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The wealth gap between young and old people

washingtonpost.com

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Re: The wealth gap between young and old people

#11

Post by 11thEarlOfMar »

A couple of factors that play into this over the last 100 years: The prevalence of credit cards that increase the amount of depreciating goods young people can buy, and the long-term power of 401(k) investing.

Expanded consumer credit, and it's appurtenant high interest rate cost, would tend to keep young people less wealthy towards the last half of last century. As credit card debt skyrocketed, savings rates plummeted from almost 11% in 1982, to 1.5% in 2007 [0].

Similarly, the power of 401(k) investing is really only coming into it's own in the last decade or so, since 401(k) accounts have had 30 years to mature, total retirement assets now total well over $3 Trillion nationally.[1]

[0] http://www.americanhistoryusa.com/give-me-liberty-or-give-me...

[1] http://www.nber.org/bah/fall02/changingCharacter.html

Re: The wealth gap between young and old people

#12

Post by toomuchtodo »

11thEarlOfMar wrote: post #11

A couple of factors that play into this over the last 100 years: The prevalence of credit cards that increase the amount of depreciating goods young people can buy, and the long-term power of 401(k) investing. Expanded consumer credit, and it's appurtenant high interest rate cost, would tend to keep young people less wealthy towards the last half of last century. As credit card debt skyrocketed, savings rates plummet…

Don't forget wage stagnation over the last 40 years and the increased cost in college education (funded, yet again, by cheap credit backed by the federal government).

Re: The wealth gap between young and old people

#13

Post by toomuchtodo »

jtzhou wrote: post #7
carsongross wrote: post #2

There is a huge generational disconnect between the boomer-driven media and political establishments and the X'ers and millenials. My prediction/hope is that the stereotype of millenials as relatively happy socialites will end up reversing, with them falling in with us burn-it-to-the-ground X'ers once they are old enough to realize how screwed they are.

True, but there is definitely a lot of staying power in those currently of retirement age, kicking the can down the road, with a growing proportion of the population over age 65 (20% in 2020 versus 9% in 1970) receiving the benefits of Social Security and Medicare which are largely unfunded. There will have to be a number of cut-backs in retirement benefits for future retirees, including means-testing, removing the m…

> removing the maximum wage for Social Security contributions, and higher Medicare premiums.

Ahh! So the question is, at what point will Millenials (myself included, at the older end of the spectrum at 32) say "f* it" when we're paying Europe-level taxes with third world country benefits

* Single-payer Medicare for retires, expensive private insurance for everyone else

* Social security essentially becomes a basic income for retirees, as its not an account that can be depleted but an entitlement until death, supported by younger workers with terrible job prospects and long hours at low pay

Maybe the problem is that no one saves enough anymore, but that's because no one makes enough to save because most new income/wealth is kept by the very top wealth bracket.

Re: The wealth gap between young and old people

#14

Post by mjevans »

stephengillie wrote: post #4
MajorLOL wrote: post #3

>If you’re over 62, your odds of having at least $1 million in net wealth (your total assets minus your total debt) are relatively achievable -- about 1 in 7. But if you are under 40, your odds are low: 1 in 55. So the older you are the more time you have had to grow wealth. The younger you are the less time you have had. This is then forcibly tied into median family income? this is huffington post tier article.

> Young people (generally defined here as those under 40) What is with the media and this strange concept of "young people" now being the 28-40 age bracket? Back in my day, "young people" meant 8-18 year olds. This isn't the only article making this bizarre wordplay. One of the previous USDS "submarine" articles referred to "young people" on a team as the members who were over 28.

Clearly they are talking about 'the workforce' as 'people'. 'kids' are not considered anything but a cost center in their equation.

Re: The wealth gap between young and old people

#15

Post by thirdtruck »

carsongross wrote: post #2

There is a huge generational disconnect between the boomer-driven media and political establishments and the X'ers and millenials. My prediction/hope is that the stereotype of millenials as relatively happy socialites will end up reversing, with them falling in with us burn-it-to-the-ground X'ers once they are old enough to realize how screwed they are.

Speaking as an older Millenial (by some measures), I'm fairly confident that "relatively happy socialites" has never been more than just a self-justifying projection by older generations.

Perhaps our poor situation is just so obvious that, instead of mostly complaining, we're mostly fully resigned or preoccupied with fixing things in our own way. We are more Hero generation than Nomad, after all (https://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generatio...).

Re: The wealth gap between young and old people

#16

Post by jandrewrogers »

jtzhou wrote: post #7
carsongross wrote: post #2

There is a huge generational disconnect between the boomer-driven media and political establishments and the X'ers and millenials. My prediction/hope is that the stereotype of millenials as relatively happy socialites will end up reversing, with them falling in with us burn-it-to-the-ground X'ers once they are old enough to realize how screwed they are.

