Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 11-28-2012, 05:45 AM   #21
Thinks s/he gets paid by the post
 
Join Date: Jan 2005
Posts: 2,554
Quote:
Originally Posted by obgyn65 View Post
Thanks for posting. I found the article very interesting.
+1
__________________

__________________
Dreamer is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 11-28-2012, 06:31 AM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,634
Here is the graph for those who need it:
Attached Images
File Type: jpg MedianWealth.JPG (91.2 KB, 73 views)
__________________

__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 11-28-2012, 06:43 AM   #23
Full time employment: Posting here.
 
Join Date: Dec 2010
Posts: 572
While politicians keep saying that the top 2% have to pay more in taxes just to be fair, it does not appear from this article, $200000/yr income for an individual or $250000 for a family cited by them are anywhere close the top 2 %. According to Table 4, a household income of $317200/yr in 2009 put one at the top 5%, and $164000/yr put one at the top 10%. The cut off figure for top 2% income earners has always been dubious.
__________________
bondi688 is offline   Reply With Quote
Old 11-28-2012, 07:07 AM   #24
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,408
The author of the study applies his own definition of wealth. For some parts of the analysis it does not include the either the equity value of the primary residence or the future value of social security.

The way it is presented makes it difficult to follow. Maybe someone here will give us a thorough review.
Quote:
I also use a more restricted concept of wealth, which I call "non-home wealth." This is defined as net worth minus net equity in owner-occupied housing (the primary residence only). Non-home wealth is a more liquid concept than marketable wealth, since one's home is difficult to convert into cash in the short term. Moreover, primary homes also serve a consumption purpose besides acting as a store of value. Non-home wealth thus reflects the resources that may be immediately available for consumption expenditure or various forms of investments.
Quote:
Also excluded is the value of future social security benefits the family may receive upon retirement (usually referred to as "social security wealth"), as well as the value of retirement benefits from private pension plans ("pension wealth"). Even though these funds are a source of future income to families, they are not in their direct control and cannot be marketed.
__________________
MichaelB is offline   Reply With Quote
Old 11-28-2012, 09:06 AM   #25
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,835
Quote:
Originally Posted by MichaelB View Post
The author of the study applies his own definition of wealth. For some parts of the analysis it does not include the either the equity value of the primary residence or the future value of social security.

The way it is presented makes it difficult to follow. Maybe someone here will give us a thorough review.
As long as the author is clear in the definitions I don't have a problem with that. One good thing about the financial crisis is that it highligthed systemic problems in the economy: income disparity, the cost of health care, education and the reduction in retirement benefits with the change over from non-contributory pension plans to 401ks have all contributed to the falling networth of the middle and working class. The paradox of individual thrift and consumer driven growth is also important.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 11-28-2012, 09:26 AM   #26
Thinks s/he gets paid by the post
target2019's Avatar
 
Join Date: Dec 2008
Posts: 3,705
As michaelb points out, there are problems with the data. Where the brackets begin and end are not aligned with current tax brackets. And those brackets changed during the last two decades.
__________________
target2019 is offline   Reply With Quote
Old 11-28-2012, 09:43 AM   #27
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,608
I think there may be a problem with the data used for this "study" The median income cited is 26K, but many other sources have the median income in the US in the 40's. This is a huge disparity and makes me concerned that either incorrect data was used to make these conclusions, or the data has been misinterpreted to make more eye-catching claims in the interest of greater circulation. Nothing in the study indicates they used some novel way to calculate which would account for the differences. Knowing that this key figure is off by a large amount makes me suspect other figures may be similarly ungrounded.
__________________
growing_older is offline   Reply With Quote
Old 11-28-2012, 10:09 AM   #28
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,408
I'm not saying there are problems with the data. The sources are legitimate:
Quote:
Three other data sources are used in the study. The first of these is the 1962 Survey of Financial Characteristics of Consumers (SFCC).
./.
The second is the so-called 1969 MESP database, a synthetic dataset constructed from income tax returns and information provided in the 1970 Census of Population.
./.
The third dataset is the Panel Study of Income Dynamics (PSID), which spans the years from 1984 to 2007.
__________________
MichaelB is offline   Reply With Quote
Old 11-28-2012, 10:14 AM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,399
I just looked at the table and what jumped out at me was the decline in median and mean net worth from 2007 to 2010. I wonder if a lot of that decline is due to people panicking and bailing on equities in 2008 and being in "safe" investments and missing the 2009-2012 rally.

