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Why So Many Rich People Don’t Feel Very Rich

economix.blogs.nytimes.com

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Re: Why So Many Rich People Don’t Feel Very Rich

#61

Post by yummyfajitas »

narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

5. Become a top developer at a big software company.

(A variation on 3. You probably won't earn $100 million, but you could definitely earn $1 million. )

6. Become a top performer in entertainment (music, sports, movies).

A fun fact ignored by most people: it isn't just CEO pay that has skyrocketed over the years. Alex Rodrieguez gets $33 million/year, at his peak Babe Ruth got (inflation adjusted) $1.1 million.

Re: Why So Many Rich People Don’t Feel Very Rich

#62

Post by Alex3917 »

roc wrote: post #49
Alex3917 wrote: post #16

Earlier quoted context omitted.

"The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money." I think the real issue is that someone making 300,000 probably doesn't have much more disposable income than someone making 80,000. Whatever extra money they have is likely just going to a slightly nicer house, their IRA, dental insurance, a slightly better preschool for their kids…

> "someone making 300,000 probably doesn't have much more disposable income than someone making 80,000" I don't think that's borne out by the stats. As I recall fixed costs essentially flat-line as a percentage of income somewhere south of 200k, up until you reach the "don't look at prices anymore" brackets. Also, I note that it really doesn't take much more disposable income to add flashy consumption. Five thousand…

"So I'm wondering if we aren't having a disagreement on definitions."

I think it mostly depends on whether or not you have kids. Kids can basically eat up an unlimited amount of money.

Re: Why So Many Rich People Don’t Feel Very Rich

#63

Post by barrkel »

schammy wrote: post #59
jeremymims wrote: post #38

This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job w…

I know of no such bank offering interest rates even close to that. You're talking 2.5% - 5%. That's unheard of these days. At my current bank, $1M in a money market account would generate about $2,500/year, which is nothing short of insulting. Who are these fabled banks offering 10x the interest rate?

Indeed, (relatively) risk-free interest rates available for modest amounts of money currently do not exceed the rate of inflation; money in the bank is money declining in value.

Re: Why So Many Rich People Don’t Feel Very Rich

#64

Post by roc »

ugh wrote: post #53
roc wrote: post #42

Earlier quoted context omitted.

As you point out: while it wouldn't be prudent to go into politics for the direct money, the modern reality is that politics is a route to a staggering amount of future money. Not unlike paying vast sums to go to an Ivy League school; not because the education is so much better, but because future opportunities will be. In that light, I don't see a huge line between his decision to 'cash-out' at this particular point…

I like that angle. Four years as communications director of one of the most spectacular presidential campaigns of all times, two years as White House Press Secretary, that certainly opens a lot of doors (and should definitely land him a book deal). It’s certainly understandable that when you then feel burnt out after six years of stress the thought of leaving must be very attractive. It’s still a bit strange that Oba…

I've got to imagine he's adjusting expectations and trying to frame the conversation before the likely stories about how much Gibbs is going to make in the private sector.

After Peter Orszag's move to the private sector generated a non-trivial brouhaha, it'd be more surprising if he didn't.

Re: Why So Many Rich People Don’t Feel Very Rich

#65

Post by loumf »

narrator wrote: post #28

The reality of this phenomenon is that people who have done everything "perfectly" in their life and academic career feel a bit cheated when their income tops out in between 100k and 200k. They might be senior engineers or doctors or lawyers but they've hit this brick wall as far as income, sometimes in their 30s and yet there are all these people out there that make more than 10x or even 100x their annual income. No…

Major league athlete, regular on a TV show or star in movies, former press secretary/lobbyist, best-selling author, multi-hit-album singer/band, music mogul/producer, real-estate agent in an expensive area.

I bet there are 100s of jobs where the top salaries are over two million. There are very few who can get them, though.

Re: Why So Many Rich People Don’t Feel Very Rich

#66

Post by duke_sam »

Reminds me of the Chicago professor who was complaining about repealing the tax breaks for "rich" people[1] (his household income was in the 250k range). As a bunch of commentators pointed out he felt like he was just scraping by because he was attempting to live the life of someone earning 350k+ not the life of someone earning 150k+.

