WSJ: A Retirement Wealth Gap Adds a New Indignity to Old Age

[timo2]

Eh, have y'all read the article quoted in the OP?

Here it is, but not from WSJ so open to the public: https://www.msn.com/en-us/money/ret...ap-adds-a-new-indignity-to-old-age/ar-BBNWwV1.

The story is about the conflict in an adult community in Santa Rosa, California. Some of the residents wanted to fund development of a pickleball court, while others did not want to see their dues go up. The division between the two groups came from the difference in their retirement incomes.

Thanks, I was pay walled out of WSJ.

Personally, I like living around people with a mix of ages.

 

[Fedup]

I was lucky I was born into the post-WW2 egalitarian societal framework. That is the first piece of luck for most people in this forum. That framework is what allowed us to use our ambition to earn a decent amount of money. Societies without that framework don't allow a person without pre-existing wealth to get ahead, no matter how ambitious.

1) my father came from an auto worker family but through the GI bill he was able to get an engineering degree. 2) the economy until the 1980's allowed one earner incomes to support a family 2) University tuition was affordable in the 1970's 3) Thanks to modern medicine and decent health insurance I was able to get past a heart attack at 51 and continue earning in the high earning years. 4) there still is social security and medicare for us older folks.

Most of those situations are not available for the current younger generations in the USA. Interpret that as you will, but it it is the actual case.

Most of the young generations don’t give a whit about cost. My kid’s best friend is on her second year of master degree in Classics, she did graduate Tau Beta Pi from Berkeley, but now she has to borrow money to pay for the MS degree. And it doesn’t stop there, she probably will have to fund a PhD too, her father said she might be lucky to teach somewhere with that degree afterwards.
From what I’ve read, she most likely teach at some small college when she gets her PhD paying somewhere in the $40K-$50k. I’m sure she will have huge loan balance by then.

 

[pb4uski]

Most of the young generations don’t give a whit about cost. My kid’s best friend is on her second year of master degree in Classics, she did graduate Tau Beta Pi from Berkeley, but now she has to borrow money to pay for the MS degree. And it doesn’t stop there, she probably will have to fund a PhD too, her father said she might be lucky to teach somewhere with that degree afterwards.
From what I’ve read, she most likely teach at some small college when she gets her PhD paying somewhere in the $40K-$50k. I’m sure she will have huge loan balance by then.

It is one thing to be idealistic, but it is another to be impractical.

During my junior year in high school I decided that my top choice for a profession didn't pay enough and I didn't want to be poor for my life so I moved to another choice... and my higher education plans were a function of that choice of profession.

NPR had a piece on the high cost of higher education and loans that today's students are saddling themselves with about a year or two ago... I recall they profiled a student that was going to graduate with $75k of college loans with an obscure degree that had no prospects for her getting a good paying job... she was screwed and just starting to become aware that she was screwed.

 

[timo2]

It is one thing to be idealistic, but it is another to be impractical.

NPR had a piece on the high cost of higher education and loans that today's students are saddling themselves with about a year or two ago... I recall they profiled a student that was going to graduate with $75k of college loans with an obscure degree that had no prospects for her getting a good paying job... she was screwed and just starting to become aware that she was screwed.

IIRC, current medical analysis is that the frontal lobes don't really kick in until age 25 or 27, depends upon the study. From what I understand the frontal lobe helps with anticipating the consequences of actions and helps in future planning. I'm not making excuses for anyone, but I think it is folly expect teenagers to be cognizant of all the future ramifications of their student loans or choices of majors. Some adult guidance is probably needed for them, but apparently adults don't like to do that any more.

 

[JustCurious]

Most people who were born or raised in the United States since World War II are lucky by accident of birth.

 

[NW-Bound]

I was lucky to be born in the USA.

We were fortunate to emigrate to the USA.

My sister who was 2 years older has recently reconnected with college friends in the old country. She found out that they were doing very well, and the story they told were amazing. Though their families were in a less fortunate set of circumstances than ours, one being outright poor and destitute, they tried hard and seized business opportunities that came along. They end up having more assets than my sister and I do.

