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It is said that 70% of families lose their wealth by the 2nd generation and 90% by the 3rd[1] Inequality is not static, it is rather dynamic. Nassim Taleb mak

It is said that 70% of families lose their wealth by the 2nd generation and 90% by the 3rd[1] Inequality is not static, it is rather dynamic. Nassim Taleb makes some good points about that here[2], for instance, ~ 70% of Americans will spend a year in the top 20% and only ten percent of the wealthiest five hundred American people or dynasties were so thirty years ago. [1] https://www.nasdaq.com/articles/generational-wealth%3A-why-do-70-of-families-lose-their-wealth-in-the-2nd-generation-2018-10 https://www.nasdaq.com/articles/generational-wealth%3A-why-d... [2] https://medium.com/incerto/inequality-and-skin-in-the-game-d8f00bc0cb46 https://medium.com/incerto/inequality-and-skin-in-the-game-d...

seattle_spring 6y ago
Seems like we're conflating wealth with income?
- maerF0x0 6y ago
  Wealth is just the generative form of income expenditures. How do you tax the "wealth" that is being able to get free food from a food bank, or a monthly check from the government? How do you tax a bunch of experiences and education? I dont think we should tax "wealth" when it's just a choice of what to do with post tax income. And pre tax investments are taxed on their exit (eg 401k)
  - JamesBarney 6y ago
    > Nassim Taleb makes some good points about that here[2], for instance, ~ 70% of Americans will spend a year in the top 20% and only ten percent of the wealthiest five hundred American people or dynasties were so thirty years ago. In this specific instance wealth vs income matters because the above statement is true of income, but very untrue of wealth.
    - AnthonyMouse 6y ago
      What makes you think it's untrue of wealth? 80th percentile wealth in the US is a net worth of ~$500k. That's where most people are at retirement when your house is basically paid off and there is money in your 401(k).
      - JamesBarney 6y ago
        https://dqydj.com/net-worth-by-age-calculator-united-states/ https://dqydj.com/net-worth-by-age-calculator-united-states/ The median net worth for a 60-64 year old is 225k a far cry from 500k. And 66% of the population have less than 500k at that age.
        AnthonyMouse 6y ago
        You're assuming "retirement" is still at 65, but increasingly it isn't. The median is actually highest at the oldest age group on that chart. Everybody also forgets to include the net present value of social security (basically an annuity you were forced to buy), which is a disproportionately large amount of the net worth for lower income people both because they don't have as many other assets and because the income cap limits how much it adds to the net worth of the people at the top. (Though people would generally have a higher net worth without it; it pays back less than you'd have from investing the same money in an index fund.)
        JamesBarney 6y ago
        The numbers don't change much at all for 80+. Not to mention lots of people won't live until 80 much less 60. And adding social security would increase the % of people who had 500k but would also increase the net present value of individuals @ the top 20%.
      - graton 6y ago
        But the higher percentile people. For example the 1 in 1000 are at $43 million dollars in wealth. Net Worth Percentile Net Worth 10.0% -$962.66 20.0% $4,798.06 30.0% $18,753.84 40.0% $49,132.21 50.0% $97,225.55 60.0% $169,550.64 70.0% $279,594.27 80.0% $499,263.50 90.0% $1,182,390.36 95.0% $2,377,985.22 99.0% $10,374,030.10 99.5% $16,115,373.00 99.9% $43,090,281.00 Source: https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/ https://dqydj.com/net-worth-brackets-wealth-brackets-one-per...
thomasfromcdnjs 6y ago
"Economics in One Lesson" would be a good choice for a lot of HN readers.
verdverm 6y ago
Case in point, my father's grandfather was quite rich for the time. He owned 20+ properties and some other things. When he died, his widow went on a spending binge, gradually selling away all the property. My father grew up poor and has set the stage for my generation to become as successful as HEAD~3
- thomasfromcdnjs 6y ago
  I'd also assume that for the families who don't squander their resources in three generations indicates they are actually good with money. And as a family probably make wise investments that support the economy in a healthy way. So we don't need estate tax because 1) most families will spend it all frivously anyway 2) the ones who don't are likely the best custodians of wealth in a nation
  - verdverm 6y ago
    I was not commenting on the tax issue, simply providing a personal account of what that parent post described about cyclic wealth across generations. Certainly my parents have been exceptional at money management and provided stability and support for their children so they could have opportunity and find their own prosperity. They told us kids not to expect money, they will spend it or donate it before the govt gets it. Setup a trust to maintain wealth across generations without all the inheritance issues
  - MereInterest 6y ago
    > the ones who don't are likely the best custodians of wealth in a nation What's good for an individual family is not necessarily good for society as a whole.
JMTQp8lwXL 6y ago
Maintaining wealth 100 years ago was different from today. Today, you can passively own index funds, and property rights are respected in the US. I would expect the 70% and 90% figures to decrease for future generations.
- tathougies 6y ago
  I wouldn't. People are irresponsible and like spending money. Even those who 'invest', they're probably going to attempt more dangerous investments at some point and lose significant portions of wealth.
zackees 6y ago
I want to add that this tax only applies to people of the mid upper level incomes. The apex families use a complex network of Trusts that outlive any of the beneficiaries and thus are not subject to an "inheritance tax". This inheritance tax is nothing more than economic warfare by the globalist central banking cartels to disgorge the upper mid tear capitalist class who aren't big enough or careful enough to go through the complex tax loopholes the megawealthy are able to procure for themselves.
_uy6i 6y ago
In furtherance of this point let’s take the article’s author at face value $50m inheritance @21% is $39.5m...not bad! But let’s now be a little more realistic, the family has two kids and not 1 so $19.25m per child - now let’s say that parents died at 85 and had their kids at the age of 30 so the kids are 55 which means they can invest their money for 30 years, and let’s say they invest it in a nice vanguard balanced fund, their after tax annualized return would be 5-7% [1] If we use the past 10-20 years as a guide (this also assumes you live in a place with no state tax like TX or FL). Now inflation is 2-3% so we’re making 3-5% real which means that over our 30 year investment horizon we could expect to increase our wealth between 2.5 - 4.3x if we don’t spend a dime... let’s be real someone with that money is going to want to enjoy at least some of it! So let’s say they spend 2% (or ~$400k/year real) now that 3-5% real is 1% - 3% real or 1.4x - 2.5x the original corpus - now they pass it on to their 2 kids, they’d be lucky to pass along the same amount they inherited - spend a little more along the way, have some bad investments, get a divorce, have more than two kids and your heirs are almost guaranteed to get significantly less than their parents ... Sure they’re still rich, most rich families are in decline once the money’s been made...it may take several generations, but eventually their progeny is back working... [1] https://investor.vanguard.com/mutual-funds/profile/performance/vbiax https://investor.vanguard.com/mutual-funds/profile/performan...

