Seems fringe and out of touch with my reality and everyone I know. Does anyone have any info on who the author is and what sorta school of though he's involved with?
The numbers aren't fake but the analysis glosses over a lot.
The author's data says the median net worth for 65–74 year-old households is about $410,000, but 56% of it is home equity. Exclude the house and the median net worth drops to $171,000 and the median financial assets (the part that could actually be converted to cash easily) are only about $115,000. At the 25th percentile, wealth excluding home equity is under $30,000 for every age bracket from 55 up. So basically the net worth number looks best for the people whose wealth is least spendable.
That calls into question the author's claim that "given their current net wealth, a solid majority of Americans can comfortably retire without Social Security." Back of the envelope math: safely drawing 4% on $115,000–$170,000 provides just $5,000–$7,000 a year versus a median SS retirement benefit in the low $20,000s.
For a typical retiree, SS is worth more than every financial asset they own combined. The author says that downsizing or reverse mortgages count as "doing fine" but that's just his opinion. Reverse mortgages are expensive and you lose your equity quickly, and downsizing in the current market basically means that you pay way more for way less.
From what I can tell, it's basically the top third who could do without SS comfortably. Not at all a "solid majority."
> downsizing in the current market basically means that you pay way more for way less
Can you elaborate on that? It's pretty common for people to sell their 4 bedroom family house and retire to Florida. But it's not "way more for way less"
For seniors who sell a house they've owned for years (even decades), they're paying way more for each unit of "house" in this market.
Price per square foot tends to go up the smaller the home and the types of homes older people prefer (single-level, near hospitals, newer/lower maintenance) are in higher demand so they're also harder to find and more expensive.
Transaction costs (agent commissions, closing costs, moving) can be 8-10% of a sale. The capital gains exclusion is only $250,00 for singles and $500,000 for couples, so if you're sitting on big gains, a sale can come with a significant tax bill. In places like California, where assessment caps like Prop 13 keep property taxes low, buying a new home means that you could end up paying more in property tax on a much cheaper home. If you move into a condo, you have to deal with HOA fees. And so on.
Renting isn't always easy either. Senior independent communities can be really expensive (under some models you even have to pay hundreds of thousands of dollars up front) and even if you just rent a regular apartment, you need to compare the rents to drawdowns. $400,000 (the median net worth for 65–74 year-olds) provides $16,000/year at a 4% draw. The median rent for a 1 bedroom apartment in the US is somewhere between $1,200-$1,500.
I do kind of get the point that ensuring Boomers who have a lot of wealth in real estate can pass a paid off house to their heirs isn't a socially valuable goal (especially since Social Security is funded by working people, including many who don't own a house or aren't due to inherit one). Maybe instead SS benefit can be considered more like a loan with the house as collateral, payable on death or transfer.
Of the two-dozen or so technical people whose lives I am familiar with, three are doing well (not at all wealthy, just comfortable). Two got there with good jobs, the third gets everything from wealthy parents. The rest live with parents or in dingy apartments in suburbs, with savings so modest as to possibly not even support that lifestyle in old age. We're all in our late 30's to late 40's. They're all smart and went to good colleges.
Wow, there's so much wrong with this "statistical analysis" to the point of absurdity. Goes to show that even a 30-year economics professor can be duped by AI.
It looks like his results are taken from the Federal Reserve 2022 Survey of Consumer Sentiments. https://www.federalreserve.gov/econres/scfindex.htm The data is publicly available. I don't think that this was hallucinated.
I was going to say something similar: invoking one’s credentials as a professor only counts for legitimacy if that 30-year legacy of thinking on the topic is applied to the problem under discussion.
In my opinion, if the analysis is offloaded to the plagiarism machine, it loses all epistemological value.
I was born and grew up in the states and am living outside the country (near Europe) and the smallest things made me realize how truly rich Americans are compared to the rest of the world, in real terms. Even things like fast food or Walmart are a testament to the abundance the US has (not saying it is right or wrong). And these systems are supported by the simple fact you just have a lot of rich people walking around relative to the global population.
