"Social security" including actual Social Security, Medicare, etc is a wealth transfer from the poorest Americans (young people) to the richest Americans (old people).
This is just another version of the same thing we see on the front page a couple times a week at this point because it's a OECD-wide trend...
“Wealth is aging.” in some manner over and over and over again... OECD, academics, ECB etc showing the thing, older cohorts control a seriously disproportionate share of national wealth. Doesn't matter if it's USA, Canada, NZ/AUS, EU etc.. Homeownership is flat for the young, rising for the elderly. Rising mortgage leverage for the young, falling for the elderly. Debt-to-income ratios are very high for younger cohorts, again on the front page it shows up weekly in some flavour of the U.S. and U.K. with student loans + mortgages- in Canada it’s primarily mortgages + consumer debt. Everywhere globally, younger folks are face considerably higher prices (inflated?) relative to income, an environment of tighter lending, and again... much higher student debt in us and uk (I suppose education less so in parts Europe and Canada, yet consumer debt there is rampant).
And young people are not having kids at all.
What's to be done? I really ask: What's to be done about it?
Everybody pissing and moaning about the old folks better save their money as they’ll be old in a small number of decades. The us has lowered its tax regime over these decades without lowering the costs associated with being old. And it’s replaced defined benefit pensions with defined contribution. Those who could and did save have done well. Those who didn’t, well, with luck they have a roof over their head and food.
As a data point, the typical social security from somebody who was in a pink collar profession is like $1500-2000/month. Somebody who maxed out social retiring at 70 gets like $5100/month. Assuming they can cover expenses until 70. These numbers are partially taxable.
The summary talks about two "smoking guns" for wealth increase in the oldest age group: home ownership rate and stock portfolio value.
To me, though, these seem like effects rather than causes. In other words, the older age group has enough money to afford these things. I doubt that the oldest age group is somehow vastly better than others at picking stocks to buy; their stock portfolios are larger because they have more money to invest in the same stock market as everyone else, right? And according to the last chart in the paper, on the final page, the home ownership rate of the under 35 group is close to the same in 2022 as it was in 1983, though it dropped lower in 2016.
Thus, I get the impression that the first factor mentioned in the summary, mortgage debt, may be the main driver. In other words, presumably, it's taking much more for the youngest group to pay off their mortgages than it did for the oldest group, because the price of housing has increased significantly. And money going into mortgage payments is money not going into other investments such as stock.
The survey defines the top one percent as "Net worth of $13,390,060 or more," which sounds greatly skewed versus what I assume is a lower median net worth at the 99th percentile. I don't think 1 in 100 Americans have over $13 million in assets.
I feel as if I've been reading some variant of this for the last 30 years (not just American, UK too).
But then what of it? I had more money at age 20 than I did at 15, more at 25 than 20, more at 30 than 25, and so on and so forth.
When I'm 70 I'll have more in real terms than I do now. Each year, barring some sort of disaster, most people work and bring in enough to survive whilst the surplus stacks up.
The main difference in my mind driving the rate of change in the proportions is just that the median person is more aware of things like the stock market, real estate, etc, now.
Basically, people are acting more efficiently. I'm more savvy than my parents were; they are/were proper working class "spend it as soon as it comes in, it might be gone" whereas I'm more like "never touch the capital, diversify".
(There are some issues, like how in the UK pensioners are given _extremely_ generous benefits, but I don't think that's relevant to the global picture).
7 comments
[ 3.5 ms ] story [ 29.7 ms ] thread“Wealth is aging.” in some manner over and over and over again... OECD, academics, ECB etc showing the thing, older cohorts control a seriously disproportionate share of national wealth. Doesn't matter if it's USA, Canada, NZ/AUS, EU etc.. Homeownership is flat for the young, rising for the elderly. Rising mortgage leverage for the young, falling for the elderly. Debt-to-income ratios are very high for younger cohorts, again on the front page it shows up weekly in some flavour of the U.S. and U.K. with student loans + mortgages- in Canada it’s primarily mortgages + consumer debt. Everywhere globally, younger folks are face considerably higher prices (inflated?) relative to income, an environment of tighter lending, and again... much higher student debt in us and uk (I suppose education less so in parts Europe and Canada, yet consumer debt there is rampant).
And young people are not having kids at all.
What's to be done? I really ask: What's to be done about it?
Good reading: https://www.nobelprize.org/uploads/2018/06/modigliani-lectur...
As a data point, the typical social security from somebody who was in a pink collar profession is like $1500-2000/month. Somebody who maxed out social retiring at 70 gets like $5100/month. Assuming they can cover expenses until 70. These numbers are partially taxable.
To me, though, these seem like effects rather than causes. In other words, the older age group has enough money to afford these things. I doubt that the oldest age group is somehow vastly better than others at picking stocks to buy; their stock portfolios are larger because they have more money to invest in the same stock market as everyone else, right? And according to the last chart in the paper, on the final page, the home ownership rate of the under 35 group is close to the same in 2022 as it was in 1983, though it dropped lower in 2016.
Thus, I get the impression that the first factor mentioned in the summary, mortgage debt, may be the main driver. In other words, presumably, it's taking much more for the youngest group to pay off their mortgages than it did for the oldest group, because the price of housing has increased significantly. And money going into mortgage payments is money not going into other investments such as stock.
But then what of it? I had more money at age 20 than I did at 15, more at 25 than 20, more at 30 than 25, and so on and so forth.
When I'm 70 I'll have more in real terms than I do now. Each year, barring some sort of disaster, most people work and bring in enough to survive whilst the surplus stacks up.
The main difference in my mind driving the rate of change in the proportions is just that the median person is more aware of things like the stock market, real estate, etc, now.
Basically, people are acting more efficiently. I'm more savvy than my parents were; they are/were proper working class "spend it as soon as it comes in, it might be gone" whereas I'm more like "never touch the capital, diversify".
(There are some issues, like how in the UK pensioners are given _extremely_ generous benefits, but I don't think that's relevant to the global picture).