seattle_spring 6y ago

Seems like we're conflating wealth with income?

maerF0x0 6y ago
Wealth is just the generative form of income expenditures. How do you tax the "wealth" that is being able to get free food from a food bank, or a monthly check from the government? How do you tax a bunch of experiences and education? I dont think we should tax "wealth" when it's just a choice of what to do with post tax income. And pre tax investments are taxed on their exit (eg 401k)
- JamesBarney 6y ago
  > Nassim Taleb makes some good points about that here[2], for instance, ~ 70% of Americans will spend a year in the top 20% and only ten percent of the wealthiest five hundred American people or dynasties were so thirty years ago. In this specific instance wealth vs income matters because the above statement is true of income, but very untrue of wealth.
  - AnthonyMouse 6y ago
    What makes you think it's untrue of wealth? 80th percentile wealth in the US is a net worth of ~$500k. That's where most people are at retirement when your house is basically paid off and there is money in your 401(k).
    - JamesBarney 6y ago
      https://dqydj.com/net-worth-by-age-calculator-united-states/ https://dqydj.com/net-worth-by-age-calculator-united-states/ The median net worth for a 60-64 year old is 225k a far cry from 500k. And 66% of the population have less than 500k at that age.
      - AnthonyMouse 6y ago
        You're assuming "retirement" is still at 65, but increasingly it isn't. The median is actually highest at the oldest age group on that chart. Everybody also forgets to include the net present value of social security (basically an annuity you were forced to buy), which is a disproportionately large amount of the net worth for lower income people both because they don't have as many other assets and because the income cap limits how much it adds to the net worth of the people at the top. (Though people would generally have a higher net worth without it; it pays back less than you'd have from investing the same money in an index fund.)
        JamesBarney 6y ago
        The numbers don't change much at all for 80+. Not to mention lots of people won't live until 80 much less 60. And adding social security would increase the % of people who had 500k but would also increase the net present value of individuals @ the top 20%.
    - graton 6y ago
      But the higher percentile people. For example the 1 in 1000 are at $43 million dollars in wealth. Net Worth Percentile Net Worth 10.0% -$962.66 20.0% $4,798.06 30.0% $18,753.84 40.0% $49,132.21 50.0% $97,225.55 60.0% $169,550.64 70.0% $279,594.27 80.0% $499,263.50 90.0% $1,182,390.36 95.0% $2,377,985.22 99.0% $10,374,030.10 99.5% $16,115,373.00 99.9% $43,090,281.00 Source: https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/ https://dqydj.com/net-worth-brackets-wealth-brackets-one-per...

