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Net worth
Old 08-09-2004, 01:05 PM   #1
 
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Net worth

From: "DO WE HAVE A RETIREMENT CRISIS IN AMERICA?", dated 9/03, somewhere on tiaa-crefinstitute.org

I thought this research is enlightening...and frightening:

Net worth by Age (including home equity)
Less than 35 yrs old: median net worth: $11k, mean: $91k
35-44: Median NW: $78k, mean $260k
45-54: median NW: $132k, mean $486k
55-64: median NW: $182k, mean $727k
65-74: Median NW: $176k, mean $674k
75+: median nw: $151k, mean $466k

What I find most interesting is that the median person has so much net worth tied up in home equity; I always "knew" it, but to see it statistically is scary.

Sunrunner4
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Re: Net worth
Old 08-09-2004, 01:06 PM   #2
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Re: Net worth

Hmph. Teach me to log in first.

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Re: Net worth
Old 08-09-2004, 01:49 PM   #3
 
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Re: Net worth

Actually what surprised me is that the figures are Higher than I thought they'd be.

I figured after this low interest rate period, most folks would have sucked all of the equity out of their home and spent it.
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Re: Net worth
Old 08-09-2004, 04:31 PM   #4
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Re: Net worth

Look at the differance between the median and the mean - SS is going to have a lot of voters. It would be interesting to a people spread. I remember a small article a while back where surprise was expressed that a large number of attendee's at Bershire Hathaway's annual meetings lived on less than 22k/yr even though their net worth was 1 mil or more.

Conversely - pensions and SS are not converted/counted.
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Re: Net worth
Old 08-09-2004, 04:52 PM   #5
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Re: Net worth

Article is here http://www.tiaa-crefinstitute.org/Pu...gs/issue77.pdf

Now we get into the problems with 'study building' and combining/extrapolating results that the built studies did not intend to produce.

These figures are based on the "Consumer Finance Study" which is done by the "national organization of research at the university of chicago". It is a study done every three years, last done in 2001, funded by the federal reserves board of governors.

It should come as no surprise that the reports produced generally support that what the federal reserve is doing has been effective, and predictively supports future movements and directions of the fed. Re-read this paragraph one more time if your eyes didnt just narrow and you didnt just say "heyyyyy!".

This particular chart is a derivative of the 2001 report, drawn from US census data in 2000, and then focused on 4500 families drawn at random for interview purposes. Should a family decide to not participate, they are not replaced. The actual sample group may have been reported somewhere, but I couldnt find it.

The author of this TIAA-CREF report subsequently used data from the 1998 study and the 2001 study and extrapolated what 2003 numbers would be. I did not see anywhere what methods of extrapolation were used, but I'll wild guess that they did some kind of linear or logarithmic progression from two extremely favorable data points during the bull market.

Further, with the small and voluntary group of interviewees who are described as "families", I'm going to go out on a limb and say that families who will agree to do a financial survey are probably doing pretty good and happy about their financial strength.

Given also that if the full 4500 family sample was used, this would represent (off the top of my head) about 2 one thousands of one percent of the total US population.

I'm also guessing that single individuals arent included?

In other words, its a statistically insignificant slice of overly optimistic data from a non representative group from the strongest financial period in US history extrapolated in a manner that is unrealistic.

I think Cut-Throats intuition is a good one. I know a HELL of a lot of people who took the 30-40% equity uptick as a 4% variable loan and blew it on toys, cars and vacations. Who are all going to get absolutely killed when rates go up or the value of their home drops.

So heres the big question...why would an organization that manages retirement money want to produce a report with washed information that appears designed to make people feel like they arent contributing enough to their retirement accounts? :
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Re: Net worth
Old 08-10-2004, 08:00 AM   #6
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Re: Net worth

If the data in the report is biased (definitively is, as every organization inherently has a bias in something), and "generous" financially (i.e - favorable selection of data points, potentially biased in sample selection in people responding to the survey and household composition), then the average person, represented by the median value, is even worse off than displayed - and mind you, as a 29 y/o punk, I don't find the net worth numbers all that impressive anyway ($12k for someone in the workforce for 10 years? *Less than $200k for those nearing retirement).

downgrading those statistics (and here I am speaking purely of the median, as there are obviously some very high net worth individuals increasing the mean value, due to the large differential between the average and 50% values), the real average person has a NW less than displayed - and lowering those median values by 25-50% would bring most of the population to a NW lower than $100k. *Including their home equity. *Wow.

