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The extraordinary rise in the wealth of older American households
- ahmeneeroe-v2 1y ago"Social security" including actual Social Security, Medicare, etc is a wealth transfer from the poorest Americans (young people) to the richest Americans (old people).
- throwway120385 1y agoBut also it's insurance for the many older people who didn't benefit from any of the accumulated gains their age peers made over their lifetimes.
- ahmeneeroe-v2 1y ago[flagged]
- HankStallone 1y agoAll my working life, I've assumed I would never collect on SS because it was obviously going to fail, so my "contributions" might as well have been tossed into a fire. It's kind of amazing that they've kicked that can long enough that it's starting to look like I might get a little back after all. But I still figure the Boomers will bankrupt it just in time for the checks to stop around my 62th birthday, or maybe that's when they'll start bumping the age up to stay ahead.
- throw__away7391 1y agoCovid messed with the math a bit, but it’s amazing how precisely it was designed to run out of money. My entire life since I was a kid people were talking about how it was going to run out of money but none of them did anything. Now that the boomers are retiring, now they will talk about removing the cap, raising rates, lower benefits for future recipients, but they have made damn sure that their own benefits are guaranteed and that they never had to sacrifice anything to pay for them. I remember when Al Gore talked about setting the surplus aside to fund future benefits in 2000 and everyone laughed at him. SNL made fun of him. Instead they voted to cut themselves a check and added more benefits for themselves for their children to pay for.
- jonny_eh 1y agoIt should be strengthened and available to everyone.
- ahmeneeroe-v2 1y ago[flagged]
- tom_ 1y agoLadies and gentlemen: the duality of Man.
- darth_avocado 1y agoIt should be strengthened for the bottom and eliminated for the top. No need to cash in the checks from your 5th million dollar vacation home.
- jonny_eh 1y agoJust charge the rich more in taxes, that covers the fairness. If you only leave the benefit for the poor, then the rich will scrap the system.
- atomicnumber3 1y agoAre you just going around arguing with everyone in bad faith just because you are convinced of your position? I see you all over this thread just throwing out any reasons you can that it should be removed. It seems like you have your mind made up and are just here to evangelize, not discuss. Hacker News is for discussion and open-mindedness.
- ahmeneeroe-v2 1y agoIt's weird to me because I seem to be replying to people talking from a prescriptive position (ie "social security should care for the elderly"), while I am trying to force the conversation to a descriptive (ie here are the actual observed impacts of social security). I don't want to discuss should-statements, and I don't think that violates the spirit of HN.
- pdntspa 1y agoOne day you will be old and get to benefit from that wealth transfer
- ahmeneeroe-v2 1y agoLikely not. I don't think it will be solvent by that time.
- kube-system 1y agoOnly if politicians choose to intentionally make it so.
- ahmeneeroe-v2 1y agoThis isn't a political choice, but rather a demographic reality. Plus the usual corruption, etc.
- kube-system 1y agoThe tax rate itself is plainly a political choice. The demographic issues are a consequence of political choices, e.g. the way we prevent working age people from coming to this country to pay into the system. (and now, kick some of them out).. but also, the ways that choose not to enable families to comfortably have children.
- ahmeneeroe-v2 1y agoMass immigration has proven to be a net cost.
- kube-system 1y agoThat's quite a tall claim to be making about a country built on immigration. The greatest periods of economic growth in the US are correlated with immigration rates. I don't know what "proof" you have but remember that the economic impacts of demographic shifts are pretty broad, so I would suggest you validate that your source is taking that into account, and isn't intentionally biased for political reasons. The overwhelmingly predominant economic opinion is that immigration is very valuable in growing a country's wealth.
- kube-system 1y agoThe point of social security is not to prop up average wealth, but a guarantee to prop up the poorest individuals.
- ahmeneeroe-v2 1y agoIs that what it actually does today in the US?
- kube-system 1y agoYes, the poor and elderly in the US overwhelmingly rely on Social Security for their basic needs.
- ahmeneeroe-v2 1y agoUndoubtedly true. Is it only people who are (poor AND elderly) or are (elderly)?
