Affluent Boomers

[armor99]

So true! Also, we seem to think we will never need assistance and can always live on our own. That is not true, and a good, pleasant, compassionate continuous care facility is not cheap. I would imagine that when the baby boomers hit these facilities, they will be in such demand that they will become frightfully expensive.

People don't want to face the fact that aging occurs, and will occur to them if they are lucky enough to live a long time. My mother was in a very nice/elegant and expensive facility in Honolulu for the last 15 years of her life, and really needed it for over 10 years. I won't need one quite so elegant, but I do not want to have to rely on Medicaid, which may not even exist in 30 years, and I do not want to end up enduring the experience of a Medicaid nursing home.

I think that possible future needs and costs of such a facility is something many of us may find worthwhile to consider when doing financial planning for ER. Those who feel comfortable relying on insurance companies for this can get long term care insurance. An alternative is to self-insure. We can see in Firecalc that a slightly lower SWR over many years can result in a nestegg that is substantially larger and could be used for such expenses. Time is on our side.

Whew - - good morning! Time for another cup of coffee. Hope the above makes sense to the reader.

Your post was excellent! Thank you so much for writing it. I think you are absolutely correct. There are so many people out there that flat out refuse to see the reality that , "Yes.... I will one day be old!". These people do not plan for that reality, and then later in life wind up scrambling for funds, or expect their children, govt, religious organization, etc. to save them. And the most amazing thing about it is, that each of us has the power to save ourselves from this. If you LBYM, save and plan for that day off into the future, everything CAN be fine. I learned the truth a long time ago that in fact I will NOT be living forever. I would think this understanding should be common sense. But as the years have gone by, I have found that "common sense" is not nearly as common as it used to be. The only thing that I think we should stongly push for is the introduction of these concepts into schooling at all levels. I think that the concepts of LBYM and saving for retirement should become as common in schooling as reading, writing, and math skills. Just my opinion....

 

[barbarus]

I'm continually amazed when people feel that, given an advanced education, lots of hard work and just a little luck, one is almost sure to make it.
This is simply not true, yet many of those that are successful can hardly imagine that things could be any other way for them when the truth is that, even with all their efforts they got VERY lucky.

Some successful people do realize the tenuous nature of their good fortune and behave prudently and correctly. They are to be applauded for their insight. It's always heartening to read their posts.

One can hardly suppress a feeling of cosmic justice likewise, when fate slams the arrogant privileged back into the dirt, never to rise again.
(Obviously assuming the slamming does not happen to oneself!!

)

 

[armor99]

I'm continually amazed when people feel that, given an advanced education, lots of hard work and just a little luck, one is almost sure to make it.
This is simply not true, yet many of those that are successful can hardly imagine that things could be any other way for them when the truth is that, even with all their efforts they got VERY lucky.

Some successful people do realize the tenuous nature of their good fortune and behave prudently and correctly. They are to be applauded for their insight. It's always heartening to read their posts.

One can hardly suppress a feeling of cosmic justice likewise, when fate slams the arrogant privileged back into the dirt, never to rise again.
(Obviously assuming the slamming does not happen to oneself!!

)

Why do you believe that hard work and effort do not matter? I believe that the outcome of my life is determined by my own actions. If I believed that only luck (or fate) determines the outcome of my life, then why should I have gone to college? Why should I save for retirement? Why should I bother doing any of the hundreds of sensible things I have done in life to improve myself. Hopefully you can see my point. There is certainly a certain amount of luck in anyone's life. Yet there are literally hundreds if not thousands of decisions that we make that have a huge impact on the outcome. If you believe that luck alone determines your future, then you are also implying that none of your personal decisions (good or bad) have any impact at all.
I for one.... will never feel bad for ANY of my achievements in life. I am very proud of everything that I have accomplished. No trust fund baby here... I have earned everything I own from the clothes I wear, to the home I live in. And I certainly have not stolen anything from anyone to make those goals possible. I guess I am an optimist... I believe in the power of people that think for themselves. I get the impression that somehow you do not want to believe that it is possible to succeed without some sort of luck, or injustice that was done to make it happen.
And just one last thing.... It is "cosmic justice" when someone who had worked hard and accomplished something to be "slammed back into the dirt never to rise again?". Why do you take delight in other people's misfortune?

