficult or requiring exceptional skill.
Also how you end up in (net worth / spending rate) is as much a result of how much you earn as what fraction of that you invest; How modest you keep your living expenses; How early you start; How well you can learn and keep up with investment reading and math requirements; And luck. Being a teacher may well predispose you with several of these.
The US make it also easy - well, maybe not easy but not uncommon - for a cliché "Wall Street lawyer" to end up broke.
We were discussing the awesome breadth in outcome in the US.
Another misconception is the 'live pay check to paycheck' statistics that are floating around, which isn't really well defined. I know many people who live 'paycheck to paycheck' simply because well, after maxing their 401k, they spend all their money every month. Doesn't mean they couldn't cut back if they needed to, or tap into a large 401k (and pay a penalty) but it's not like they're destitute.
I get what you're saying, but I don't really think this counts as living paycheck to paycheck. This is just reverse budgeting.
Heck, I do the same thing. I have a predefined amount that goes into my various accounts each paycheck. The rest is used for the mortgage, bills, other monthly expenses, etc...
It is much easier to adjust your 401k, Roth, HSA and Brokerage account transfers than to get a raise.
It's the Warren Buffet quote: “Do not save what is left after spending, but spend what is left after saving.”
I don't even see the money that goes into my savings--it happens automatically before I even get paid. What's left over is a small, small percentage of my actual after-tax pay, and that has to somehow stretch to the next paycheck, which is not always easy.
If your 401k is maxed out it is probably wrong to save anything more in general. Maybe you are planning an expensive vacation so you save for a few months, and everyone should save a small emergency fund. However there is no reason to think you will live to see tomorrow and if you are one of the unlucky who don't wake up again any savings will be lost. A 401k is for most the right level of compromise unless you start late in life a maxed 401k is probably slightly too much savings. If you have the 401k maxed it is time to start living on whatever money is left - buy toys you will enjoy, donate to a good cause, I don't care, but if there is money left over after paying for normal life enjoy it as you can't take it with you (see religion for possible exceptions - you get to figure that out on your own)
This is bad financial advice. I recommend to anyone reading to not do this lest you become the subject of another crappy CNBC headline.
Relying on a 401k alone means that in the best case scenario means you're all but guaranteed to work until 60. Being on this site, you're statistically likely to be a person that can retire on great sums long before 60 and be both financially secure and have many healthy years to enjoy your life.
> Relying on a 401k alone means that in the best case scenario means you're all but guaranteed to work until 60.
This isn't actually true. I don't mean to suggest that the GP is good advice, but:
1) Many companies offer "mega-backdoor Roth" 401k, with in-service conversion from regular after-tax dollars to Roth after-tax, meaning you can contribute a total of ~$53k annually or whatever the number is now.
2) When you separate from your employer, you can roll over your Trad and Roth 401k into Trad and Roth IRAs.
3) After 5 years (which clearly won't be an issue), the principal contributed to a Roth can be withdrawn tax and penalty free even before retirement age.
4) You can always convert Trad IRA dollars to Roth IRA dollars by paying tax. These dollars become principal in the Roth and therefore eligible for early distribution.
Assuming you haven't retired incredibly early or made highly unusual gains, a combination of continued Trad->Roth conversion and Roth principal distribution can get you to retirement age even without any additional savings.
Retiring at the youngest age possible isn't the be-all-to-end-all and I will continue professional activities for at least a time at some level after "retirement." But, yes, giving yourself options is good advice generally.
// If your 401k is maxed out it is probably wrong to save anything more in general.
This sounds like really bad advice. 401K limits are 22.5K this year. If you are making 100K and you are able to put away over 20% of it, maybe that gives you a reasonable probability of maintaining your lifestyle in retirement. If you're making good money and you're only saving 22.5K, you are probably going to take a serious hit whenever your income stops.
You are also completely undervaluing having "dry powder." Let's say interest rates go through the roof and "nobody" can afford to take out a mortgage, being the one guy with cash-on-hand will let you capture some once-in-a-lifetime real estate deals.
Also, freedom. Under your scenario, someone working a decade will have saved 220K in their 401k and that's it. Now they want to quit their job and start a business. They have to cash out their 401k just to sustain ~1 year of them not drawing a salary. Who's gonna do that? Versus, imagine the same person has a ton of additional savings - they can take the risk because it's a much smaller risk to them (longer runway)
// if there is money left over after paying for normal life enjoy it as you can't take it with you
You are probably undervaluing the "enjoyment" people get out of deep financial safety.
To say nothing of the fact there is an guarantee your tax rate once you retire will be less than it is now. In theory we all asume it will be, but like all other financial decisions, past performance should not be assumed to be future results. Factor in Uncle Sam is the tax rate decision maker and anything is possible.
In short, saving taxed income is a form of diversification.
If you max out your 401k from 25-62 you will have a nice nest egg - that is 8 million dollars assuming 10% returns and constant contributions. Realistically the max will go up over time, so you will contributing more money - inflation will eat some of the gains, but even still the extra contributions will make that up. That should make for a comfortable lifestyle if you retire early.
The key is to save all a long. If you start saving for retirement at 50, even with catch up contributions you are probably not going to have a nice retirement.
What you're saying here is that you can be OK if a lot of things go perfectly. Which is probably true. I am going to assume your math works out, but what if (1) you are unable to work a chunk of that period due to illness, unemployment, etc. Saving beyond your 401k contrib when you're able can mitigate some of this risk (2) the 10% rate is a very nice assumption. What if it doesn't hold up, or doesn't hold up for the period that matters to you. What is the impact on your life if this number ends up being 5% instead? (3) Are you under-concerned about inflation in these projections. I am not totally convinced 401k limits have risen in tandem with the real inflation rate.