Luck definitely played a part in my success. Sure, doing the right thing (LBYM, taking risks by investing my money, etc...) allowed me to take advantage of the opportunities that presented themselves, but the returns I obtained on my investments were due to luck. I have no control over what the market giveth. In hindsight, the housing crisis of 2008 was perhaps my generation's greatest money making opportunity. After a 9-year bull market, it is tempting to take credit for my financial success. But it could have just as easily ended very badly instead (history is full of economic catastrophes upending people's lives). If we had a full blown depression post-2008, my life would be very different. And I would probably be sitting here bemoaning a very unlucky set of circumstances.

True too. Still, even during the Great Depression, people who were more resourceful would end up doing better, I think.

Being smarter may also be due to luck. Some people are born clueless, and they cannot help it.

 

[Ready-4-ER-at-14]

Quite an interesting thread!

I've bought and fixed and flipped homes a number of times. All but one at a significant profit and that loss was mostly break even.


I've bought and sold stocks, bonds, oil wells, reits, options and personal loans, most with a profit.


The homes and the investments, even when bad, had "sweat equity" in them and all involved calculated risks.


I've always told people who have some wealth and are comfortable talking at that level, that I didn't know if I was lucky or good, but either worked just fine. Now I'll have to amend that to I don't know if I was lucky, prudent, or blessed but any one or combination is enough.

The key thing is you have to grab at that brass ring when the merry go round offers an opportunity and to do that you have to strive to become more than we are now, even if just economically.

 

[Fedup]

I finally read this article from wsj last night. I can see people with fixed income get annoyed. I personally do not like to pay more in HOA then I have to. In the past 5 years, my HOA went up $10. I think this is due to some kids in the swim class who turned on the shower non stop. Now there is a notice not to do it. But I play cop when I’m there, make sure they don’t waste water because it will affect my bottom line.

 

[Hermit]

Quite an interesting thread!

I've bought and fixed and flipped homes a number of times. All but one at a significant profit and that loss was mostly break even.


I've bought and sold stocks, bonds, oil wells, reits, options and personal loans, most with a profit.


The homes and the investments, even when bad, had "sweat equity" in them and all involved calculated risks.


I've always told people who have some wealth and are comfortable talking at that level, that I didn't know if I was lucky or good, but either worked just fine. Now I'll have to amend that to I don't know if I was lucky, prudent, or blessed but any one or combination is enough.

The key thing is you have to grab at that brass ring when the merry go round offers an opportunity and to do that you have to strive to become more than we are now, even if just economically.

I believe higher risk offers the opportunity for higher reward. For me, it was not necessary. In about 20 years I accumulated enough wealth to live comfortable for the rest of my life. The homes I bought and sold over my life made a little money. Mostly kept up with inflation. My investments were quite conservative, but I socked away as much as I was allowed in a 401k for many years. I had a job that included a very good pension. A lot of folks left that company for greener pastures and higher income. I stayed where I had the pension.

There are different ways to get there. A lot depends on your entrepreneurial spirit. The one thing that assures you will not be in a good position at retirement is spending all your income and trying to achieve a higher standard of living through debt. I think that is the main difference for most of the haves and have-nots.

 

[Independent]

Luck is the intersection of opportunity and preparation.

That's one possible definition for "luck". Other people have different definitions.

I prefer "things we can't control" and "things we can control". Those phrases seem to get more agreement.

Something as simple as playing the lottery includes both. I have 100% control over whether or not I'll buy a ticket, and 0% control on whether that ticket has the winning number. Lots of real life is like that.

I think there is an upper limit on what you can do with hard work. I'm quite sure that I couldn't earn LeBron James kind of money no matter how hard I work.

The upper limit varies by individual, according to those things we don't control. I have to admit that the upper limit for some people is distinctly lower than what I earn.

And, the impact of things we can control is not symmetric.

There is no lower limit on the effects of my "lack of hard work". Anybody can take that to zero by being sufficiently lazy.

 

[Huston55]

Regarding the subject of the article (Oakmont Village) - It’s right up the road from us and we know that area. Having served on a condo HOA Board (in SF) back in the 1990s, I’m not surprised by how little it takes for residents’ tempers to flare & conflict to ensue. And, it surprisingly (to me anyway) involves what I’d characterize as otherwise kind people doing mean, petty things...I digress. There is another Oakmont 55+ community a stone’s throw from Oakmont Village (Oakmont at Varenna) which is newer and fancier so, I have to wonder why those who are financially better off didn’t move there instead.