 

[JonnyM]

If you leave the ER part out of the equation, nearly everyone's potential lifestyle in retirement improves. It's easy to lose sight of the fact that "we" are a tiny minority of any group. DW and I are "mid-boomers" (1955-56). If we had wanted or been able to work another decade we would have been so In-Like-Flint! We chose professions that traded high-income potential for very secure pension type payouts. In effect our savings for retirement were automatic to a degree and therefore became pretty painless within the context of our lifestyle. A small difference between ourselves and our co-workers is that we determined that FIRE would be Just So Way COOL! We attempted (with limited success) to guild the Lily by throwing as much as we could into pretax savings. That option being a "choice" is not very typical for coworkers that were not into the FIRE concept (95% at least), they just tend to figure on plodding along until 62 or 65/66 and know in the heart of hearts that that level of pension plus SS plus some limited savings will get them through the rest of their life.

The thing is they are RIGHT. It will work for them, they will not have to worry about having a place to live and food to eat, and in fact should be pretty well off, particularly those with 30 years in.

My point is we won't be hearing from that large group on this board. Boomers for the most part will carry on, and keep working until they can't or reach some magic (for them) age where there is little risk of retirement failure.

The sad portion that didn't plan in any way for the inevitable will be the one's making the news. My mother at 77 is just getting by after decades of retirement after the loss of her husband (my father) and losing that second SS check. My brother (just about 50 now) has never saved a dime in his life, and will be SOL no matter when he quits working.

 

[mickeyd]

the truth is that, even with all their efforts they got VERY lucky.

All successful people in the USA fully understand that they made their own good luck.

 

[ladelfina]

All successful people in the USA fully understand that they made their own good luck.

All successful people in the USA (should) fully understand how much luck was really involved in their success, in addition to hard work and careful planning.

 

[ERD50]

I'm continually amazed when people feel that, given an advanced education, lots of hard work and just a little luck, one is almost sure to make it.
This is simply not true,....

Why do you believe that hard work and effort do not matter?

All successful people in the USA fully understand that they made their own good luck.

All successful people in the USA (should) fully understand how much luck was really involved in their success, in addition to hard work and careful planning.

barbarus, I think your statement would hold up better if you turned it around - some *bad* luck can easily derail someone, despite their education/skill, work ethic, etc.

But to say that it is mainly luck that gets you somewhere is pushing it.

Certainly, most of us were 'lucky' to be born in the US where you are allowed to succeed with some education/skill and hard work. Some of us were also 'lucky' to be raised in an environment that instilled some values and work ethic in us. Without that luck, it can be a very hard to succeed, the odds are stacked way against you, but certainly not impossible.

The vast majority of 'successful' people I know worked hard at it. The people that I know that are struggling - well, it's pretty easy to see why, they made bad choices. And yes, a few got hit upside the head with some terrible bad luck, no amount of work could dig them out of their situation.

Offhand, I don't think I know anyone who hit 'success' through pure luck (inheritance, lottery ticket, etc). The one local lottery ticket winner that I know of had a successful business before they won.

-ERD50

 

[barbarus]

ERD, my point is not that most financially successful people just blindly stumble into wealth with no effort. Quite the opposite. For the great majority, success requires continued hard w#rk. The successful usually earn their positions by the sweet of their brows (or brains).

I also am not saying that hard w#rkers are owed success either.

What I am pointing out is that we've entered an era where many and possibly the majority of educated, hard-working folks are finding success elusive.

At one time, if you played by the rules, you could be fairly well assured that things would turn out alright, but no longer. It seems especially problematic for young people, many of whom are nowhere near as far along as their parents or grandparents at similar points in their lives. When enough people realize that the reward for playing by the rules has fled, society will slip into a dismal, ghetto-like, why-bother attitude.

 

[Khan]

ERD, my point is not that most financially successful people just blindly stumble into wealth with no effort. Quite the opposite. For the great majority, success requires continued hard w#rk. The successful usually earn their positions by the sweet of their brows (or brains).

I also am not saying that hard w#rkers are owed success either.

What I am pointing out is that we've entered an era where many and possibly the majority of educated, hard-working folks are finding success elusive.

At one time, if you played by the rules, you could be fairly well assured that things would turn out alright, but no longer. It seems especially problematic for young people, many of whom are nowhere near as far along as their parents or grandparents at similar points in their lives. When enough people realize that the reward for playing by the rules has fled, society will slip into a dismal, ghetto-like, why-bother attitude.

http://www.seeklyrics.com/lyrics/Billy-Joel/Allentown.html

Well we're waiting here in Allentown
For the Pennsylvania we never found
For the promises our teachers gave
If we worked hard
If we behaved

 

[Spanky]

We chose professions that traded high-income potential for very secure pension type payouts.