To put it more succinctly, I know engineers/lawyers/doctors in this country I’ve been living in that make 2k a month and it’s good. They work hard, it’s stressful. A fast food worker in the US can make $15/hr and bring in 2.4k a month.
And for that 2k/mo they barely make rent, can't save and are one health issue away from $100k debt. Not really a shining example of either wealth or freedom.
Data from US gov since 2000 show this (BLS, SSA), as do multiple university studies (MN, KY). And the ratio for rural areas is getting worse, more pressure, than urban.
That it varies is not interesting, lots of things have variance. The data shows its generally true.
Income to rent ratio, which is what this thread is about, varies geographically. Rent eats 30-40% of income in prestige cities like NYC or SF or LA. It's only 25% in Kansas City or Columbus.
You seem to be thinking about overall cost burden over time.
The US does not lead in broad markers of "social good" like life expectancy, happiness index or social mobility, so what exactly is this KPI useful for?
Even things like fast food or Walmart are a testament to the abundance the US has
You can get similarly fatty foods in most corners of the world. Doesn't matter if you're deep in central Asia or Africa, any urban settlement will have a restaurant that sells them and most of the roadside stations too.
Supermarkets are pretty American, but that's not true for the same reason it might have been in Yeltsin's day. I think you'd have trouble making a serious argument that communities with Tesco are fundamentally poorer or worse off than those with Walmart.
American megastores with 60,000+ SKUs are just a cultural preference in North America, and not even a universal one at that. Costco is very successful both domestically and internationally by rejecting that model. Trader joes (Aldi) is extremely competitive in the US despite a blatantly European business model. Americans are far more excited for either one of those to move in than a Walmart.
The issue for Americans is that living a pretty "normal" lifestyle is way more expensive compared to living very similar "normal" lifestyle in most other developed cities.
Easiest example would be groceries. If you live in a crazy expensive place like Manhattan, you could easily spend 4-5x more on groceries compared to a city like Warsaw. But it's not like you are getting better produce or products in Manhattan, you are getting same stuff, just paying way more.
And this is true for other day to day stuff too like Housing, Healthcare, Schools, etc.
It annoys the heck out of much of the rest of the world but the truth is that Americans are staggeringly wealthy compared to nearly every other place on the planet. The US GDP per capita figures do translate into staggering wealth for a large portion of the population.
Most don’t live like it and frankly the ones that show off typically are nowhere are wealthy as they’d like you to believe. Meanwhile the person driving an older model car and mowing their own grass has millions in the bank and doesn’t think twice about it.
Once you realize that 10% of households are getting $200k+/yr of unearned income and 1% of households are getting 1.3M+/yr of unearned income by virtue of owning lots of assets in an economic system geared to pump assets at the expense of literally everything else, it becomes very clear why the social contract experienced by most people is undergoing rapid degradation yet still has legions of staunch influential defenders that come out of the woodwork any time someone proposes to modestly push back on the worst of it.
Oops, did I say "unearned income"? Forgive me, I meant unrealized gains -- I didn't mean to imply that taxes were due on those massive passive flows of money. Perish the thought!
All you’ve said is people with assets certainly couldn’t have earned those assets by earning income prior. Shock horror that people follow basic financial principles and decades later they have some wealth.
Quite the opposite. Whatever they did to earn the income with which they originally bought those assets was 100 times more honest than the relentlessly self-serving politics through which they pumped those assets by creating a living hell for their compatriots.
From the Fed's own description of the dataset "The Survey of Consumer Finances (SCF) is normally a triennial cross-sectional survey of U.S. families. The survey data include information on families' balance sheets, pensions, income, and demographic characteristics."
The chart there is deceptive—to be fair, we should be showing 1 and 5 percentile as well. Saying “walking around a mall you might encounter a few decamillionaires” is shifting focus from the fact that 1 in 10 people are experiencing near zero net worth and the bottom 1 percentile likely are suffering way more than the top 1 percent are enjoying their riches.