- kube-system 1y agoThe fact that the income is guaranteed is an important part of being an effective safety net. Nets with holes in them don't work -- you don't want to create just another retirement plan that can fail and leave grandma homeless. Otherwise you're back to square one with the same problem. Boomers might have a bunch of wealth on paper when you count the value of their deferred-maintenance post-war home, and their 401k that is invested in a tech bubble -- but if their home burns down and the markets crash, even 'rich' boomers need a rent check on the first of the month. Not to mention, that means testing also places burdens on the poorest among us that can be insurmountable for some. A social safety net that doesn't catch these people is worthless, as it fails the entire point of having one instead of relying on private retirements.
- ahmeneeroe-v2 1y agoA social safety net that destroys the payors (younger generations) is worthless. Everything has a cost. The cost of social security outweighs the benefit.
- Analemma_ 1y agoIt's a textbook example of the classic political problem (and I don't just mean in democracies, every system is vulnerable to this) where subsidies and handouts are extremely sticky and almost impossible to get rid of, even when the underlying condition has changed and the original motivation for the subsidies no longer applies. Social Security made sense in a world where you had a 10:1 worker-to-dependent ratio and people rarely lived for very long after retirement. But right now it's exactly the opposite: the dependency ratio is cratering, people can live on SS for decades, and the Boomers are hugely rich while their grandchildren can't afford a house. We desperately need to completely invert Social Security and instead have massive wealth transfers from the old to the young. But that's politically quite impossible, so this perverse situation remains.
- ahmeneeroe-v2 1y agoTotally agree. Distributed costs, concentrated benefits.
- RhysU 1y ago> ...instead have massive wealth transfers from the old to the young... Free public schooling through 12th grade is one such transfer.
- SirFatty 1y agoExcept all the money taken from my check each and every payday. So yeah, wealth transfer...
- mindslight 1y agoWhile you're not wrong, focusing on social security instead of the massive bankster handouts for the past 40 years is fighting over scraps and really distracts from discussing the actual problem of monetary inflation driven wealth centralization. Nobody is getting rich from social security - it basically covers living expenses, if you're lucky. And the 15% income tax isn't responsible for destroying personal financial situations - rather it's the extreme asset inflation and corresponding rampant hyperfinancialization (eg ballooning rent, insurance) that have made so many people effectively poor.
- RickJWagner 1y agoSocial Security is a progressive tax. Workers with lower wages get a relatively larger portion compared to the workers that had a higher paycheck.
- neom 1y agoThis 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? Good reading: https://www.nobelprize.org/uploads/2018/06/modigliani-lecture.pdf https://www.nobelprize.org/uploads/2018/06/modigliani-lectur...
- BJones12 1y ago> What's to be done? I really ask: What's to be done about it? There's a document that gets posted every so often here called The Return Rate on Everything. In it, it says that the returns on capital outweigh economic growth, meaning capital gets more concentrated, at all times except during war. So the answer to your question would seem to be 'war'.
- neom 1y agoYou weren't kidding: https://hn.algolia.com/?q=The+Return+Rate+on+Everything https://hn.algolia.com/?q=The+Return+Rate+on+Everything I'd not seen it, thank you kindly for sharing. :)
- ahmeneeroe-v2 1y agoWow, how have I missed this. Intuitively makes sense since capital still can't fight wars, so "labor" commands a premium.
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- jleyank 1y agoEverybody 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.
- ahmeneeroe-v2 1y ago>without lowering the costs associated with being old Not exactly accurate. The costs of being old at the same QoL and for the same lifespan as a 65+ person in 1935 is probably cheaper than it's ever been. The problem is we're living much longer and our QoL is higher and "healthcare" to achieve that is stupendously expensive.
- jleyank 1y agoOther countries reduce the cost of meds or services for people above a certain age, or have age/income relatd tax benefits and payments. The us is the wealthiest country in the world, so doing so would have been a mere exercise of political will. Instead, pushing money to the top has been the goal.
- BobaFloutist 1y agoI mean, Medicare is pretty good.