What was the high-income potential and what did you end up doing in exchange for security? Did you find job satisfaction? Have you had any regrets or wondered what could have been? Life is all about choices. We make our choice and never look back. It seems that you feel the same way.

 

[Spanky]

But to say that it is mainly luck that gets you somewhere is pushing it.

It is not totally pure luck, but I would not refute that it is mostly luck.

 

[ERD50]

What I am pointing out is that we've entered an era where many and possibly the majority of educated, hard-working folks are finding success elusive.

Well, I'm not even sure what numbers we would use to prove/disprove that.

At one time, if you played by the rules, you could be fairly well assured that things would turn out alright, but no longer. It seems especially problematic for young people, many of whom are nowhere near as far along as their parents or grandparents at similar points in their lives.

I'm not sure I buy that one. If true, why did LBJ start the 'war on poverty' in the early 1960's?

Let's see, when I was 27, no kids, I moved into a pretty nice 4 BR 2.5B home in a nice neighborhood on almost a 1/2 acre. When my dad was 40, we lived in a tiny 2 BR 1 bath house - three kids in one small bedroom. And by most measures, my Dad was 'successful'.

My grandparents needed the financial support of their kids in their later years.

Sure, just one data point, but I don't think it is atypical. And comparisons can't be made in just $, you have to consider the total quality of life. Kids today have stuff I couldn't even dream of.

I'll go back to a 'challenge' I made a while back - you have a time machine, pick a year to take yourself and your family back to. And don't romanticize a life w/o chlorinated water, vaccines, antibiotics, etc. Realistically, I wouldn't budge.

When enough people realize that the reward for playing by the rules has fled, society will slip into a dismal, ghetto-like, why-bother attitude.

The only worlds like that that I recall were the great experiments in socialism.

Now I will give credence to one 'issue'. Developing countries want to raise their standard of living. In a more global economy, we are in competition with people willing to work for much less than we are accustom to. Yes, I think that has and will continue to put a strain on the advanced countries. But I don't think that is necessarily all doom and gloom, there will be opportunities for smart people. And I sure am not in any position to tell someone less fortunate than myself that I don't want them to do my $30/hour job for $2/hour, when that means they can feed their family, and for me it means accommodating a lifestyle that would be like the 'rich and famous' to those people.

-ERD50

 

[armor99]

ERD, my point is not that most financially successful people just blindly stumble into wealth with no effort. Quite the opposite. For the great majority, success requires continued hard w#rk. The successful usually earn their positions by the sweet of their brows (or brains).

Ok... sounds correct so far to me. I believe as well that for the great majority, success requires hard work.

I also am not saying that hard w#rkers are owed success either.

I agree here as well. There are no guarantees in this life. Just things you can do to help put things in your favor, or against you. Going to college and getting a degree shows overwhelmingly that your earning power in life will be better. Spending every dime you make and saving nothing, almost insures poverty for you in the end. Both of those are choices that we must make for ourselves.

What I am pointing out is that we've entered an era where many and possibly the majority of educated, hard-working folks are finding success elusive.

Ok... here is where the train seems to fly off the rails a bit. How did you go from hard work and effort pays off for most... to the majority finding success elusive. This seems to be a contradiciton. At last check our unemployment rate was 5%. Some might argue this is too high, but if you check that number compared with years ago.... we are at some of the lowest un-employment seen in decades. Compare this with unemployment rates in most european countries in the double digits.

At one time, if you played by the rules, you could be fairly well assured that things would turn out alright, but no longer. It seems especially problematic for young people, many of whom are nowhere near as far along as their parents or grandparents at similar points in their lives. When enough people realize that the reward for playing by the rules has fled, society will slip into a dismal, ghetto-like, why-bother attitude.

What can I say? The world is not always fair? No... it is not. There is no utopian like society that is going to come about any time soon. No guarantees that your life will turn out "just fine". But I do believe in the power of choice. What is best for me, may not be what is best for all. Even on this forum, there are dozens of ideas for what makes the best investment strategy. Only history will one day show who was right or not. But at least I get to make that decision for myself. If someone wants to believe that their lives are controlled or downtrodden by other people and forces that are "out of their controll", then they are free to believe that. As for myself... I will keep building my own personal fortune.... one dollar at a time. And continue to laugh at anyone that says it is "impossible for me to achieve it"

 

[Independent]

Well, I'm not even sure what numbers we would use to prove/disprove that.

