As a reminder, the median is the point where half the families are above and half below.
The median is where you add up all the net worths, and then divide by the number of families. These mean values are higher than the median values because the distribution is not normal. It is skewed to the right by the minority of families that have very high net worths.
The scariest thing I see in this data is that median net worths are very low for the baby boomers that are likely thinking to retire. For their sake I hope Social Security will stay solvent, otherwise they will likely be working until their final days.
Beware these calculators and use at your own risk. They may cause you to become despondent...
CNN Retirement Planner
AARP Retirement Calculator
Census Table
23 comments:
The thing about net worth figures is that there is not a lot to which they are relevant. Their homes, are the biggest asset for most people, and what impact do their fluctuations in value have on anyone? Such fluctuations don't matter much if you aren't selling your home, or seeking financing. And what you find, and what people are learning now, is that when people are forced to sell their homes, as is happening now, they turn out to be a whole lot less valuable than previously thought.
--Hiram
So why are homes the majority of many family's net worth? A significant lack of self control or a lack of income?
Both companies I have worked for have consistently and continually promoted that employee's should contribute to their 401K, and they even matched the first 6%. And yet many employees still weren't saving...
Maybe they were busy making house payments on that really nice home instead of diversifying their portfolio?
I do see your point, and it's clear in the chart that there's a problem, but handwringing about net worth is what they call on Twitter a #Firstworldproblem.
Families like yours and mine can play the long game and relatively painlessly save a decent % of our paychecks. But if you were raising your girls on your own on $13/hour, trying to sock away a little for their college or pay off medical debt from you kid's appendectomy--would you really be able to spare those sheckles in the interest of your net worth?
I think we all have the tendancy to project our circumstances on society at large. Yeah, if people with six figure incomes are consistently spending more than they make and not saving, it's probably a matter of making short-sighted and selfish decisions. I will be first in line for the fingerwagging.
But for many people the decision is between your health insurance and your 401k and your kid's braces. As always, I'm disinclined to be judgy and more likely to ask how we can begin to fix it on a macro level (national health care, adjusting Social Security) rather than expecting people to spin their salary straw into retirement silk.
--Annie
Definitely 2 ways to look at the problem. Overall I am a believer that if you get the small stuff right, the big stuff will work itself out.
And I not trying to be judgy, anymore than when Liberals seem to want to make the rich responsible for the plight of the poor.... Which of course makes no sense.
I remember the story of a Mgr that was ecstatic every time one of his employees went and bought a new truck. He knew that on their income they would need to stay at the company and do whatever he asked. Now what if they had bought a cheaper used vehicle and put the rest in that 401K.
By the way, speaking of relating things to ourself. I was 35 when I got my first new car. I started my 401k when I was ~23... It was very frustrating at the time, but I am very happy now.
So why are homes the majority of many family's net worth?
That's just a choice people make. But the situation isn't that different when you look at maybe the other big investment people have, their 401k. If you aren't looking to withdraw money any time soon, market fluctuations just shouldn't matter that much. But if for some reason, you do have to withdraw money early, it will very often be the case that the reason you have to cash in, are reasons that are driving the value of those investments down.
"I think we all have the tendancy to project our circumstances on society at large."
I do that a lot and quite intentionally so. What society at large does is simply the aggregate of what individuals do. And if individuals find it in their interest to do one thing, it is unreasonable to think the aggregate will do anything differently. In the Wall Street Journal this morning noting critically that we have a very low savings rate in this country. Well in this country we have a slow economy, savings have a very low interest rate, and people are burdened with debt. In these circumstances, it makes sense to use any extra cash to pay down higher interest debt, than put it into lower interest savings. Since it's good on a micro level not to save, how can we reasonably expect people to save, act against their interest, on a macro level?
But there is a paradox of thrift here. What's good on a micro level, paying down debt, is hurting us on a macro level since lowers demand unacceptably.
--Hiram
The problem with your theory is that our savings rate was abysmal even in good times. Instead of saving for rainy days, the majority of us were apparently living for the now...
On the upside, my family has been single handedly trying to help us spend our way out of this down cycle... Thank God the garage door, retaining walls, patio, kitchen, insulation, etc is done !!!!