So let's say your number is 2x optimistic and someone retires with 4M instead - whatever that means in a bunch of decades from now. Then you pay tax. Depending on where you live, between federal, state, and city that can be close to 50% especially if rates go up. So that leaves you with 2M. Then say you end up living to 90, that's like 71K per year take-home. I guess you can live on that today. But for example my taxes for the house are like 20KL. So almost a 1/3 of your take-home goes to that. it's not SOOOO cozy.
It's also possible to save another ~$30k (depending on employer match) if one's 401k offers the "mega backdoor" option. It's definitely a great option if one can afford it (after regular pre-tax 401k), as it's basically a gigantic Roth IRA (with no RMDs during retirement, like a Roth).
Just FYI, you should definitely do your own research and your own planning for what's right for you / what your trusted financial advisor says. For example, this comment is completely wild financially to me to read for advice.
- You will live to see tomorrow.
- If you are high enough income, maxing 401k, an IRA, and an HSA every year is sadly still not enough.
- Location variance makes it really hard to find comparable intel online for a right path. Cost of living, job market / income levels, family situation and size, etc...
- Although sometimes extreme, the Bogglehead and FI/RE communities are great.
I agree you do need to do your own research about what is right for you. However I still think that my advice is right for most people - it gives a comfortable retirement without sacrificing too much of the now. If you are starting to save at 50 it doesn't work of course, starting young is continuous savings is key.
> You will live to see tomorrow.
statistically yes, but there are outliers who won't.
> If you are high enough income, maxing 401k, an IRA, and an HSA every year is sadly still not enough.
Sure, but few people are that high. Even of those who are, 22k (adjusting upward every year) from 25-65 is a lot of money. You can save a little more if you want to retire early, but you are only young once and your time is better spent enjoying youth while you have it.
Paradoxically, if you max your 401k/IRA/HSA every year, the higher your income, the less that money is going to be enough in retirement. If you earn 400k/yr and only save ~30k/yr, then that implies you spend 370k (incl taxes, so ... say, 250k) per year. You need MUCH more retirement savings than 30k/yr to manage that, unless you want to take a drastic lifestyle cut when you retire.
Paying off incurred debt is saving, especially if you pay it off early. If you retire without a mortgage but own a house, then you effectively have reduced your expenses by that much.
The only thing to keep in mind is that debts like that contribute to negative net worth/retirement savings. If you have 200k in student loan debt, you have a -200k net worth (even if it costs ~250-300k to pay off due to interest...)
Are you claiming that many people you know who are maxing out their 401k, HSA, and Roth IRA literally speak the words "paycheck to paycheck" to describe their financial situation?
Is the article saying "average" as in mean or median? It's hard for me to imagine that the mean would be particularly meaningful, since the wealthiest people not spending billions of dollars per year seems like it would offset an enormous chunk of people with no savings whatsoever, but it's also hard for me to imagine that a statistic from a publication not making the distinction explicit would be both competent enough to know which to use and unscrupulous enough not to try to exploit the ambiguity. If this is the median, I'd be similarly curious to you, but if it's the mean, I don't feel like I know the total sum of all incomes in the US with high enough precision to gauge whether 16% is more or less reasonable than 6% or 26%.
I have a family member who does financial planning for high net worth people. She says these people's savings rates have been through the roof. My guess is these people are throwing off the average.
I mean, it makes sense. Unless you are living some extravagant lifestyle, beyond a certain point, income just gets hoarded straight into savings. If I made $1M a year, I wouldn't even be able to spend it if I wanted to. I couldn't think of anything to do with that money besides invest it somewhere or give it away. There are a lot of these doctors, lawyers, and corporate executives who make more money than they could possibly spend, so of course it all just gets slammed into savings.
A lot of money can be/is spent on travel and vacations. For the last several years, the picture on that has changed significantly, for my own account meaning fewer international vacations, less domestic travel to see family, and a dramatic reduction in eating in restaurants (which is really expensive compared to cooking at home).
I'm not high-net worth, but I suspect that a lot of the same vacation forces are at play in that community as well, particularly during the pandemic.
Who would have thought that a couple thousand dollars of "stimulus" monies, your dollar being worth 20% less than it was a few years ago, record credit card debt, record wealth inequality between the have's and have-nots, and a completely screwed up housing market would lead to Americans saving "less than previously thought"...
Remember, the people making fiscal policy have been citing "savings accrued during covid" every chance they can. The same chattering donor class, bureaucrats, and politicians that insist the economy is doing better than ever. The same chattering donor class, bureaucrats, and politicians, who redefined the meaning of "recession" when it was inconvenient to their policy goals. The same chattering donor class, bureaucrats, and politicians, who were gleefully calling for people to lose their jobs if they didn't get the latest iteration of a vaccine with questionable and overstated results.
> Remember, the people making fiscal policy have been citing "savings accrued during covid" every chance they can.
That sounds pretty suspicious, except that this correction goes back well before covid, and the spike in 2020 and 2021 is just as huge with the new data.
> The same chattering donor class, bureaucrats, and politicians, who redefined the meaning of "recession" when it was inconvenient to their policy goals.
Look, "two quarters of shrinking GDP" is a really easy rule to apply, but it's so dependent on timing and ignores everything around it.
Specifically, we had a single quarter with 7% growth, then two quarters that combined to 2.6% shrink, then a single quarter with 2.7% growth.
I think it's fair to say that was not a recession, and the weird result in 2020 with -28.0% immediately followed by +34.8% is important to mention but also not a recession, so 2008 was the last actual recession in the US.