I'll I'm saying is, I'll skip the country before I pay some 90% SS Tax For Lazy Oldsters (which I'm sure will be called the Tax Relief For The Children Act of 2015).

BTW, if anyone has some good net worth statistics, I'd love to see them, if you should have a link. *I'm just trying to get a sense as to the averages for my generation.

TH - thanks for the great analysis in breaking down study/academic bias.

Sunrunner4


PS - for the record, I am not confused about dryer sheets. And this week I got yelled at by the garbageman for "overfilling" - hey, if I have to pay by the can, I'm going to build a load properly. I swear, it was all reinforced and structurely sound, contained within the diameter of the can.
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Re: Net worth
Old 08-10-2004, 10:59 AM   #7
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Re: Net worth

We'll overlook the dryer sheet confusion

I've seen some broad based studies on retirement savings that actually looked reasonable and had a decent sample size. The news is not very appealing.

A majority of people in this country have little to nothing saved up for retirement, even at near retirement age. A majority also says they feel they'll be comfortable in retirement and live at or near the same lifestyle level as their working years.

Apparently this will not come to pass.

Many will continue working because they'll discover they have no choice. Others will try to subsist on social security, if its even still there, at a likely reduced level.

As a species we're not very good long term planners.

I used to 'wash' reports through universities all the time. There are a boatload of grad students and professors looking to do 'studies' for cash and publication. I would meet with them, tell them what kind of study I wanted to run, what results and conclusions I wanted, and how I thought they could go about getting from here to there. Usually 250k a pop for a basic analysis/study, twice that for something in depth or a multi-tiered study.

I'd offer that nobody, including the fed, forks over six figures for a study without an end state in mind.

The real trick is getting 2-4 of these things going on in parallel, each of which looks at an aspect of something, and then tying their unrelated results together to produce a story that helps you sell whatever your product or service is.

Then you're really golden if some consultant or analyst takes your gilded results, extrapolates something good for you from it, and publishes their own study. Sometimes you dont even have to pay those folks.

I guess the bottom line is never look at a chart or graph without digging in and finding out where the data came from, how it was compiled, and who paid for the work.

Overfilling the can? Shoot and I thought I lived in the only area with girlie man trash collectors. Ours whine about everything.
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Re: Net worth
Old 08-10-2004, 12:05 PM   #8
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Re: Net worth

Quote:
I used to 'wash' reports through universities all the time. There are a boatload of grad students and professors looking to do 'studies' for cash and publication. I would meet with them, tell them what kind of study I wanted to run, what results and conclusions I wanted, and how I thought they could go about getting from here to there. Usually 250k a pop for a basic analysis/study, twice that for something in depth or a multi-tiered study.
All I can say is I hope you didn't work for a pharmaceutical outfit. This is a pretty dark view of academic integrity.

Mikey
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Re: Net worth
Old 08-10-2004, 02:13 PM   #9
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Re: Net worth

High tech but I would doubt its any different for any other industry.

It probably wont help you to hear that on all my research studies, for $25k I retained the right to supress publication if I didnt like the results and this was always readily agreed to.

Money talks and theres nothing like a handful of independent research studies coupled with a 3rd party expert analysts opinion of said studies, resulting in a bar chart that either drives a consumer to buy more than they needed, or at least makes them somewhat uncomfortable with not buying as much as I wanted them to...

These folks see an opportunity to do a high profile study, hire a couple of grad students, publish a paper, and worry about re-engaging their morals later, I guess. Its hard to get grants and stay in the academic sector without cash flow. The alternative is (gasp) a job...
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Re: Net worth
Old 08-10-2004, 03:40 PM   #10
 
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Re: Net worth

Quote:
High tech but I would doubt its any different for any other industry.

It probably wont help you to hear that on all my research studies, for $25k I retained the right to supress publication if I didnt like the results and this was always readily agreed to.

Money talks and theres nothing like a handful of independent research studies coupled with a 3rd party expert analysts opinion of said studies, resulting in a bar chart that either drives a consumer to buy more than they needed, or at least makes them somewhat uncomfortable with not buying as much as I wanted them to...

These folks see an opportunity to do a high profile study, hire a couple of grad students, publish a paper, and worry about re-engaging their morals later, I guess. *Its hard to get grants and stay in the academic sector without cash flow. *The alternative is (gasp) a job...

I've always suspected that I have been too cynical in life. After reading these posts, I think I have not been cynical enough
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Re: Net worth
Old 08-10-2004, 06:09 PM   #11
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Re: Net worth

Hey, if people realized how bad off they were on saving for retirement, they might stop doing things like buying new cars and knick-knacks made in China. We can't have that!