OH NO !!!! How many days until Christmas!!!! Here we go again !!!
"The problem with your theory is that our savings rate was abysmal even in good times."
Well, we aren't in good times now, and are not likely to be in the foreseeable future. Doctrinaire Keynesian that I am, when the economy is strong, I do think it's good to save, to slow things down a bit, to save for a rainy day. But the rainy day is here now, and although it would have made sense to fix the roof when times were good, it's essential that we fix the roof now.
The irony is that if you do have money, this is a great time to be a buyer of stuff. Prices are low, financing if you can get it is cheap. Viewed more broadly and historically, lots of great businesses were either started, or established the basis of future prosperity during hard times. The foundation of America as a modern technological country was laid during the Great Depression.
--Hiram
--Hiram
There was a fascinating op-ed piece in the Wall Street Journal yesterday about inflation and chastising Obama about his seeming lack of concern about rising food and energy prices. Inflation is blipping up, due almost entirely to increasing food and energy prices. I was amused by this. In this severe recession, how in the name of David Ricardo, can the Obama or the Fed crack down on prices in those areas without slowing our already too slow economy even more? People are paying more at the grocery store, but what is of more concern to them? The fact that coffee is now ten bucks a can? Or that their job is in jeopardy?
--Hiram
More people would save and delay gratification if a) government tax policy quit punishing savings and b) the existence (and promotion of) government entitlements didn't convince people they didn't need to save.
Imagine if we had a FAIR tax. Social Security would be phased out over the next 40 years, with nobody losing anything. Everybody would get a 7% bump in pay, which they could invest completely tax free until withdrawn and spent. (Every investment a tax-free IRA) capital gains and the estate tax would disappear, so people would feel free to build businesses and create an "estate" that government wouldn't eat away at.
The other nice thing about the FAIR tax is that we get past this nasty class envy/hatred thing of the last few posts. People who live beyond their means, with conspicuous consumption, are going to pay the FAIR taxes, while the ordinary rich fellow who has all his income re-invested in his business or saved for a rainy day or retirement, living like you and I, is not and does not look like an "evil rich person" and doesn't incur the punishing taxes. We don't hate the rich because they're rich, but because of their lavish lifestyles. That's what the FAIR tax "punishes."
J. Ewing
More people would save and delay gratification if a) government tax policy quit punishing savings and b) the existence (and promotion of) government entitlements didn't convince people they didn't need to save.
Doubtful. There are incredibly beneficial saving programs, IRA's and 401k's that go unused. And in these difficult times it simply doesn't make sense to save, particularly when people are dealing with credit card debt.
A FAIR tax, a 30% sales tax on everything, doesn't seem a good idea when we have an economic crisis in which lack of demand is the critical problem.
Republicans believe we live in a class based society, strangely enough, and that any measure which tends to undermine those distinctions is a form of class warfare, not a very pleasant world view, in my opinion. I don't think the rich are waging war on me, and I don't think the rich would be well served in thinking I am waging war on them. In neither direction, is that a very useful way of thinking.
As for envy the rich, am I the only one who looks at the lifestyle of the Kim Kardashian's of the world and sees nothing worth envying? Isn't this notion that there is widespread rich envy out there, one of the silliest notions ever?
--Hiram
My thought is that tax policy has little to do with our income and savings problem. It seems to me that the problem will get worse as long as we, as a whole, continue to demand the least expensive products and services, no matter the consequences.
The upside is that it is good for many developing countries. I mean we keep searching for people that will do good work for less money. That's what us American consumers demand.
(side note: I had a Professor who visited SE Asia. He went with an initial belief that the "child/low income labor" shops were terrible. Once there he grew to understand that the alternatives were much worse. (ie sell the extra mouths as slaves or into the sex trade) He quickly reversed his position and started to belive that good manufacturing jobs were helping those communitees.
I mean wages double in China... We had better start moving some work to Vietnam... No one wants their tennis shoes to cost more...
And as those jobs flow, we are left with more and more really low end jobs. Or do we really think the cashier at Target should earn $20/hr.
Hiram, I think you are confusing celebrity and wealth. Most days I like my job, but I think I could be happy being wealthy and anonymous...