> The same chattering donor class, bureaucrats, and politicians, who were gleefully calling for people to lose their jobs if they didn't get the latest iteration of a vaccine with questionable and overstated results.
What did you find questionable that was in addition to any overstatement of results?
And nobody wanted job losses, they just wanted people to try to fight the spread. Eventually enough spite built up, mostly against the people acting bad on purpose, but between a "make them lose their job" button and a "make them try (retroactively)" button I bet basically everyone you describe would have smacked the latter.
> What did you find questionable that was in addition to any overstatement of results?
Not one single thing, but many straws that finally broke the camels back, as it were.
The speed at which it was developed and made "mandatory", for one. The release from liability granted to all the produces of said vaccine, for two (which I would be more sympathetic if not for #1).
The laughable "100% effectiveness rate" that was touted and walked back rather sheepishly.
The equally laughable assertion that the common flu just "took a year off" in 2020 and every cough and sniffle was COVID.
The outright hostility to _reasonable_ skepticism (i.e. "this technology is relatively new and could have unintended side effects so we should study it more", not "Bill Gates is putting microchips into the syringes to track your children").
Hospitals and media / government types deliberately conflating deaths _from_ covid and deaths _with_ covid. (It's this specific example that makes me suspect the redefinition of "recession" as a political exercise).
The outright lies surrounding how vulnerable children were/are vs the elderly, the latter being FAR more vulnerable.
The idea that the virus was created and escaped from a lab in Wuhan that was a conspiracy theory, until it wasn't.
Politicians and elites clearly not practicing what they preach, be it the governor of a state going out to a fancy restaurant with their buddies, unmasked, during the height of the crisis or those who enriched themselves and their businesses on relief funds.
There are more but it's actually pretty depressing to list.
> And nobody wanted job losses, they just wanted people to try to fight the spread. Eventually enough spite built up, mostly against the people acting bad on purpose, but between a "make them lose their job" button and a "make them try (retroactively)" button I bet basically everyone you describe would have smacked the latter.
Could have fooled me based on public statements made by pro-lockdown politicians at the time. "Fight the spread" was repeated ad-nauseam by those pushing questionable methods that many people knew were suspect to be begin with, yet were castigated as "killing grandma", "anti-science", "rubes" and every other name in the book rather than taking their concerns seriously.
Oh I thought you were talking about the vaccine itself, not the politics.
> the redefinition of "recession" as a political exercise
Hasn't the NBER been in charge of it for a very long time? Has the definition actually changed recently?
> rather than taking their concerns seriously.
Weird, I remember a ton of time devoted to taking the concerns seriously.
But "seriously" doesn't mean that if the same concerns get repeated over and over they become more correct. Some concerns were correct but most weren't. And if someone keeps talking about "shedding" or masks trapping CO2, even after multiple corrections, they deserve to be insulted.
The first three items I mentioned were regarding the vaccine itself…namely the speed at which it was developed, the release from liability to manufacturers, and the outright lie that it was 100% effective.
Perhaps in your eagerness to get to the “deserved to be insulted” part of your response you missed that?
Specifically, you said "questionable and overstated results".
The speed and release from liability don't fit that.
The "outright lie that it was 100% effective" falls under overstated. So I wanted to know what you meant by "questionable" in addition to "overstated".
So no, I didn't miss that.
And I didn't write that comment in a rush, just to be clear.
No shit. Rampant inflation, coupled with poor consumer spending habits such as buying expensive cars, being "house poor", iPhones, eating/drinking out non-stop, etc - def adds up.
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[ 2.9 ms ] story [ 307 ms ] threadThere is a good methodological discussion on the merits of this change, published back in May by the BEA [0].
> "At the same time, the inclusion of capital gains dividends, which flow to households, biases upward the estimates of personal income and saving from current production for the household sector.
> Under the new treatment, BEA will remove income from capital gains from dividends paid by REITs (and, for consistency, from dividends paid by other corporate real estate businesses). This change will generally result in downward revisions to REIT dividends paid and offsetting upward revisions to undistributed profits of REITs, and thus business saving. This change will lead to similar downward revisions to dividends received by shareholders (households), to personal income, and to personal saving."
0: https://apps.bea.gov/scb/issues/2023/05-may/0523-ric-reit.ht...
This is adjusting the inflows not the outflows of rich people (and thus low marginal propensity to spend) people. So while every revision teaches us more things, this doesn't isn't really hitting "where the action is".
Remember that in macroeconomics, saving is the break, and spending is the gas.
Obviously that isn't true on smaller scales, living paycheck to paycheck isn't considered a good thing.
It just means it is nuanced to discuss these problems from a Macroeconomic perspective. On the one hand saving a little is good for individuals on the other spending is better for the "economy".
So, from the perspective of economic growth, we want people to spend as much as possible, not save.
Beyond the money itself that is spent that spurs growth, you also can add on the fact that people with minimal savings are forced to work to survive. People with lots of savings are more inclined to lounge around and be unproductive.
Of course, one could also argue that people with minimal savings are less creative, because they're in constant survival mode and grinding out the style of work they've always done.
That feels like a perversion of the credit industry. We can clarify that we want people to have as much excess income as possible, spending a fair percentage of it. If they're spending more than a sustainable amount, they are incurring excess and efficiencies and/or deficit spending which will have a suppressive effect on spending over the long term.
Holding that $5 prevents any business to business transactions and possibly causes the company to constrict employees economy mobility or requires laying people off.
By making the 1% richer through reduced taxation is actually economically harmful in the long run and reduces economic mobility. Same as politicians supporting budget cuts.
