If you are going to count future potential earnings as an asset, you also need to count future potential expenses as a liability. Sure the WalMart greeter can accumulate a million dollars - if he doesn’t eat and needs no place to live.
And if your expenses rise faster than your earnings, you are doubly screwed.
If you have no rent and no mortgage, then you are indeed in an excellent position to invest. I don’t think that many people are in this position.
More people might be in the position that they have a mortgage that is constant while their income rises over time. That works much better if your income actually rises, not the case on average for a while.
Just a guess, but I’d suspect the inequalities in both salaries and in the unemployment rate has a lot more of an impact than housing does.
Plus no one seems to have factored in the fact that you have to live somewhere even when you are retired. People who live in high cost markets and can move to somewhere cheaper have more of an asset in their home than people living in rock bottom markets
I started a thread recently where I asked whether SS income should be considered an asset. The consensus is no. It is income, but not an asset. (essentially, you can’t sell it).
One way to factor it in is to consider the present value, but most people simply don’t.
My thread highlighted the importance of income streams, especially reliable ones like social security.
A discussion of income streams is at least as important as net assets. But it seems to be discussed rarely if ever.
Think about saving for retirement. Someone with $1million in net investments can, according to the most conservative measure, spend $40K/yr. Livable but not great.
Now add in two SS income streams, say $35K/yr, and all of a sudden that $1mill is looking more than adequate. Even though SS doesn’t count toward assets.
Consider the person with no net assets, but living in a low-cost place where his/her SS covers the living expenses. Zero assets isn’t necessarily the dog-food route after all.
The point is that looking at just net assets is leaving out a very important part of the discussion. Something which happens a lot. A person’s financial future is determined by net assets + income stream. Both must be considered.
How, exactly, have “whites” exploited the stock market?
I have no problem with that formula. A person who has arranged his lifestyle such that his earnings exceed his living expenses, has a “wealth”, and it is unrealistic to disregard its value. If a person earns $2-million in a lifetime ($40 a year) and lives on the same million as an unskilled wage earner, is he a millionaire (or “rich”), based on that unrealized differential?
The fact is, it costs about $1.5-million to sustain an American at minimal subsistence for a lifetime. Current indicators are that it costs about $450K to raise a child to age 18, and a million in income during that adult lifetime is pretty close to the minimum wage, and society has placed safety nets to protect people who fall short of that potential. So we have pretty much left “million” behind as the threshold of wealth, and should probably stop talking about millionaire in the same breath as rich. It is closer to “eke”.
Maybe that was the plurality of answers on a general interest web board but it’s wrong. Of course it’s an asset, just not a liquid asset. A lot of people seem to get this confused or insist that their conflation of the two terms ‘asset’ and ‘liquid asset’ is how it is. Not being abl to sell something doesn’t make it ‘not an asset’. If you were somehow no longer eligible for SS it would be pretty straightforward to find out how much you’d have to pay an insurance company for a proxy replacement, inflation adjusted, give or take just the different risk (ins co going belly up v Congress changing the SS program) and different tax treatment. How much it would cost to replace is about as good an estimate of an asset’s value of what you could sell it for.
And there is no mutual exclusivity between a known or expected income stream and an asset present value. Those are two sides of the same coin.
The Fed survey quoted does not count Social Security present value in household net worth because
a) the great majority are eligible so it’s a kind of baseline, origin of the axis
b) although it’s a bottom up survey, to tie it in with top down aggregate numbers you must consider that the future SS receipts of some households must be offset by the future tax liabilities of other households. Other asset classes don’t have that zero sum feature within the household sector (a pension is a future liability of the corporate sector, etc)
But on an individual basis of course SS can be expressed as an asset (just like stocks can be expressed as an expected future income stream) and amounts to generally a few to several $100k PV. So few households are really worth nothing, unless they have a lot of negative net worth not counting Social Security, and again $1mil household net worth plus SS is really more like maybe 3 times as much as just SS, not an infinite multiple of nothing.
I believe a Dickens character said that if you spend a shilling more than your income a year you will be miserable, while if you spend a shilling less you will be happy. (Quote badly mangled.) But you will be happier if you make a pound more than you spend. That should be reflected in every increasing assets, so you don’t need expected wealth.
In a similar vein, many measures of wealth I’ve seen do not count house value. since this can fluctuate wildly, as it did. Also it is not as liquid as money in the bank.
That’s certainly true. Where I live not very exciting three bedroom homes of under 2,000 sq. ft. are worth $1,000,000. I have a Game of Life from the '60s. The dollar amounts there are laughable today. The trouble is that there is no nice round number that means rich any more.
In the same sense that it is a consensus in Congress that global warming is not an issue.
It seems about right.
The US is about 63% white, so 1 in 7 of those equates to 9% of the population. Add a few more percent to represent the non-white households worth over a million to arrive at say, 12% of american households.