And count me in on the "long gone before 90% tax kicks in" crowd. Maybe we can have a party somewhere in the Caribbean
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Re: Net worth
Old 08-10-2004, 06:24 PM   #12
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Re: Net worth

I dont think you have to be cynical about anything.

Just as long as you realize that most people dont do something unless they get paid to do it and/or expect to be able to do something with the result. True charities and the truly charitable aside.

Just make sure when you're reading someone report, study, chart, graph or survey that you know how the information was gathered, what its limitations are, what is fact, what is opinion, and what is projected. Then if you also know what it is the people who paid for the data wanted you to do or feel, thats helpful too. Then make your own informed decisions.

Where it drives me to distraction is when people take projections and abstracts based on bad data that someone cobbled up to prove a point, and make bad decisions on the basis of that information.

You *are* being led around by the nose most of the time. If it helps I believed the nose-leading I did was probably beneficial to my customers in the long haul. Your job is to know the score and snatch those fingers from your proboscis and do your own leading if you dont like it.
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Re: Net worth
Old 08-10-2004, 08:59 PM   #13
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Re: Net worth

Wow -- that's a huge drop in the savings rate!
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Re: Net worth
Old 08-11-2004, 04:10 AM   #14
 
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Re: Net worth

Give me the result you want and I will give you a "study" to support it.

I have the corner on cynical and yet, I am a very happy
retiree. You see, cynical is not like pessimism. I am quite optimistic, but this mostly relates to what I can do.
I have little or no faith in the masses and even less in
government. That's where the cynicism comes in.

Finally, we have no "girlie men" garbage collectors
out here in the boonies. I put out all sorts of weird stuff.
Some couldn't be lifted with a back hoe. They take it all.
No complaints.

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Re: Net worth
Old 08-11-2004, 08:02 AM   #15
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Re: Net worth

Quote:
Finally, we have no "girlie men" garbage collectors out here in the boonies. *I put out all sorts of weird stuff. Some couldn't be lifted with a back hoe. *They take it all.
No complaints.
John, STOP giving away our secret bennies of living in the boonies. I don't want people catching on and crowding me...
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Re: Net worth
Old 08-11-2004, 08:22 AM   #16
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Re: Net worth

Quote:
And count me in on the "long gone before 90% tax kicks in" crowd. *Maybe we can have a party somewhere in the Caribbean
Interesting you mention this. *I've noticed that most of the people I talk to regarding ER (and, mind you, since most of who I talk to are young and/or dumber than stumps, I get a lot of blank, you-must-be-woo-woo-crazy looks) have at least considered or examined offshore as a lifestyle.

I am investigating a job offer now that has paid int'l travel, the best way to see the world: on someone else's nickel, and plan on using it to fully investigate the possibility of moving abroad (I'm fooling myself: my wife will never, ever move, unless her entire family dies at once. *But hell, I can dream), especially if it allows me to retire with a lower asset base.

Sure, sure, I know there's another thread for it, but they're mainly discussing the actuals, and I'm curious on the research. For the folks following at home, where have you researched/poked at even in curiousity to escape the Capitalist paraide?

Sunrunner4
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Re: Net worth
Old 08-11-2004, 09:19 AM   #17
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Re: Net worth

Hi Sunrunner,
We have spent many years in Mexico and Thailand, and love them both. Along the way we have met many folks that infact retired to these locations full on. It is nice to have another perspective.

Billy
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Re: Net worth
Old 08-11-2004, 09:25 AM   #18
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Re: Net worth

Billy,

Thanks for the response - I just today has run into your FIRE posts at the Fool (I'm pretty sure it was there, anyway) and just came from your site - great job on it!

Sunrunner4
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Re: Net worth
Old 08-11-2004, 09:30 AM   #19
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Re: Net worth

Thanks Sunrunner,
Our site is a work in progress, much like our lives!

Billy
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Re: Net worth
Old 08-11-2004, 10:18 AM   #20
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Re: Net worth

Quote:
Sure, sure, I know there's another thread for it, but they're mainly discussing the actuals, and I'm curious on the research. *For the folks following at home, where have you researched/poked at even in curiousity to escape the Capitalist paraide?
I figure, in ten years some of those countries may not be as cheap or as nice to live in as they are now, and some other countries may turn out to be gems. Maybe a few years before retirement is a good time to start scoping things out.

I think by then, all the young Mexicans will be in the US and all the old Americans will be in Mexico.
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