I know at least one person who did this and suspect a couple others based on random comments I have heard, all despite widely disseminated advice for people to stay the course and stick to their AA. In fact, I can see in hindsight that I missed an opportunity to make out like a bandit by not having the courage to sell bonds and buy equities in 2008 when my AA was screaming at me to do so.
__________________
pb4uski is online now   Reply With Quote
Old 11-28-2012, 10:28 AM   #30
Thinks s/he gets paid by the post
 
Join Date: Nov 2011
Posts: 2,356
IMO inflation is largely responsible for the average increasing while the median does not. I'm wondering if a balloon can be a useful analogy.

Imagine a balloon that represents the total wealth of all citizens. Paint one half of the balloon red and the other black. Half the citizens are in the red (below median wealth), and half are in the black (above mediam wealth). As years pass inflate the balloon. Since the balloon is now larger, everyone's average wealth is higher, but the median remains unchanged with half the citizens still in the red and half in the black.
__________________
GrayHare is online now   Reply With Quote
Old 11-28-2012, 10:33 AM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by pb4uski View Post
I just looked at the table and what jumped out at me was the decline in median and mean net worth from 2007 to 2010. I wonder if a lot of that decline is due to people panicking and bailing on equities in 2008 and being in "safe" investments and missing the 2009-2012 rally.

I know at least one person who did this and suspect a couple others based on random comments I have heard, all despite widely disseminated advice for people to stay the course and stick to their AA. In fact, I can see in hindsight that I missed an opportunity to make out like a bandit by not having the courage to sell bonds and buy equities in 2008 when my AA was screaming at me to do so.
Could be, but housing is/was the far more important asset class for the average Merkin, so I would guess the plunge in home values accounted for most of it.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 11-28-2012, 11:02 AM   #32
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,258
Quote:
Originally Posted by target2019 View Post
... I drive through some of the most depressed areas in Philadelphia a couple of times each month. There is no way out for people born into those environments which have been declining for more than 50 years.
Quote:
Originally Posted by JPatrick View Post
I take issue with the "no way out" comment. ...
Quote:
Originally Posted by brewer12345 View Post
Is it impossible? Clearly not. There are no legal barriers and there are always outlier-type people. ...
I really have a problem with this 'no way out' comment.

I personally know a couple people who risked life and limb to escape from occupied countries. If evading armed guards, hiking over the Alps with no supplies, digging up root crops from farm fields as you go to avoid starvation, risking arrest on the way, which meant return and probably torture and death - or sailing a home-made boat from Cambodia and making your way to the US and making it to an engineering grade at a MegaCorp is possible, then certainly leaving a 'disadvantaged' area in the US is achievable.

Or, as the Eagles sing: "So often times it happens that we live our lives in chains, And we never even know we have the key".

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 11-28-2012, 11:13 AM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by ERD50 View Post
I really have a problem with this 'no way out' comment.

I personally know a couple people who risked life and limb to escape from occupied countries. If evading armed guards, hiking over the Alps with no supplies, digging up root crops from farm fields as you go to avoid starvation, risking arrest on the way, which meant return and probably torture and death - or sailing a home-made boat from Cambodia and making your way to the US and making it to an engineering grade at a MegaCorp is possible, then certainly leaving a 'disadvantaged' area in the US is achievable.

Or, as the Eagles sing: "So often times it happens that we live our lives in chains, And we never even know we have the key".

-ERD50
Did you miss the word "outlier?" Yep there are millionaire boat people, but Pol Pot still killed millions of Cambodians.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 11-28-2012, 11:14 AM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,399
Quote:
Originally Posted by brewer12345 View Post
Could be, but housing is/was the far more important asset class for the average Merkin, so I would guess the plunge in home values accounted for most of it.
I was thinking that initially as well, but then I noticed that non-home wealth had precipitous declines as well, so I suspect it is a combination of both.
__________________
pb4uski is online now   Reply With Quote
Old 11-28-2012, 11:15 AM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,258
I haven't churned through all the data, but whenever I see these 'income disparity' articles, I wonder if the right thing is being measured.

I guess I'd be more interested in some kind of measure of "Quality of Life" or "Standard of Living" for each group. If the Standard of Living is increasing for the lowest, then I'm not that concerned about the rest. I don't know if that's the case, but I don't think 'disparity' numbers tell us anything about that.