thomasfromcdnjs 6y ago

"Economics in One Lesson" would be a good choice for a lot of HN readers.

verdverm 6y ago

Case in point, my father's grandfather was quite rich for the time. He owned 20+ properties and some other things. When he died, his widow went on a spending binge, gradually selling away all the property. My father grew up poor and has set the stage for my generation to become as successful as HEAD~3

thomasfromcdnjs 6y ago
I'd also assume that for the families who don't squander their resources in three generations indicates they are actually good with money. And as a family probably make wise investments that support the economy in a healthy way. So we don't need estate tax because 1) most families will spend it all frivously anyway 2) the ones who don't are likely the best custodians of wealth in a nation
- verdverm 6y ago
  I was not commenting on the tax issue, simply providing a personal account of what that parent post described about cyclic wealth across generations. Certainly my parents have been exceptional at money management and provided stability and support for their children so they could have opportunity and find their own prosperity. They told us kids not to expect money, they will spend it or donate it before the govt gets it. Setup a trust to maintain wealth across generations without all the inheritance issues
- MereInterest 6y ago
  > the ones who don't are likely the best custodians of wealth in a nation What's good for an individual family is not necessarily good for society as a whole.

JMTQp8lwXL 6y ago

Maintaining wealth 100 years ago was different from today. Today, you can passively own index funds, and property rights are respected in the US. I would expect the 70% and 90% figures to decrease for future generations.

tathougies 6y ago
I wouldn't. People are irresponsible and like spending money. Even those who 'invest', they're probably going to attempt more dangerous investments at some point and lose significant portions of wealth.

zackees 6y ago

I want to add that this tax only applies to people of the mid upper level incomes. The apex families use a complex network of Trusts that outlive any of the beneficiaries and thus are not subject to an "inheritance tax". This inheritance tax is nothing more than economic warfare by the globalist central banking cartels to disgorge the upper mid tear capitalist class who aren't big enough or careful enough to go through the complex tax loopholes the megawealthy are able to procure for themselves.

_uy6i 6y ago

In furtherance of this point let’s take the article’s author at face value $50m inheritance @21% is $39.5m...not bad! But let’s now be a little more realistic, the family has two kids and not 1 so $19.25m per child - now let’s say that parents died at 85 and had their kids at the age of 30 so the kids are 55 which means they can invest their money for 30 years, and let’s say they invest it in a nice vanguard balanced fund, their after tax annualized return would be 5-7% [1] If we use the past 10-20 years as a guide (this also assumes you live in a place with no state tax like TX or FL). Now inflation is 2-3% so we’re making 3-5% real which means that over our 30 year investment horizon we could expect to increase our wealth between 2.5 - 4.3x if we don’t spend a dime... let’s be real someone with that money is going to want to enjoy at least some of it! So let’s say they spend 2% (or ~$400k/year real) now that 3-5% real is 1% - 3% real or 1.4x - 2.5x the original corpus - now they pass it on to their 2 kids, they’d be lucky to pass along the same amount they inherited - spend a little more along the way, have some bad investments, get a divorce, have more than two kids and your heirs are almost guaranteed to get significantly less than their parents ... Sure they’re still rich, most rich families are in decline once the money’s been made...it may take several generations, but eventually their progeny is back working... [1] https://investor.vanguard.com/mutual-funds/profile/performance/vbiax https://investor.vanguard.com/mutual-funds/profile/performan...