Now go to any site that calculates your percentile by net worth and plug in $1MM, and it will tell you it’s about the 88th percentile – so yeah, unless I’m doing something wrong here, that’s just about exactly right (my wild guess that only about 3% of non-white households cracks a million could be way off).
But it’s still largely an effect of the wealth being concentrated at the top – to get into the 80th percentile you only need 539K or so, a large dropoff from the ~90th percentile.
They are also not uniformly distributed, geographically. 20% with a half a million, one out of five. In my Texas neighborhood, I bet there wasn’t a single half-million net wealth household within ten blocks of my house, except for maybe a few drug dealers.
So whether these numbers seem out of whack to you or not depends on where you live and who shops at your neighborhood supermarket…
dude, it’s one in seven of the subset, not the entirity of households.
FFS.
Where do you keep your 10%?
Invest in what?
If the investments arent in guaranteed return, arent you risking a lot?
I hear too much negative from Wall Street investments, why cant banks give higher interest rates anymore??
yes, 1 in 7 of white households, which comes to 9% of all americans if the US is 63% white, no? then i added 3% (a wild guess) for nonwhites. my math wrong somehow?
I find it hard to “believe,” too. It must mean that there are many places with far more affluent people than I know around here. Yeah, wealth runs in families, but the number of wealthy people seems too high.
Then again, I marvel at what you guys consider “not rich” around here. So where I live must be atypical.
Well, as was pointed out, the number is skewed - when you look at the median its much more reasonable.
Also consider that you are talking about wealth - that would include the family farm or the family business. Small business owners often have assets in excess of a million dollars. Your dentist has a few hundred thousand in equipment, add in his house, his car, and his IRAs and if he’s been in business long enough to pay down his student loans, he’s probably doing ok. The guy who owns the independent mechanic shop or plumbing business likely has a few hundred thousand in equipment as well.
Then we have an aging population - for white baby boomers, if they’ve managed to avoid unemployment and save for retirement and pay down their homes, a few hundred thousand is pretty much expected. There are lots of people who didn’t manage that, of course, but then - because we have averages - we have Bill Gates out there pushing up the mean (and the median, although with much less force)
For years my husband and I have gone to the Berkshire Hathaway annual meeting - its a bunch of white people. The median income in that room is higher than average - but the demographics are unusual. At fifty, we are young (with the exception of the investment groupies). There are Asians (Indians, Japanese, Koreans, Chinese - most of them who seem to live in Asia), but almost no Blacks or Hispanics. Its weighted heavily to people from the Midwest - most people we run into are from Iowa, Nebraska, Kansas…many of them are wearing cowboy boots - and not ironically in a hipster fashion. And there is almost no flash - I’m willing to bet that the average wardrobe bought from Fleet Farm is higher than the median in America as well. (Except for the investment groupies, who somehow think wearing am expensive suit in Omaha’s CenturyLink Center is impressive).
Securities, mostly. Investments without risk don’t pay much.
Well this is why other people have more money than you. Banks pay interest to compete for your funds. It sounds like they don’t need yours very much.
Historical returns obviously do not guarantee future returns, so we can only look at what happened. Someone who invested as I mentioned above and retired last month would have over $3 million socked away just from an S&P index.
Even if you pick a shitty end date, say March 2009 when the market bottomed out, that person ended up with nearly $2 million. All from $458.33 a month over 40 years.
To hit only $1MM, I’m seeing $235 per month ending in March 2009 or $140 per month ending last month.
Because in order to pay higher interest, they must charge higher interest. The rates are set by the Fed, and the Fed has a monetary policy for quite a long time now that low interest rates will keep the economy humming. Low interest rates mean businesses are more likely to invest, individuals are more likely to buy cars and houses and send their kids to college. Low interest rates fund everything from infrastructure project for state governments to your dental work - basically anything that you have to borrow for, that you can put off, you are more likely to do if interest rates are low. But low interest rates have a downside, if you make your money off interest - like a lot of retirees - your income goes down.
We like it when people spend money - that’s because there is something about spending money - when you do it, it makes more money. Its called the multiplier effect.
I think he’s saying that since the parents and grandparents of today’s white people owned more property and land, they were able to get a head start into the stock market’s appreciation over the past 30 years. We’ve taken advantage of it (“exploited” it).
I’m not saying I completely buy that argument, but I think that’s what he’s saying.
I think home value increases are much more geographically limited that people think. Yeah, if you bought a house 30 years ago in San Francisco or Chicago or DC you made out. But what if you bought in Detroit, Cleveland, or Buffalo?
House equity probably helps the median get up to 177k but the average is driven by the super wealthy.
**1 in 7 white households has over a million dollars in assets?
**
If only ours were one of them…