And to the extent that some of this is due to jobs going oversees to third-world countries - aren't we reducing the 'global disparity of income'? Maybe that is more important, if we are all 'brothers and sisters'?

And certainly a group of low income people don't have the resources to set up manufacturing, import and sales to provide jobs to third world people. That takes wealthy people with resources.

I'm not saying that is the case, I don't have the data to prove one way or the other - I'm just raising the questions.

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 11-28-2012, 11:22 AM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,258
Quote:
Originally Posted by brewer12345 View Post
Did you miss the word "outlier?" Yep there are millionaire boat people, but Pol Pot still killed millions of Cambodians.
I caught that, but the OP said "no way out" - that is what I was responding to.

Being near Chicago, we get the reports almost daily of the shootings and deaths, mainly concentrated in certain areas of the city. Sometimes you see what appears to be an intelligent, well spoken, caring family member in front of the camera, crying about another senseless loss in their family or neighborhood. It's heartbreaking.

I always wonder - there is shooting in your neighborhood everyday - why don't you move? I'm not naive, I know it's not easy to pick up and move - but compared to living among gunshots, in an area with little hope of getting a job, or an education?

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 11-28-2012, 11:48 AM   #37
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,835
Looking at the size of financial accounts is only part of the story as the fall in median networth isn't just because of stock values. The fundamental reasons are the stagnation of wages and increase in costs associated with college, medical insurance etc.

IMHO the greatest loss of networth suffered by the middle class in the last 30 years came from the move away form non-contributory DB plans to the largely employee funded 401k type plans. Couple that with wage stagnation and it's hardly surprising that the average American feels squeezed.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 11-28-2012, 12:24 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,258
Quote:
Originally Posted by nun View Post
IMHO the greatest loss of networth suffered by the middle class in the last 30 years came from the move away form non-contributory DB plans to the largely employee funded 401k type plans.
How does that work? It seems that these various studies include a 401K balance as part of 'net worth', but rarely include the present value of a future pension income stream (a 'phantom asset').

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 11-28-2012, 12:49 PM   #39
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,835
Quote:
Originally Posted by ERD50

How does that work? It seems that these various studies include a 401K balance as part of 'net worth', but rarely include the present value of a future pension income stream (a 'phantom asset').

-ERD50
My point that the replacement of non contributory DB plans by 401ks has greatly reduced the actual net worth of the middle class as most 401k balances are worth far less the the DB plans they replaced and they are also funded mostly by the employee. If DB plans were not included in the net worth figures and they were more common 30 years ago the fall in real net worth is even worse.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 11-28-2012, 01:12 PM   #40
Thinks s/he gets paid by the post
imoldernu's Avatar
 
Join Date: Jul 2012
Location: Peru
Posts: 4,616
I posted the article, as I thought it was timely, given the the current level of interest in the economy, and particularly the fiscal cliff. As all sides turn up the heat, much of the back and forth has been reduced to talking points, leaving many Americans confused and likely to follow whatever party, or news broadcast, or leader that has obtained their confidence.

Admittedly, the numbers, from whatever source, can be confusing, and I'm not sure that the article shed a spotlight on the answers. For those who might be interested in things like "What does it take to make it into the top 1%... or 2, or 5 or 10 or 20 percent... Here's a challenging article that tries to explain that...
How Much Money Does It Take To Be In The Top 1% of Wealth and Net Worth in the United States

As I struggled with the Wolff study, one thing came through to me... the part about the effect on the economy as a whole that comes from the consumption base of the middle class. The middle three quintiles.

Although the sourced base of the study necessarily came from existing data that does not include the past two years, even a moderate increase would not begin to provide a floor for the the 3 to 5% growth rate needed for a strong recovery.

As I watch the people in the media trying to frame the political picture, it looks to me as if the answer has to be a return of the lost wealth to the middle class... I cannot see any way in which investment in business can, by itself, create jobs or increased profits, without a consumer base to buy product or services.

The way this takes place 'or not' ...(getting more spending money into the hands of the buying public)...will be deciding factor that will be important to our neartime future, in my opinion... Getting any results at all will be a delicate balancing act.

My opinion only... Am willing to be convinced otherwise... Whatever happens, won't likely affect DW and me, so I don't have a vested interest.
My concern is for the future of the country, and shouldn't like to see the wealth inequality continue on the current path.
__________________

__________________
imoldernu is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 11:24 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.