On the subject of this thread, which turned into “how much does luck play in one’s success”, I come down on the side of luck playing a very large role, perhaps the largest. There is a lot of research which supports this view. The link from DLDS was one such study, and the graphic below from it illustrates the point very well for me.

I think this bit of research from Raj Chetty also indicates how “luck” (those factors that the individual has no control over) plays a very large role in one’s success.

https://www.brookings.edu/blog/soci...s-on-opportunity-and-mobility-we-should-know/

On a more personal note, with the benefit of 20-20 hindsight, I can see clearly how luck, both good & bad, has played a significant role in my life; a few examples are below:

+ Parents moved frequently as part of work so, I wasn’t stuck in the small rural (read ‘limited opportunities’) town of my birth
+ My college education was paid for
+ Had a guaranteed job (USAF) in 1978, when the economy was in the toilet.
+ Met a Sr. Executive from my eventual post-USAF employer, half a world away from his office by complete serendipity, which resulted in an interview I would have never got otherwise (worked for that Mega 30+ yrs)
+ Moved 16 times during Mega career & on Mega’s schedule, bought & sold several homes, made $$$ overall & on every transaction except one (We even had a saying @ Mega about our careers & real estate, “In our business, when it comes to real estate, it’s better to be lucky than smart.”)
+ One of those homes purchased was a SF condo, which we sold when moving out of SF. I lamented for several years that we should have kept it; that is, until the side of the hill it was on collapsed and every condo owner had the pleasure of relocating for 4 mos while it was red tagged, then paying a 6-figure special assessment for repairs when they moved back in).


- We bought a home in 2007 and had to sell when we moved in 2011.
- I was tainted by an ethics violation committed by my boss & a subordinate; unlucky by being too close in the organization.
- Inherited from my predecessor a large project with an inherently faulty design; it manifested about a year into my tenure & I took most of the blame.

Have to take the bad with the good; I’m fortunate to have had more good than bad.

 

[Fedup]

I take offense when the article states good luck with timing for real estate purchase. Yes by definition we fell into that camp. But back when we moved to SV in the early 90s, we waited for a few years before we purchased our home and we were praying we didn’t get laid off either. There is no such thing as slam dunk. Back then if we lost our jobs, we would lose the down payment period.
Timing was not even our intention, we just wanted to make sure jobwise were decently secured. Hindsight, it looks like it was great timing, but no so much when we bought the house.

 

[lucky penny]

Conflict between haves & have-nots in a retirement community

[Moderator note: This post was merged in from a new thread in which it was the first post. -- samclem]


I just read the recent WSJ article ("A Retirement Wealth Gap Adds a New Indignity to Old Age") containing a quote that has sparked a debate on another thread about whether good luck or good planning contributes more to someone's financial well-being.

I didn't see much discussion of the article itself. It focuses on a 55-and-over community in a wealthy area of California where there appears to be fierce conflict between newer, well-off residents who want to upgrade by adding expensive amenities (e.g. a "tournament-quality pickleball complex") and those who bought in early, whose finances tend to be more limited. The level of hostility is extremely high, with some in the former group suggesting that those in the latter group should go back to work or look at reverse mortgages to pay for the upgrades. For now, the two factions in the 4700-resident community seem evenly split (and the pickleball complex is on hold), but I can't help thinking that in 5 or 10 years the well-off newcomers will have the numbers to get whatever they want, which means the limited-income group will be in trouble.

Thought-provoking article. I can see the appeal of such a place - sometimes - & might enjoy some of the activities & want state-of-the-art facilities. But the tyranny of the majority is scary. (Disclaimer: I live in a co-op apartment with a board that sometimes makes decisions I don't like -- like choosing a rug for the hallways --but nothing like this!)

 

[Floridatennisplayer]

This happens all the time. My parents bought a condo in a modest golf community in 1988. They were in their late fifty’s. Now in mid 80’s. Most of the original homeowners and condo owners have passed on. My mother and only 4 others original owners are left.

The rest of the condos have been purchased by people in their mid-50s with much more money at their disposal now. These new owners are all now on the board and are upgrading things left and right. Condo fees have soared and they are continually approving assessments. My mother and the other 4 are all widows with limited funds. Their 5 votes are worthless.