If money simply rotates between customer and employee, that business never existed in the first place - because somebody had to invest in the first machine, coffee, location, etc.
1) That's not what the parent meant by "holding that $5." They didn't mean investing it, they meant electing not to spend it. It isn't used to buy coffee, not is it put in the bank, it is put under the mattress (per say).
2) That is not how modern investing works. If you invest $5 into a company, that company does not get $5 to grow their business. Modern investing is quite different than the idea many of us were taught as a kid. Angel and seed investing are more related to this concept you are implying, but not the type of investing most people do: i.e. buying something on the NYSE. That kind of investing has extremely different metrics for success that do not necessarily rely on generating better products or even a "better business." (different metrics are often used to define this -- state yours and you'll start a hot thread -- so quotes)
I don't have statistics on how much money is "under the mattress". I expect little enough that I don't need it. All the more so when our oh-so diligent govt mostly doesn't care either and navigates based on "money supply" actually in circulation. Happy to be corrected if someone has data.
"Spending $5 on coffee ... lets that business ... re-invest ..." means I'm giving them $5 and they are choosing to hold or they reached their tipping point of saving and can initiate a re-investment. That $5 could be used as simple as replacing a broken electrical outlet cover or fund constructing a drive-though. Could also go to funding the employee pizza party to invest in employee satisfaction.
Just like cars, some business investments are fully paid off and are now just there for utility. Only need operations and maintenance costs. Investment does not mean you need to by another car or build another location.
Is that a more clear?
Everyone stepping on the brakes means no one is going any where. Just like everyone stepping on the gas means no one is going any where. Wouldn't the 2007-2008 financial crisis be a good example of both? Didn't too many people overspending, which originally looked good on paper, turned out to become a head on collision causing too many stepping on the brakes because they could not afford the gas?
Your previous post contrasted spending $5 on coffee as letting that business operate, versus holding the $5 as not allowing that.
I pointed out that there is no such thing as merely withholding the $5. That is, in the real economy, the $5 that is not spent in day to day operation is instead invested. The choice is not between buying the coffee and doing nothing. The choice is between buying the coffee and leaving the $5 either for you or for someone else to invest (through your bank). Either way it's getting invested. THAT $5 is what created a coffee house in the first place. I was pointing out the fallacy of these $5 being somehow idle and out of the game. Sure a little money is out of the game (perhaps under a mattress) but not much.
I agree with gas vs brakes analogies in the economy. Even if I have a hard time with yours. Economic policy and overall mood can push people to spend more or save more (which gets invested). That investment activity can be very productive or not very. In extreme cases it's really but really not productive - just the best that people can think of. In some cases it's a bubble which seems like a good, productive idea at the time - and then isn't. Sure. And all economies need both spending and at least long term investing.
You introduce something new in this response (I think) "some business investments are fully paid off and are now just there for utility." I don't think that's correct. Money / capital has an opportunity cost. Either that business produces now (dividends or value increases) or it's held in the hope that soon it will, or it's sold to someone who thinks they can do better and the money redeployed somewhere else. More so if it's actively losing money. Holding the business is an active management decision for that capital at each moment. Even when that decision is "no change, carry on". "Paid off" would be about what happened 20 years ago and usually never even gets looked at. It's rarely relevant. See also "sunk cost fallacy".
This is assuming zero govt. corruption.
Also, the 1% don't save. They invest. Which would have created the coffee shop in the first place.
There's really no need to blame the 1% for your coffee shops.
You think those are the only kind of investments? The local small businesses don't get loans? The local small businesses don't depend on other businesses?
I guess you are not from the US but I really am a fan of better economics and financial education worldwide.
There are no Scrooge McDucks hoarding gold coins in a vault.
The Scrooge McDucks are landowners who disproportionately benefit from low property taxes relative to the security they receive from the rest of taxpayers paying for police/courts/etc. For example, a coffee shop or whatever business built on someone else’s land might as well just be a job you bought for yourself, because the landowner is going to come for the extra profits at some point.
The US does allow for copyright/IP though, which adds an additional asset to rent seek from.
asking as someone who's never owned property.
https://en.wikipedia.org/wiki/Land_value_tax
Also, get rid of 1031 exchange.
https://en.wikipedia.org/wiki/Internal_Revenue_Code_section_...
Once land is properly taxed, supply of housing units will increase to limit its price.
Precisely why the LVT is inherently flawed and regressive, and prone to abuse and exploitation by the rich and powerful, instead of being dictated by the aggregate market demand of regular citizens.
>Empirical data from the US and France, however, indicates that ownership of land value (in absolute terms) is negatively correlated to the social welfare weight. Middle income households would pay relatively more land value taxes than high income households, but less in absolute terms.
Unfortunately, the "relatively more" aspect (to one's income) is what matters.
LVT is predicated on this idea landowners will be forced to "make efficient" land for common good, as an empty lot is taxed the same as the skyscraper. In practice, this just makes desirable areas unaffordable for the middle class and completely forces out the lower class. e.g. it _makes explicit_ into the tax laws, what is already happening in practice with property tax.
property taxes in a desirable area say "sorry you're poor and your house isn't nice, but you pay less tax than your rich neighbor". LVT says "don't let the door hit you on your poor ass on your way out, but if you want to stay you can pay the same tax as Mr Moneybags next door".
Not to mention the irony that LVT actually decreases the value of the land.
>If buyers know that they’ll have to pay £10,000 in tax on a piece of land they valued at £100,000, they’ll only be willing to pay £90,000 for that land. The tax lowers the returns from land ownership which is reflected in the value of the land. The current owners of land are the ones who bear the full cost of future tax bills.