A growing trend is how quickly the income of those at the top is increasing relative to those at the bottom[2] and the disconnect this brings[3]. At what point does someone earning minimum wage stop and think "How exactly is someone working in a hedge fun worth tens of thousands of me in yearly salary alone?". Would they push for legislative solutions? Can you even use something as blunt as the tax code for this?

[1] His blog posts were taken down but you can see commentary: http://www.huffingtonpost.com/2010/09/21/todd-henderson-rich... http://www.theatlantic.com/national/archive/2010/09/in-defen... [2]http://www.forbes.com/2008/04/30/ceo-pay-historic-lead-bestb... - for reference $1 in 1989 is worth around $1.70 now so inflation does not account for a near 6x increase. [3]http://www.theatlantic.com/magazine/archive/2011/01/the-rise...

Re: Why So Many Rich People Don’t Feel Very Rich

#67

Post by barrkel »

roc wrote: post #49
Alex3917 wrote: post #16

Earlier quoted context omitted.

"The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money." I think the real issue is that someone making 300,000 probably doesn't have much more disposable income than someone making 80,000. Whatever extra money they have is likely just going to a slightly nicer house, their IRA, dental insurance, a slightly better preschool for their kids…

> "someone making 300,000 probably doesn't have much more disposable income than someone making 80,000" I don't think that's borne out by the stats. As I recall fixed costs essentially flat-line as a percentage of income somewhere south of 200k, up until you reach the "don't look at prices anymore" brackets. Also, I note that it really doesn't take much more disposable income to add flashy consumption. Five thousand…

I don't even make 80K USD, but living in the UK and thus with more vacation time (25 days), even I take at least 3 holidays abroad every year.

Re: Why So Many Rich People Don’t Feel Very Rich

#68

Post by artmageddon »

schammy wrote: post #59
jeremymims wrote: post #38

This article wonders why the rich are getting richer and the answer is compound interest. Having $1 million in the bank will reliably generate between $25k and $50k per year. Having $2 million in the bank will reliably generate between $50k and $100k per year. Having $3 million in the bank will reliably generate between $100k and $150k per year. So someone with $3 million in savings and still working their 200k job w…

I know of no such bank offering interest rates even close to that. You're talking 2.5% - 5%. That's unheard of these days. At my current bank, $1M in a money market account would generate about $2,500/year, which is nothing short of insulting. Who are these fabled banks offering 10x the interest rate?

Before the subprime crash in 2007, interest rates were well in that range. I had an ING savings account(regular savings account, not a CD) with a rate that was earning me $7 per day, as opposed to now in which I get maybe $2 per month.

Re: Why So Many Rich People Don’t Feel Very Rich

#69

Post by d2viant »

colanderman wrote: post #57
AlexC04 wrote: post #4

Perhaps it's because the definition of "rich" that they would need to feel is one where they'd never have to work again if they didn't want to. The article points out an annual income of $172,000 as being rich, but by implication, these people still have to work for their money. Therefore probably don't feel "rich" If they could maintain that income or even half that income in perpetuity without working. If they coul…

If I had one year of $172,000 income, I could bank it and live off the interest for the rest of my life. People who make that much and don't feel "rich" feel so because somehow they incur $172,000 in expenses every year. I'm a tutor and often work with kids of rich families, and it astounds me what their parents spend money on (think private jets and race cars). Actually, I work with kids of poor families as well, an…

Maybe, but probably not comfortably. After taxes, that 172K will be about 120K. Even if you were to somehow make 8% interest on your money for the rest of your life, that's still only $800 a month.

Re: Why So Many Rich People Don’t Feel Very Rich

#70

Post by skittles »

My idea of being rich is when you don't have to work to maintain your lifestyle (as long as you are happy with that lifestyle--being a miserable homeless person doesn't count). The problem with a majority of high-earners is that they have too many on-going expenses that force them to keep working.
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