Looking at a generation that benefited from both an epic housing price run up and same for stock market and observing that the old people seem to be very rich is A) stating the obvious and B) not a sign of the system being healthy and sustainable
Of course people in US are very wealthy if you are looking at dollar amounts. It would be impossible for cost of living to be this high, without a lot of people having decent amount of wealth.
But people's perception of their own wealth depends way more on relative value of their wealth compared to cost of living. If you live in a city where some shitty 2 bedroom apartments cost 1m$+, you aren't going to feel all that rich even if you have 10 million dollar net worth.
$10M at 10% returns is $1M/yr passive. That'll pay for an expensive apartment before you consider working.
In fact, that's sort of the problem: the massive "rich people get paid for being rich in proportion to how rich they are" cash flows run away exponentially from the "poor people get paid for working" cash flows, inflating the price of any inelastic good beyond their reach. The economy stops being about work and starts being about wealth. Which might be fine if most people were wealthy enough to not work, but that's overwhelmingly not the case so it's overwhelmingly not fine.
The mean and the median wealth differences is the most striking. USA is second on mean wealth and 27th in median (just ahead of Greece). A few trillionaires pulling it up with nothing trickling back down.
Still wealthy either way but I always find it a bit jarring how skewed the US self perception is since people generally experience something closer to the median.
The numbers are broken, a more accurate measure would have been median rather than average.
People work because they dont have or need more money to survive.
Reality will tell you if people need to work as many hours and as many jobs, they must be struggling. This is also true of many western and other so called rich countries.
25th percentile never goes above 125k at any age, and 50th percentile doesn't go much about 400k at any age.
Sounds like a lot compared to annual income, but that's trivial if you're trying to retire and live off these assets until you die. Especially since public support, pensions, etc have been eviscerated.
Assuming you can get income of 5%/year from your assets (obviously depends on interest rates, investment mix, etc), 50 percent of people would need to survive on 20k/year or less to retire.
That's not being wealthy. That's choosing between abject piece, and working until you die. Dystopian.
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[ 1.6 ms ] story [ 4.0 ms ] thread"I got in early to the ponzi and life is good can't see what the ungrateful young'uns are whining about!"
The author's data says the median net worth for 65–74 year-old households is about $410,000, but 56% of it is home equity. Exclude the house and the median net worth drops to $171,000 and the median financial assets (the part that could actually be converted to cash easily) are only about $115,000. At the 25th percentile, wealth excluding home equity is under $30,000 for every age bracket from 55 up. So basically the net worth number looks best for the people whose wealth is least spendable.
That calls into question the author's claim that "given their current net wealth, a solid majority of Americans can comfortably retire without Social Security." Back of the envelope math: safely drawing 4% on $115,000–$170,000 provides just $5,000–$7,000 a year versus a median SS retirement benefit in the low $20,000s.
For a typical retiree, SS is worth more than every financial asset they own combined. The author says that downsizing or reverse mortgages count as "doing fine" but that's just his opinion. Reverse mortgages are expensive and you lose your equity quickly, and downsizing in the current market basically means that you pay way more for way less.
From what I can tell, it's basically the top third who could do without SS comfortably. Not at all a "solid majority."
Can you elaborate on that? It's pretty common for people to sell their 4 bedroom family house and retire to Florida. But it's not "way more for way less"
Price per square foot tends to go up the smaller the home and the types of homes older people prefer (single-level, near hospitals, newer/lower maintenance) are in higher demand so they're also harder to find and more expensive.
Transaction costs (agent commissions, closing costs, moving) can be 8-10% of a sale. The capital gains exclusion is only $250,00 for singles and $500,000 for couples, so if you're sitting on big gains, a sale can come with a significant tax bill. In places like California, where assessment caps like Prop 13 keep property taxes low, buying a new home means that you could end up paying more in property tax on a much cheaper home. If you move into a condo, you have to deal with HOA fees. And so on.