Again this disproportionately affects the middle class landowner and unceremoniously kicks the lower-class former-landowner who inherited the property out of the landowner class.
LVT is ultimately the billionaire's dream. It's a dressed up neo-Eminent Domain, pretending to be progressive while being punitive to those without means.
Worst of all* is the suggestion LVT it discourages land speculation - it actually does the exact opposite. It severely exacerbates speculation, akin to how people scalp concert tickets or limited edition Jordan shoes today.
*there's also countless issues with trusting the government to evaluate the land; the issue of value vs. area; subjectivness of varying types of land value from agricultural farmland vs. industrial land vs. service-oriented vs. transport/logistics vs. inherent value from resources, but "make the poor family living in a shack pay the same tax as the rich guy who build a skyscraper" is sufficiently flawed without going in depth into those issues.
One is incentivizing land to be used more productively, for example for public transit, higher density housing, so that more people benefit.
Another is a too large rich/poor gap.
The latter problem requires a different solution, which is taxes to redistribute wealth.
Where are the 1% most likely going to invest to maximize profits? More likely with stocks or areas with a higher yield. Sticking with coffee, very unlikely that they will invest in the shop down the road. More likely in Starbucks. Yet franchises actually slowly siphon out the local economy. Unless there is a means to bring wealth back in the community, it will slowly die.
When was the last time you saw Starbucks investing in the community, such as helping finance / sponsor the local boys and girls baseball teams? Would it be more likely that local coffee house or business will be doing just that versus Tesla? Is that not an economical investment, one in the community, where the local food truck can benefit from those local baseball games?
This weekend I dined at a restaurant where the bartender was living out of his car for a portion of his life. Talking with him I also found out, he is going to school for botany. Turns out he taught himself how to grow and maintain exotic plants. Going there and tipping is an investment in him and those around him in my community. A social economic investment as such is very unlike going to be from 1% wealthy that are looking an a pure financial gain.
An unbalanced economy where the wealth are very top heavy prevents local investments. For example, lets say the taxation is cut for them and thus needs to cut funding for Mental Health Facilities. That reduced the probability to invest in people that could be assisted in becoming a more stable part of society. Doesn't a dramatic cut in education speeding reduce the ability for a more talent pool of people in the community? This type of investment must be long term and equivalent to R&D in a company. It does not pay off right away but done the road it has a high potential.
Economic abuse can be exacerbated by large economic inequality. Take a bank, turns out that there are 100 deposits in the bank to fund the loans departments. One person's account contains 90% of all funds. Now that one person closes their account and the bank becomes defunct and all others loose. With enough wealth people can concluding to make this happen. Lets conclude to invest in a bank, that has stock in the market, though deposits. We become over 60% of the loan department. We wait a while and then start shorting the bank stock. Pull our money out and make money on other people misery. Where a well balanced economy would prevent this ability and create a more long term stable economy.
Fraud is part of every Government and society. Some people just want to make as much money as possible as soon as possible. No matter how big or small the community is. Decent firewalls need to be put into place to prevent it and forensic accounts needs to be deployed to find it. Fraud is crime, is it not? Where does most crime take place? Probability states in larger populations such as California and Texas versus smaller ones such as Maine and Wyoming. Based of probability, wouldn't most fraud be from the more affluent individuals?
Look at Toyota vs Ferrari. Ferrari is priced for the rich and has the highest margin per vehicle between the two. Toyota is priced for the non-rich, produces the most cars, employees more people directly, and has more manufactures. Toyota is more of a driving force for the economy though initial sales and second hand market than Ferrari. Driving force of any economy is not dictated by the wealthy but by everyone else. Coffee is no different. 1% cannot economically support that coffee shop, it is the community with spending power that can.
*Fixed wording.
When it comes to talking about the wealthy I like to frame the problem a bit differently. Instead of focusing on the ceiling, it is better to focus on the floor. I don't care if there is an unbounded ceiling (that would be preferable if possible) but I do care about a bounded floor. There are many ethical reasons to care about the poor, but understanding capitalist economics as a river flowing, poor people are also sinks (like the rich). They too are not able to effectively spend money, or even generate capital in the first place (remember, this is a positive sum game where the point is to generate more capital[0] year over year). We don't actually want poor people, and we don't actually want less people. So the best solution is to make these people not poor. I don't know if the answer is through UBI or actually addressing the complex issues within our society that prevent people from climbing economic ladders[1]. Unless you believe that poor people are genetically different (no evidence) or that they're "too far gone" (extremely weak evidence and doesn't argue against fixing the new generation), then it makes sense to help these people out. After all, the government's role in economics (it is a player) is to prevent these types of pooling and to promote competition. It is really an extension of the ideas behind why we monopoly bust. Not because monopolies are always bad (sometimes they are good. Damn network effect), but because the power is abused in such a way that capital resources pool into a system that prevents the economic growth of the society as a whole.
The huge irony is that part about how helping the poor helps the rich. I'll put it this way: a king a few hundred years ago lived a worse life than many middle class people. They did not have plumbing or working toilets, as good of health care, could not travel around the world in hours, and honestly most probably did not have as good quality of food (new cooking techniques, accesses to new spices, access to goods throughout the year, overall variety, etc). These are not things you can directly "buy" but rather you have to let the chaotic nature of the system create these things. You kinda just got to throw money into the wishing well and wait for it to happen, but it happens faster when more people are not struggling economically. They can still be extravagantly wealthy while advancing this too. Let's be real, there's no way the top 50 richest people can spend their money in their lifetimes.[2] The truth is that going for the "high...