 

[griffithee]

What I found objectionable was the implication that wealth is accumulated by "luck" or "timing" -- well timed-home purchases or well-timed stock buys.

As Robbie said, he's been investing since he was 23. I strongly suspect his wealth is due to a lifetime of disciplined, prudent investing and not due to luck or a stock tip that resulted in a windfall. (Of course, I don't know Robbie so this is just my surmise.)

I guess I'm a little thin-skinned on this topic because I've been hearing it from family members. I went to school at night while w@rking full-time, w@rked hard and advanced my career, put away money every month, generally lived within my means, and was able to FIRE this year. But, according to family members I was able to retire early because I was "lucky".

It sounds as if your family are saying your were lucky because they are comparing their own position in life to yours. They might see themselves as being just as capable as you are but refuse to realize the sacrifices you made were not made by them. Instead of admitting to themselves that they made some poor choices (relative the choices you made), they can instead blame it on chance. Or in your case, luck. That way they are off the hook because luck favors no one, it is pure chance. This also precludes them from saying what a great job you did, also implying they did a poor job. And no body... well mostly nobody wants to admit they make poor decisions or admit a sibling/ cousin/ son/ daughter is better than they are. So, if you dont hear from them, take it from a random stranger, "Great job and well done!!!!"

 

[razztazz]

Overweening Sense of Entitlement. It ain't just for poor people... if it ever was.

The real American Dream is: If I can buy it, I deserve it. And that means you.

 

[FIREd]

This happens all the time. My parents bought a condo in a modest golf community in 1988. They were in their late fifty’s. Now in mid 80’s. Most of the original homeowners and condo owners have passed on. My mother and only 4 others original owners are left.

The rest of the condos have been purchased by people in their mid-50s with much more money at their disposal now. These new owners are all now on the board and are upgrading things left and right. Condo fees have soared and they are continually approving assessments. My mother and the other 4 are all widows with limited funds. Their 5 votes are worthless.

My mother is in the same situation. She is one if the few original owners left in her building. Lots of new professionals with more disposable income moving into the building and demanding more security, amenities, upgrades, etc... Her HOA fees have skyrocketed (with insurance and property taxes it’s almost equivalent to paying rent on a condo she owns outright!). She can’t keep up on her fixed retirement income, so I have had to help. Meanwhile, the HOA fees have increased so much that they are starting to hurt property values.

 

[samclem]

I can see the appeal of such a place - sometimes - & might enjoy some of the activities & want state-of-the-art facilities. But the tyranny of the majority is scary. (Disclaimer: I live in a co-op apartment with a board that sometimes makes decisions I don't like -- like choosing a rug for the hallways --but nothing like this!)

My mother is in the same situation. She is one if the few original owners left in her building. Lots of new professionals with more disposable income moving into the building and demanding more security, amenities, upgrades, etc... Her HOA fees have skyrocketed

This happens all the time. My parents bought a condo in a modest golf community in 1988. . . . . Condo fees have soared and they are continually approving assessments. My mother and the other 4 are all widows with limited funds. Their 5 votes are worthless.

Would a cap on assessments/HOA fees, etc in the bylaws of these organizations help? Something that pegs all fee increases for existing owners to inflation + 1% ? Fees could be reset to higher levels for new buy-ins, but the existing folks would be grandfathered in and protected by the cap. It would protect the early stakeholders from being priced out, and would put new buyers on notice that, as far as amenities, what they see now is what they'll probably see in the future--don't expect a super pickleball stadium. The rule would have to be fairly hard to amend in order to work.

Maybe this is already commonly done.

 

[pb4uski]

This happens all the time. My parents bought a condo in a modest golf community in 1988. They were in their late fifty’s. Now in mid 80’s. Most of the original homeowners and condo owners have passed on. My mother and only 4 others original owners are left.

The rest of the condos have been purchased by people in their mid-50s with much more money at their disposal now. These new owners are all now on the board and are upgrading things left and right. Condo fees have soared and they are continually approving assessments. My mother and the other 4 are all widows with limited funds. Their 5 votes are worthless.

But there is the dilemma... if the majority who want positive change were to acquiesce to the minority who can't afford the increasing condo fees then nothing would ever change so that doesn't seem like the right answer either.