Renting isn't always easy either. Senior independent communities can be really expensive (under some models you even have to pay hundreds of thousands of dollars up front) and even if you just rent a regular apartment, you need to compare the rents to drawdowns. $400,000 (the median net worth for 65–74 year-olds) provides $16,000/year at a 4% draw. The median rent for a 1 bedroom apartment in the US is somewhere between $1,200-$1,500.
You'll have a hard time convincing anyone that they want to participate in that.
In my opinion, if the analysis is offloaded to the plagiarism machine, it loses all epistemological value.
To put it more succinctly, I know engineers/lawyers/doctors in this country I’ve been living in that make 2k a month and it’s good. They work hard, it’s stressful. A fast food worker in the US can make $15/hr and bring in 2.4k a month.
Data from US gov since 2000 show this (BLS, SSA), as do multiple university studies (MN, KY). And the ratio for rural areas is getting worse, more pressure, than urban.
That it varies is not interesting, lots of things have variance. The data shows its generally true.
Income to rent ratio, which is what this thread is about, varies geographically. Rent eats 30-40% of income in prestige cities like NYC or SF or LA. It's only 25% in Kansas City or Columbus.
You seem to be thinking about overall cost burden over time.
Supermarkets are pretty American, but that's not true for the same reason it might have been in Yeltsin's day. I think you'd have trouble making a serious argument that communities with Tesco are fundamentally poorer or worse off than those with Walmart.
American megastores with 60,000+ SKUs are just a cultural preference in North America, and not even a universal one at that. Costco is very successful both domestically and internationally by rejecting that model. Trader joes (Aldi) is extremely competitive in the US despite a blatantly European business model. Americans are far more excited for either one of those to move in than a Walmart.
Easiest example would be groceries. If you live in a crazy expensive place like Manhattan, you could easily spend 4-5x more on groceries compared to a city like Warsaw. But it's not like you are getting better produce or products in Manhattan, you are getting same stuff, just paying way more.
And this is true for other day to day stuff too like Housing, Healthcare, Schools, etc.
Most don’t live like it and frankly the ones that show off typically are nowhere are wealthy as they’d like you to believe. Meanwhile the person driving an older model car and mowing their own grass has millions in the bank and doesn’t think twice about it.
Once you realize that 10% of households are getting $200k+/yr of unearned income and 1% of households are getting 1.3M+/yr of unearned income by virtue of owning lots of assets in an economic system geared to pump assets at the expense of literally everything else, it becomes very clear why the social contract experienced by most people is undergoing rapid degradation yet still has legions of staunch influential defenders that come out of the woodwork any time someone proposes to modestly push back on the worst of it.
Oops, did I say "unearned income"? Forgive me, I meant unrealized gains -- I didn't mean to imply that taxes were due on those massive passive flows of money. Perish the thought!
Is this chart based off personal or household net worth?
Families would suggest household, not personal.
But people's perception of their own wealth depends way more on relative value of their wealth compared to cost of living. If you live in a city where some shitty 2 bedroom apartments cost 1m$+, you aren't going to feel all that rich even if you have 10 million dollar net worth.
In fact, that's sort of the problem: the massive "rich people get paid for being rich in proportion to how rich they are" cash flows run away exponentially from the "poor people get paid for working" cash flows, inflating the price of any inelastic good beyond their reach. The economy stops being about work and starts being about wealth. Which might be fine if most people were wealthy enough to not work, but that's overwhelmingly not the case so it's overwhelmingly not fine.
Still wealthy either way but I always find it a bit jarring how skewed the US self perception is since people generally experience something closer to the median.
People work because they dont have or need more money to survive.
Reality will tell you if people need to work as many hours and as many jobs, they must be struggling. This is also true of many western and other so called rich countries.
Sounds like a lot compared to annual income, but that's trivial if you're trying to retire and live off these assets until you die. Especially since public support, pensions, etc have been eviscerated.
Assuming you can get income of 5%/year from your assets (obviously depends on interest rates, investment mix, etc), 50 percent of people would need to survive on 20k/year or less to retire.
That's not being wealthy. That's choosing between abject piece, and working until you die. Dystopian.