- jleyank 1y agoI thought us Medicare is somewhat comparable to normal healthcare in the other g20 countries? Sufficient to show how others handle the problems and possible strengths and weaknesses. Never used it, not familiar with its details. Readers can comment.
- lapcat 1y agoThe 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.
- jt2190 1y agoI think that’s what the paper was trying to express: That the older cohort got more leverage from the increase in housing prices because they had more invested when prices shot up. > Summary and Concluding Remarks > The paper focuses on the slippage in the net worth ratio among households under age 35 relative to all households between 1983 and 2022 and its phenomenal rise among households aged 75 and over. Based on differential leverage between the two groups (the much higher debt- net worth ratio among younger families compared to older ones), we would have expected exactly the opposite – namely, that the net worth of younger households should have risen relative to older ones. Indeed, the average real rate of return on net worth of the youngest age group over years 1983-2022 was 5.67 percent while that of the oldest was 3.29 percent. What factors explain these seemingly perverse results? > The first is increasing net home equity for the elderly. The increase in the ratio of mean net home equity to the overall level over 1983- 2022 explains a substantial 38.3 percent of the relative gain in net worth of the 75 and over age group but very little for that of the youngest group. The second is surging mortgage debt among the youngest households. This explains 297 percent (.160/.054), of the actual decline in the group’s mean net worth ratio – that, is almost three times the actual decline. Its relative decline also accounts for a significant 35.2 percent of the increase in the oldest group’s mean net worth ratio. However, it should be stressed that these results are not additive across the various factors considered in the analysis > Third, the homeownership rate might well be close to a “smoking gun” for the oldest age group. It shoots up by 11.5 percentage points for this group, and the group’s relative wealth holdings expand by a sizeable 50.4 percent. Likewise, relative to the overall average homeownership rate, that of the oldest enlarges by 8.9 percentage points from 6.0 to 14.9 percent. The fourth is the fantastic growth in stock holdings among the oldest age group, which could constitute another smoking gun. The value of the group’s stock portfolio relative to the overall average skyrockets from 0.56 to 3.47, which accords with the sharp increase in its relative net worth, and accounts for a staggering 269 percent of its gain in net worth relative to the overall average. > Fifth, among the youngest age group, despite dire press reports, educational loans fail to appear as a significant factor. As a fraction of overall mean student debt, it actually fell from 2.45 in 2007 (the first date of available data) to 1.66 in 2022, so that the trend is contrary to that of the group’s relative net worth. Moreover, subtracting the change in the group’s mean educational debt over 2007- 2022 from its 2007 net worth ratio lowers the group’s mean net worth ratio by a rather trivial 0.006. 24 References Bricker, Jesse, Jacob Krimmel, Alice Henri
- eltondegeneres 1y agoThe 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.
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- kube-system 1y agoThat doesn't seem unreasonable to me. Any middle-class boomer who was planning to retire and paid off their mortgage can expect to be in the 7 digits of net worth. Net worth is a weird number for many people to interpret because it is pretty intangible -- most can't cash it out.
- darth_avocado 1y agoA lot of boomers are sitting on 7 figure homes that they refuse to downsize from that’s adding to their “net worth”. Most of these homes are in disrepair and need six figure upgrades before they are even up to code, but on paper they’re all millionaires.
- em500 1y agoNot sure what "a lower median net worth at the 99th percentile" means (median is net worth level at the 50th percentile), but 1 in 100 American households (not individuals) indeed have over $13 million net worth: https://fred.stlouisfed.org/series/WFRBL99T999309 https://fred.stlouisfed.org/series/WFRBL99T999309 This threshold has about doubled since 2010, which should not be too surprising as house prices more than doubled and the S&P500 increased six fold in the last 15 years.
- eltondegeneres 1y ago~"Minimum Wealth Cutoff for the 99th to 99.9th Wealth Percentiles" in that link reads to me as 1 in 1,000 households have a net worth over $13 million, not 1 in 100.~ edit: seems like I'm wrong
- throwaway22032 1y agoI 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).