True, but there is definitely a lot of staying power in those currently of retirement age, kicking the can down the road, with a growing proportion of the population over age 65 (20% in 2020 versus 9% in 1970) receiving the benefits of Social Security and Medicare which are largely unfunded. There will have to be a number of cut-backs in retirement benefits for future retirees, including means-testing, removing the m…

The reason there is a maximum on Social Security contributions and no means testing is that it is strongly marketed politically as a universal retirement account. Many of the system's characteristic are designed to ensure this perception. You receive Social Security roughly proportional to your contribution. This positioning is very important to the political support because there is the pretense of having earned it.

If you remove the cap on contribution and/or means test the receipt then that pretense is gone. Politically, it becomes explicitly a welfare system for people that did not save for retirement and penalizes those that do save. Once Social Security is perceived as "unearned" it becomes an acceptable target for reduction or elimination to the population at large.

Social Security is in fact a welfare tax and no one is entitled to receive it (see: https://en.wikipedia.org/wiki/Flemming_v._Nestor) but its political viability is dependent on the popular perception to the contrary.

Re: The wealth gap between young and old people

#17

Post by andyv »

ForHackernews wrote: post #8
jtzhou wrote: post #7

Earlier quoted context omitted.

True, but there is definitely a lot of staying power in those currently of retirement age, kicking the can down the road, with a growing proportion of the population over age 65 (20% in 2020 versus 9% in 1970) receiving the benefits of Social Security and Medicare which are largely unfunded. There will have to be a number of cut-backs in retirement benefits for future retirees, including means-testing, removing the m…

> removing the maximum wage for Social Security contributions This sounds like a great idea to me. It's absurd that only the first $118,500 of earnings are subject to to social security tax, and it means that our tax structure is much less progressive than it appears at first glance (which is one reason certain people strenuously avoid talking about any taxes except Federal Income Taxes).

The social security tax is capped because the benefits are also capped. Billionaires don't need $100k/month in SS benefits.

Re: The wealth gap between young and old people

#18

Post by twoodfin »

ForHackernews wrote: post #8
jtzhou wrote: post #7

Earlier quoted context omitted.

True, but there is definitely a lot of staying power in those currently of retirement age, kicking the can down the road, with a growing proportion of the population over age 65 (20% in 2020 versus 9% in 1970) receiving the benefits of Social Security and Medicare which are largely unfunded. There will have to be a number of cut-backs in retirement benefits for future retirees, including means-testing, removing the m…

> removing the maximum wage for Social Security contributions This sounds like a great idea to me. It's absurd that only the first $118,500 of earnings are subject to to social security tax, and it means that our tax structure is much less progressive than it appears at first glance (which is one reason certain people strenuously avoid talking about any taxes except Federal Income Taxes).

It's not absurd: Social Security's benefits formula has significant "bend points" that make it an increasingly bad "investment" for higher income workers. Eliminating the wage cap would remove any remaining fig leaf covering its essentially redistributive nature: High income workers would have to live to 140 to get back what they "paid in" even without interest.

Re: The wealth gap between young and old people

#19

Post by dragonwriter »

jandrewrogers wrote: post #16
jtzhou wrote: post #7

Earlier quoted context omitted.

True, but there is definitely a lot of staying power in those currently of retirement age, kicking the can down the road, with a growing proportion of the population over age 65 (20% in 2020 versus 9% in 1970) receiving the benefits of Social Security and Medicare which are largely unfunded. There will have to be a number of cut-backs in retirement benefits for future retirees, including means-testing, removing the m…

The reason there is a maximum on Social Security contributions and no means testing is that it is strongly marketed politically as a universal retirement account. Many of the system's characteristic are designed to ensure this perception. You receive Social Security roughly proportional to your contribution. This positioning is very important to the political support because there is the pretense of having earned it.…

> You receive Social Security roughly proportional to your contribution.

Well, its a monotonically increasing function of your contributions, but its not proportional to them, because of the bend points.

> If you remove the cap on contribution and/or means test the receipt then that pretense is gone.

Means testing might arguably do that in theory (except that it empirically doesn't in practice, as SS is, in fact, already means-tested via the rules for taxability), but how does removing the contribution cap so long as further contributions above the old cap still contribute to the benefit calculation?

Re: The wealth gap between young and old people

#20

Post by jmulho »

ForHackernews wrote: post #8
jtzhou wrote: post #7

Earlier quoted context omitted.

True, but there is definitely a lot of staying power in those currently of retirement age, kicking the can down the road, with a growing proportion of the population over age 65 (20% in 2020 versus 9% in 1970) receiving the benefits of Social Security and Medicare which are largely unfunded. There will have to be a number of cut-backs in retirement benefits for future retirees, including means-testing, removing the m…

> removing the maximum wage for Social Security contributions This sounds like a great idea to me. It's absurd that only the first $118,500 of earnings are subject to to social security tax, and it means that our tax structure is much less progressive than it appears at first glance (which is one reason certain people strenuously avoid talking about any taxes except Federal Income Taxes).

The goal of the tax is not redistribution of wealth. The goal is to fund the benefits. The tax is capped because the benefits are capped.
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