If the economy is a car then people saving extra is the equivalent of hitting the brake pedal and people spending more is the equivalent of hitting the accelerator (or gas) pedal.
So the huge cash reserves of large companies are a brake on the economy which is why all the politicians are so keen to increase corporation tax /s
I don't really understand how increasing corporate tax could encourage corporate spending. It seems to me the opposite is the obvious mechanism. The more money that goes to the government, the less money a corporation has to put into the economy. If the corporation is in a "save" mode, they're more likely to spend less if they are taxed more than they are to continue the same spending and save less.
Maybe that's not what you're saying or maybe the effect is different than I'd expect (economics is weird sometimes) but I don't get your point there.
Right now companies are saving up profits in their bank balances. I think if you increase the tax they pay then those balances will grow more slowly and the tax money will flow into the economy via the public sector. You think the companies will spend less but I'm not sure why companies would scale back operations?
This requires you to have the discipline to not spend your emergency fund on Christmas shopping. It's for emergencies.
Also we somehow owed over $6000 in taxes this year despite me increasing how much money was set aside each paycheck by $250 per paycheck after the same thing happened the previous year.
We still have an emergency savings, but wow is life working hard to keep depleting it. There's a chance I might have to liquidate some investments to pay for everything this year.
If insurance doesn't cover it, I'm expecting to pay over $10k for the roof.
Doubly so if the HVAC system's intake is down there.
We rented a dumpster and tossed most of what was in the basement (various things were on shelves or in the elevated crawlspace and didn't need to be tossed, like my old NES games), ripped out the carpet, and hired a mold remediation company that ripped out the bottom two feet of our drywall. And we will replace the sump pump soonish, although it hasn't had a problem since.
It's fine down there now. Wasn't cheap to get it to that point, though. Especially since our insurance company doesn't cover sump pump failures unless you have a specific rider, which apparently we didn't have.
Still might not be good enough for you, and that's fine. But I suspect you wouldn't notice if you went down there and didn't know it had once flooded beforehand. About the only telltale thing down there is a bump here and there where the seam of the bottom two feet of the new drywall is.
Anyone who finds it important and has the means to do so is—in general—likely saving more than a token amount. 10% is a good start and enough to be noticeably worth the effort. And then of course you have the FI/RE crowd who (while rarer) push their savings to anywhere from 30–50%, or even higher.
Also, a lot of people have equity in their homes. I don’t know if that counts as savings, but is money that can be accessed with HELOC or sale.
We have friends and acquaintances in the same income bracket and many are leveraged to the gills, don't fund their 401k, don't have any emergency savings, etc... Hell, they're often using margin for risky investments.
There is for most people little reason to keep much money in a savings account. They don't earn much interest.
Unless you've made a typo and you mean 20 years? (in which case, now 300k is below maxing out, but slightly closer (although with returns it should be a good bit more))
You’re right…but that’s not what was said. After 2 years, all they had was $13K. But if they’d been contributing for 20 years like they should have been doing (because they’re 40, not fresh out of college), they’d have $300K.
IOW, $13K is nothing to brag about if you’re 35 and working software jobs your whole career. At least that’s how I read it.
This is a bit of an aside, but… this isn't quite correct.
Your (combined) individual contribution limit to a Traditional 401(k) and Roth 401(k) is $22,500 for this year. That doesn't include employer contributions. It also doesn't include after-tax contributions. The total combined limit for all contributions from all sources is $66,000 this year. So you could max out your Traditional 401(k), have your employer contribute $4,000, and then contribute an additional $39,500 to the after-tax portion.
The after-tax portion has no advantageous tax treatment whatsoever. It's identical to putting that same amount into a brokerage account… except for one detail. If you employer has a plan which allows for in-service distributions, you can immediately roll over after-tax contributions into the Roth portion of your account. This enables individuals working for companies with very good benefits packages to save an incredible $66,000/yr into tax-advantaged retirement accounts.
So assuming no growth, you can actually legally put $132,000 into a 401(k) in two years.
It is thoroughly fucked up that the majority of Americans who don't work for giant companies with gold-plated benefits packages only have access to $6,500 in tax-advantaged savings through IRAs.
But, the second most popular option was to pay via credit card, and this does not preclude having the money in savings. Given the popularity of credit cards in the US, this makes sense too. If faced with a sudden large expense, I too would put it on credit and pay it off at the end of the cycle instead of pulling from savings, despite being able to afford the latter.
Similarly, the third most popular option was to pay the bill and cut other expenses, which also doesn't exclude savings and would be a pretty normal thing to do too.
IIRC only ~15% said they'd take a loan or borrow from friends/family.
> Lawmakers who opposed the bankruptcy bill cited a 2005 study by Himmelstein, Thome, Warren, and Woolhandler finding that approximately half of bankruptcies were medical-related. Supporters of the bankruptcy bill countered with a court record analysis conducted within the Department of Justice (DOJ). According to the DOJ analysis, over half of the sample (54%) had no medical debt at all, the average medical debt among those with any such debt was under $5,000, and medical debt comprised only 5.5% of the total unsecured debt of the sample.
https://www.bankrate.com/banking/savings/emergency-savings-r...
The source of their statistics, which has a separate section which clearly asks about how much savings people have (granted, in terms relative to their living expenses instead of absolute numbers), rather than pulling 56% out of the statistic about how they would pay for an expense: https://www.bankrate.com/banking/savings/emergency-savings-r...
This finds that ~22% of Americans don't have emergency savings. Which is still a lot, but certainly not as crazy and eye catching as 56%.
Note that the second link is the 2023 version, CNBC references the 2021 stats, but those don't seem to be accessible anymore (which is a strange arrangement).