-ERD50

Here's some numbers that seem relevant. They show median income by education level and sex. If you combine data from tables P-16 and P-17, you'll find that the median real income for males with bachelor's degrees has been approximately flat for the last 30 years. The different tables give slightly different results.

Historical Income Tables — People

These numbers don't support the notion that "People today have it a lot harder than people did a generation ago". Nor do they support the notion that "My generation did a lot better than my parents, so my kid's generation must be doing a lot better than mine."

I think that for much of US history, people really did do a lot better than their parents. Now the "up escalator" has stalled. Maybe they do a little better (over this long time frame, I wonder about the accuray of the CPI), but not a lot better. I expect it's easier today to find 20-somethings who thought a college degree was the ticket to a high-paying job, but discovered that it needs to be the right degree, possibly with some extras.

 

[Independent]

On the "hard work vs. dumb luck" question, I'd say that:

Nearly everybody agrees that your financial success (or lack of success) is partially due to hard work and partially due to dumb luck. The disagreement is how much of each.

I'd suggest that the if you are well above the median, there's a healthy dose of dumb luck.

When I was working, I earned 3-4 times the median income. I also worked with people who were earning the median. There's no way that I was working 3-4 times as hard. I had a higher investment in education then most people, so some of my extra earnings represent a reasonable return on the education. But mostly, I earned more because I was luckier. I had genes that fit good-paying jobs in the 20th century. I had parents who were committed to providing opportunities for their kids. I had a decent community and good schools. I happened to go to a university that had a program in a field that was a good fit for me.

I see myself as a "typical" higher-earner. I don't know anyone who I would believe really works 3-4 times as hard as the median workers I knew. In fact, I don't think it would be physically possible to work that hard. (I'll admit that I live in the midwest, maybe there is something to the idea that most people around here have a "good work ethic".) I think that most of the extra income that highly-paid people earn results from them leveraging opportunities that other people didn't have.

 

[DJRR]

Median individual income for 2006 was $32k and top 10% was $75k

Median family net worth in 2004 was $93,100

I would say an income of $71K and a networth of $257k plus house would qualify as affluent, cetainly in the top quartile of all Americans who are definitely in the top quartile of the world.

We are distorted by our discussions about how most people really live

 

[W2R]

Here's some numbers that seem relevant. They show median income by education level and sex. If you combine data from tables P-16 and P-17, you'll find that the median real income for males with bachelor's degrees has been approximately flat for the last 30 years. The different tables give slightly different results.

Historical Income Tables — People

These numbers don't support the notion that "People today have it a lot harder than people did a generation ago". Nor do they support the notion that "My generation did a lot better than my parents, so my kid's generation must be doing a lot better than mine."

I think that for much of US history, people really did do a lot better than their parents. Now the "up escalator" has stalled. Maybe they do a little better (over this long time frame, I wonder about the accuray of the CPI), but not a lot better. I expect it's easier today to find 20-somethings who thought a college degree was the ticket to a high-paying job, but discovered that it needs to be the right degree, possibly with some extras.

Interesting tables! Thanks. Parenthetically, one thing that most definitely isn't included in such tables is how much people are earning in benefits, such as a strong pension plan and a good group health insurance policy. These benefits have eroded greatly during recent years. So, I think that there has been a corresponding drop in compensation that is not shown in these tables.

 

[ERD50]

When I was working, I earned 3-4 times the median income. I also worked with people who were earning the median. There's no way that I was working 3-4 times as hard.

Agreed, my experience also. But in a free market, the pay difference is not so much based on how hard you work, but on what the company needs to pay to get the skills they need.

There are plenty of people to work the assembly line, even though it is hard, demanding work. So $X/hour gets the company as many people as they need.

There are fewer people with degrees in specialized areas, and those people wouldn't put in the time, money, and effort to get the degrees in that area if there were not a good enough supply/demand ratio to command that 3-4X salary.

I also agree with your previous premise - there probably is not that huge of a difference between generations. Obtain education or a needed skill, apply yourself, and you will very likely do better than the median. Yesterday, today, and tomorrow.