The reality is that people get priced out of their homes all the time and the increasing HOA fees in your mother's case and in the article are just an additional pressure on people on fixed income.

Perhaps the best answer is a middle ground where improvements are made steadily but slowly... but in my condo association you would think that some people are down to their last nickel the way they squeal about HOA fee increases.

 

[daylatedollarshort]

A few years back I was at a 24 hour grocery store at night. Since it was open 24 hours they stocked the shelves when shoppers were there. A stocker in the next aisle over was using a forklift to load boxes onto the top shelf. He accidentally pushed some big boxes of cans down from a high shelf 15 feet from where I had been standing seconds before. They hit the aisle floor like a piano being pushed out of window. I had looked up and saw the boxes moving so I purposely put that 15 feet distance in. But what if I hadn't looked up? What if I had been listening to music with ear phones in? What if he had worked a little faster and I han't had time to move? Those big boxes of cans would have fallen on my head. A few seconds and 15 feet made the difference between life and serious injury, maybe even death or disability for me.

I am a firm believer in luck playing a big role in my life and I also learned not to shop at 24 hour grocery stores at night any more.

 

[Souschef]

This happens all the time. My parents bought a condo in a modest golf community in 1988. They were in their late fifty’s. Now in mid 80’s. Most of the original homeowners and condo owners have passed on. My mother and only 4 others original owners are left.

The rest of the condos have been purchased by people in their mid-50s with much more money at their disposal now. These new owners are all now on the board and are upgrading things left and right. Condo fees have soared and they are continually approving assessments. My mother and the other 4 are all widows with limited funds. Their 5 votes are worthless.

I can understand that. My folks bought their condo in Florida in 1974. My mom lived to 102 and all the original residents had either died or moved.

 

[lucky penny]

Would a cap on assessments/HOA fees, etc in the bylaws of these organizations help? Something that pegs all fee increases for existing owners to inflation + 1% ? Fees could be reset to higher levels for new buy-ins, but the existing folks would be grandfathered in and protected by the cap. It would protect the early stakeholders from being priced out, and would put new buyers on notice that, as far as amenities, what they see now is what they'll probably see in the future--don't expect a super pickleball stadium. The rule would have to be fairly hard to amend in order to work.

Maybe this is already commonly done.

I like this idea. Maybe the newer, well-heeled residents should pay proportionally more for the expensive upgrades they want, like the $300,000 pickleball court, than the long-timers who view that as an unnecessary frill.

 

[braumeister]

How about saying the current HOA fee is strictly to maintain the facilities that presently exist?

Newly built facilities like the fancy pickleball court would be financed by a new supplemental HOA fee and give only those who pay it the right to use those facilities.

 

[samclem]

How about saying the current HOA fee is strictly to maintain the facilities that presently exist?

Newly built facilities like the fancy pickleball court would be financed by a new supplemental HOA fee and give only those who pay it the right to use those facilities.

An interesting Freakonomics podcast covered an apartment building in Manhattan where many of the units are under old rent control laws. Folks who bought later and are paying higher rents are the only ones allowed to use a nice new gym in that building. The podcast had interviews with economists, tenants, etc. Some other similar cases were discussed (in one, the tenants paying the lower rents had to enter and leave the building through a back door! ) Lots of strongly held opinions, per the episode title: "Fitness Apartheid."

 

[WyomingLife]

Luck plays a big role in our area in terms of wealth. Some start ups go bust, some turn into Facebook and a lot are in between. Employees here play the start up lottery all the time trying to get in early on on stock options that might be worth a small fortune or worthless in a few years.

Houses? When we moved to the Bay Area, Silicon Valley was having layoffs, house prices there dropped and many tech workers were out of work. In our part of the Bay housing was hot, then cold for years, then hot again. Cashing out from a hot housing market to a LCOL area can mean an extra $1M+ for retirement.

Studies show luck plays more of a role in success than many successful people would like to think it does:
The Role of Luck in Life Success if Far Greater Than We Realized
https://blogs.scientificamerican.co...life-success-is-far-greater-than-we-realized/

Kitces has a thoughtful analysis regarding the role that "when you were born" plays in investment outcomes, too: https://www.kitces.com/blog/birth-y...vesting-baby-boomer-gen-x-millennial-returns/