>When faced with a hypothetical expense of $400, 63 percent of all adults in 2022 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as “cash or its equivalent”). The remainder said they would have paid by borrowing or selling something, or said they would not have been able to cover the expense.
https://www.federalreserve.gov/publications/files/2022-repor...
Per another Federal Reserve study I saw, the percentage of the population where income does not exceed necessary expenditures -- people with no income surplus, latent or otherwise -- is something like 12%. Which sounds about right and is still a lot of people.
...the 2022 SHED included a new question asking what is the largest emergency expense people could handle using only savings. Sixty-eight percent of adults said they could pay an expense of at least $500 using only their current savings (table 12). This is a somewhat larger share than the 63 percent of adults who said they would pay an unexpected $400 expense with cash or the equivalent, suggesting that some people do choose to pay with other methods, even if they have cash savings available to them.
The median US household entering retirement age has saved about $120k-$150k. That is, over 50% of people are more or less 100% reliant on social security to get by in retirement.
The mean US household savings at retirement age is like closer to $500k, because it's overwhelmingly top heavy in the 1%/0.1%/etc of people.
Consider that this reporting is/was complete bullshit intended to get clicks. More critically, that headline gobbled up answers like "I would put this expense on a credit card" into "people have no savings to pay for things" when it's extremely common for people to pay for things with a credit card and have 30 days to settle their balances for the month.
We often hear this "all over the map" blamed on the "1%" (that's a lot of people in the US). Not so. A police officer is not expected to be a rich career, but it's one where it's easy to put in lots of high-paid overtime and like in any other job, invest a lot from early on. It's a short career that leaves time for a second one afterwards. It's easy to finish with a high pension in addition to high investment. Obviously not all cops will do that but it's possible. Investing is also well understood by many people so you see teachers ending up with very nice piles. Nothing to do with "1%" or income inequality.
The US make it also easy - well, maybe not easy but not uncommon - for a cliché "Wall Street lawyer" to end up broke.
We were discussing the awesome breadth in outcome in the US.
Heck, I do the same thing. I have a predefined amount that goes into my various accounts each paycheck. The rest is used for the mortgage, bills, other monthly expenses, etc...
It is much easier to adjust your 401k, Roth, HSA and Brokerage account transfers than to get a raise.
I don't even see the money that goes into my savings--it happens automatically before I even get paid. What's left over is a small, small percentage of my actual after-tax pay, and that has to somehow stretch to the next paycheck, which is not always easy.
Relying on a 401k alone means that in the best case scenario means you're all but guaranteed to work until 60. Being on this site, you're statistically likely to be a person that can retire on great sums long before 60 and be both financially secure and have many healthy years to enjoy your life.
This isn't actually true. I don't mean to suggest that the GP is good advice, but:
1) Many companies offer "mega-backdoor Roth" 401k, with in-service conversion from regular after-tax dollars to Roth after-tax, meaning you can contribute a total of ~$53k annually or whatever the number is now.
2) When you separate from your employer, you can roll over your Trad and Roth 401k into Trad and Roth IRAs.
3) After 5 years (which clearly won't be an issue), the principal contributed to a Roth can be withdrawn tax and penalty free even before retirement age.
4) You can always convert Trad IRA dollars to Roth IRA dollars by paying tax. These dollars become principal in the Roth and therefore eligible for early distribution.
Assuming you haven't retired incredibly early or made highly unusual gains, a combination of continued Trad->Roth conversion and Roth principal distribution can get you to retirement age even without any additional savings.
This sounds like really bad advice. 401K limits are 22.5K this year. If you are making 100K and you are able to put away over 20% of it, maybe that gives you a reasonable probability of maintaining your lifestyle in retirement. If you're making good money and you're only saving 22.5K, you are probably going to take a serious hit whenever your income stops.
You are also completely undervaluing having "dry powder." Let's say interest rates go through the roof and "nobody" can afford to take out a mortgage, being the one guy with cash-on-hand will let you capture some once-in-a-lifetime real estate deals.
Also, freedom. Under your scenario, someone working a decade will have saved 220K in their 401k and that's it. Now they want to quit their job and start a business. They have to cash out their 401k just to sustain ~1 year of them not drawing a salary. Who's gonna do that? Versus, imagine the same person has a ton of additional savings - they can take the risk because it's a much smaller risk to them (longer runway)
// if there is money left over after paying for normal life enjoy it as you can't take it with you
You are probably undervaluing the "enjoyment" people get out of deep financial safety.
In short, saving taxed income is a form of diversification.
The key is to save all a long. If you start saving for retirement at 50, even with catch up contributions you are probably not going to have a nice retirement.
So let's say your number is 2x optimistic and someone retires with 4M instead - whatever that means in a bunch of decades from now. Then you pay tax. Depending on where you live, between federal, state, and city that can be close to 50% especially if rates go up. So that leaves you with 2M. Then say you end up living to 90, that's like 71K per year take-home. I guess you can live on that today. But for example my taxes for the house are like 20KL. So almost a 1/3 of your take-home goes to that. it's not SOOOO cozy.
2023 - $293,319.96
Federal minimum wage 2013 - $7.25 an hour
Federal minimum wage 2023 - $7.25 an hour
https://data.bls.gov/cgi-bin/cpicalc.pl
- You will live to see tomorrow.
- If you are high enough income, maxing 401k, an IRA, and an HSA every year is sadly still not enough.
- Location variance makes it really hard to find comparable intel online for a right path. Cost of living, job market / income levels, family situation and size, etc...
- Although sometimes extreme, the Bogglehead and FI/RE communities are great.