-ERD50

 

[barbarus]

Many of the readers of this blog are techies so it's interesting to read the writings of Prof. Norm Matloff on the state of the IT/EE market. I saw an article a few days ago about how 40% of the engineering grads of Duke U. can't find jobs in engineering. I have met a number of computer science and electrical engineering grads who are un/underemployed and for a significant time. Students are voting with their feet and pursuing business and finance degrees, with the potential of a healthy ROI rather than beating their brains out for four or five years and ending up behind the grill.

It's true the really bright grads in technical fields are doing really well. Such people always will. The problem is that opportunity declines to come a knockin' for the ordinary geniuses in these fields.

I've not done any formal studies and can't submit a list of works cited in University of Chicago style so I'm posting here rather than submitting to any refereed journals and begging the kind indulgence of you, the reader.

 

[barbarus]

Interesting tables! Thanks. Parenthetically, one thing that most definitely isn't included in such tables is how much people are earning in benefits, such as a strong pension plan and a good group health insurance policy. These benefits have eroded greatly during recent years. So, I think that there has been a corresponding drop in compensation that is not shown in these tables.

I refer to these Census tables too, but they always seemed too high to me. Can anyone comment of the accuracy of the information? It seems like the data is gathered by survey and that would very likely lead to inflated figures.

I'd rather see data tables created from IRS data where it's rather harder to fudge the numbers.

 

[ERD50]

I have met a number of computer science and electrical engineering grads who are un/underemployed and for a significant time. Students are voting with their feet and pursuing business and finance degrees, with the potential of a healthy ROI rather than beating their brains out for four or five years and ending up behind the grill.

Markets are dynamic. That may not be any different now than in our parents/grandparents time. No 'hard' numbers from me either - just some observations:

Buggy Whip factory is closing. (New jobs for auto mechanics)

Tractors replace 30 plowboys and their teams of horses. (Tractors are going to need fuel - go to the oil fields)

Steel Mill is laying off (get an education, go for a white collar job).

Robots on the assembly line (time to learn how to program robots).

That job is being done by computer now., etc, etc, etc

Is it really any different? Like armor99 pointed out - we are at ~ 5% unemployment. If this was some type of huge cumulative problem, we'd be at 50% by now.

-ERD50

 

[barbarus]

The difference is that cost of entry has increased. It took 2 weeks of on-the-job training for the village idiot to learn to make a buggy whip or a pair of spats.

It takes 10years+ to get a Ph.D in computer science and a certain amount of treasure and lost opportunity. One may find at the end of that time that one's field of endeavor is no longer in demand.

I know of B.S.-degreed programmers being retrained in health fields to gain employment. A number of auto workers whose jobs are gone forever are now finishing government-sponsored IT retraining just in time to find they can not find work in their new field and need to be re-retrained in something else. I suppose the wise college student simultaneously pursues two widely divergent fields and hopes that one will pay off.
To end on a positive note, at least a man can end up erudite from a lifetime of "trainings", if impecunious.

 

[Spanky]

I am not aware that the job market for CS and EE is on the decline. Our company still has a big need for new grads in biomedical engineering, EE, ME and CS.

 

[armor99]

I am not aware that the job market for CS and EE is on the decline. Our company still has a big need for new grads in biomedical engineering, EE, ME and CS.

That is one of the reasons that I got my degree in engineering. The technology is ever changing, but the ability to understand how things work never goes out of style. I can remember a cousin of mine got out of college and thought he would become ultra weathy, being a web site designer. I warned him to stay away from "fad" type jobs. I am glad he did.... the big bucks in that field only lasted for a few years. One of the big advantages of an engineering degree is not what you know when you leave college. It is the fact that the engineering degree has "taught" you how to learn almost anything.

 

[ERD50]

The difference is that cost of entry has increased. It took 2 weeks of on-the-job training for the village idiot to learn to make a buggy whip or a pair of spats.

It takes 10years+ to get a Ph.D in computer science and a certain amount of treasure and lost opportunity. One may find at the end of that time that one's field of endeavor is no longer in demand.

Well, I think you may be titling those numbers in your favor. You don't need a Ph.D to get a decent job, and many trades have a long apprenticeship.

At any rate, you have not answered the 5% unemployment question. If things are so bad, why isn't that number much worse? Why don't the tables Independent provided show a much worse picture (even accounting for some fudge - they are not doom/gloom)? Why do we have people risking their lives to come into this country?

-ERD50