Along those lines, who else hopes that Jesse Ventura moves to Mexico and stays there forever... Jesse
'I think you are confusing celebrity and wealth."
Republicans seem to confuse wealth with adequate health care.
--Hiram
And leftists seem to equate health INSURANCE paid for by somebody else as having health care. Recent surveys show that about 50% of doctors will retire, quit, or not accept government insurance if Obamacare is implemented.
J. Ewing
I find that funny since a lot of their funding currently comes from Government sources.
Please comment with the source of this information. Thanks.
"Recent surveys show that about 50% of doctors will retire, quit, or not accept government insurance if Obamacare is implemented."
As much as anything, this explains why health care in America is so awful. Doctors simply don't care about their patients, and are in it only for the money.
--Hiram
Please comment with the source of this information.
I am referring here to Medicaid and Medicare. And to some extent, the conductibility of health insurance to business, and the myriad of ways we fund health care, and health care research.
--Hiram
"… A lot of their funding comes from government…"
That's not true. The big problem with Medicare and Medicaid is that payments from these programs barely cover the cost of treating these patients. Right now, we have more and more doctors simply refusing to take on Medicaid patients, and a number of doctors who will not accept Medicare patients without a previous doctor-patient relationship – that is, if you turn 65 while in their care, they will continue to treat you. Even at that, you can expect the quality of care to go down because Medicare simply will not pay for anything better. It's pretty easy to understand that if Obamacare goes into full effect with more patients on Medicaid, reduced payments for Medicare and increased paperwork and micromanagement for everybody, doctors won't just voluntarily give up the practice but be forced out of business.
J. Ewing
J, Still waiting for that source...
not my habit to do your research for you, and this is not necessarily a primary source, but:
http://www.humanevents.com/article.php?id=45252
All of this could as easily be deduced from simple logic and an understanding of the law of unintended consequences.
I wouldn't think that backing up your statements is doing the research for me. I must say that they are interesting sources and articles, though it seems bias may be an issue.
Apparently HumanEvents.com is the Right's version of MotherJones.com. And Physician's Foundation got its start suing managed care insurance companies that were trying to control costs.
Human Events Obamacare's Consequence
Human Events About
Physician's Foundation Survey
Physician Foundation About
I can't argue that some Doctor's may quit, but I don't think it would be anywhere near as severe as these folks would lead us to believe. In fact, there may be another unintended consequence. It may filter out some Doctors that are just in for the money, and give us more Doctors that are truly patient focused...
Very well, let us assume for the moment that the estimates of 40% fewer doctors are completely wrong, and that we will only lose 10%. (I am even willing to specify that these are those doctors "only in it for the money," not that it will matter.) So how do we expect to treat another 45 million people now being insured under Obamacare, with 10% fewer doctors than we now have? It would seem Obamacare is a poor solution, regardless of the detailed reasons why it might be so.
"and give us more Doctors that are truly patient focused..."
That is an interesting speculation, but entirely wrong. One of the reasons doctors might leave the profession is because Obamacare will interfere more with the patient focus and the doctor-patient relationship than now exists in government-run healthcare and vastly more than the system of private insurance which it will inevitably drive out of existence. It simply must be so; it is the nature of the beast.
I would like to tie this back to the original topic, but I seem to have forgotten what it was. :-)
J. Ewing
Original topic...
What the reader's thought as to why so many people have such a very low net worth?
Look's like they will be working for a long time.
One would think that low net worth would be a symptom of over-consumption and underinvestment, as simple as that. Now low income over a lifetime, which is far less common than low income for a PART of a lifetime, would be one reason-- call it "living from hand to mouth." The other would be living beyond one's means and "not saving for a rainy day" or "your golden years."
I don't think anybody can tell you how much money you need to be happy, but there are all kinds of retirement planners out there telling you how much you need based on your own expected lifestyle. Like somebody said, "scary." So, why don't people do it? First, government double-taxes savings and investment, discouraging it. Two, our government tells us that Social Security is our "investment" for retirement. We're covered, right? And, of course, our society encourages consumption and high living, never mind tomorrow.
J. Ewing
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