> You will live to see tomorrow.
statistically yes, but there are outliers who won't.
> If you are high enough income, maxing 401k, an IRA, and an HSA every year is sadly still not enough.
Sure, but few people are that high. Even of those who are, 22k (adjusting upward every year) from 25-65 is a lot of money. You can save a little more if you want to retire early, but you are only young once and your time is better spent enjoying youth while you have it.
The only thing to keep in mind is that debts like that contribute to negative net worth/retirement savings. If you have 200k in student loan debt, you have a -200k net worth (even if it costs ~250-300k to pay off due to interest...)
The path to freedom is max, not min or mean.
Are you claiming that many people you know who are maxing out their 401k, HSA, and Roth IRA literally speak the words "paycheck to paycheck" to describe their financial situation?
I'm not high-net worth, but I suspect that a lot of the same vacation forces are at play in that community as well, particularly during the pandemic.
Who would have thought that a couple thousand dollars of "stimulus" monies, your dollar being worth 20% less than it was a few years ago, record credit card debt, record wealth inequality between the have's and have-nots, and a completely screwed up housing market would lead to Americans saving "less than previously thought"...
Remember, the people making fiscal policy have been citing "savings accrued during covid" every chance they can. The same chattering donor class, bureaucrats, and politicians that insist the economy is doing better than ever. The same chattering donor class, bureaucrats, and politicians, who redefined the meaning of "recession" when it was inconvenient to their policy goals. The same chattering donor class, bureaucrats, and politicians, who were gleefully calling for people to lose their jobs if they didn't get the latest iteration of a vaccine with questionable and overstated results.
That sounds pretty suspicious, except that this correction goes back well before covid, and the spike in 2020 and 2021 is just as huge with the new data.
> The same chattering donor class, bureaucrats, and politicians, who redefined the meaning of "recession" when it was inconvenient to their policy goals.
Look, "two quarters of shrinking GDP" is a really easy rule to apply, but it's so dependent on timing and ignores everything around it.
Specifically, we had a single quarter with 7% growth, then two quarters that combined to 2.6% shrink, then a single quarter with 2.7% growth.
I think it's fair to say that was not a recession, and the weird result in 2020 with -28.0% immediately followed by +34.8% is important to mention but also not a recession, so 2008 was the last actual recession in the US.
> The same chattering donor class, bureaucrats, and politicians, who were gleefully calling for people to lose their jobs if they didn't get the latest iteration of a vaccine with questionable and overstated results.
What did you find questionable that was in addition to any overstatement of results?
And nobody wanted job losses, they just wanted people to try to fight the spread. Eventually enough spite built up, mostly against the people acting bad on purpose, but between a "make them lose their job" button and a "make them try (retroactively)" button I bet basically everyone you describe would have smacked the latter.
Not one single thing, but many straws that finally broke the camels back, as it were.
The speed at which it was developed and made "mandatory", for one. The release from liability granted to all the produces of said vaccine, for two (which I would be more sympathetic if not for #1).
The laughable "100% effectiveness rate" that was touted and walked back rather sheepishly.
The equally laughable assertion that the common flu just "took a year off" in 2020 and every cough and sniffle was COVID.
The outright hostility to _reasonable_ skepticism (i.e. "this technology is relatively new and could have unintended side effects so we should study it more", not "Bill Gates is putting microchips into the syringes to track your children").
Hospitals and media / government types deliberately conflating deaths _from_ covid and deaths _with_ covid. (It's this specific example that makes me suspect the redefinition of "recession" as a political exercise).
The outright lies surrounding how vulnerable children were/are vs the elderly, the latter being FAR more vulnerable.
The idea that the virus was created and escaped from a lab in Wuhan that was a conspiracy theory, until it wasn't.
Politicians and elites clearly not practicing what they preach, be it the governor of a state going out to a fancy restaurant with their buddies, unmasked, during the height of the crisis or those who enriched themselves and their businesses on relief funds.
There are more but it's actually pretty depressing to list.
> And nobody wanted job losses, they just wanted people to try to fight the spread. Eventually enough spite built up, mostly against the people acting bad on purpose, but between a "make them lose their job" button and a "make them try (retroactively)" button I bet basically everyone you describe would have smacked the latter.
Could have fooled me based on public statements made by pro-lockdown politicians at the time. "Fight the spread" was repeated ad-nauseam by those pushing questionable methods that many people knew were suspect to be begin with, yet were castigated as "killing grandma", "anti-science", "rubes" and every other name in the book rather than taking their concerns seriously.
Oh I thought you were talking about the vaccine itself, not the politics.
> the redefinition of "recession" as a political exercise
Hasn't the NBER been in charge of it for a very long time? Has the definition actually changed recently?
> rather than taking their concerns seriously.
Weird, I remember a ton of time devoted to taking the concerns seriously.
But "seriously" doesn't mean that if the same concerns get repeated over and over they become more correct. Some concerns were correct but most weren't. And if someone keeps talking about "shedding" or masks trapping CO2, even after multiple corrections, they deserve to be insulted.
Perhaps in your eagerness to get to the “deserved to be insulted” part of your response you missed that?
The speed and release from liability don't fit that.
The "outright lie that it was 100% effective" falls under overstated. So I wanted to know what you meant by "questionable" in addition to "overstated".
So no, I didn't miss that.
And I didn't write that comment in a rush, just to be clear.
This conversation is over. Have a pleasant evening.
You said a thing, I asked for clarification, your reply made me realize that I had misunderstood. Hence "oh I thought you were talking about".
I was happy at that point! Everything was settled!
I'm not trying to get you in any way at all. I just replied because you said I skipped things, but I didn't skip them.