Why would you even need a citation? It is tautologically true that one becomes rich by spending less than one earns.
msmith537’s point was that the earning side is the important part, not the frugal spending side. Sam Walton would be a billionaire even if he lived like MC Hammer.
Your username makes this post even more awesome.
When I hear “the 1%” and things like that, it’s exactly those middle managers and executives making six figures with a net worth of $1M or $2M that I think of.
I think about it like this: there are 300+ million Americans today. The wealthiest 1% means a little more than 3 million Americans. Sure there are a handful of Waltons and Bill Gates at the very pinnacle worth many Billions, and there are a fair number of people worth tens or hundreds of millions, but most of those 3 million Americans in “the wealthiest 1%” are guys like Shodan. Maybe 80% or 90% of “the wealthiest 1%” are what I think of as typical millionaires: people who saved a lot, didn’t buy new vehicles or extravagant lifestyles, but have now saved up a nice nest egg that seems well-situated to see them through a comfortable retirement. Those people aren’t my enemies. They didn’t steal from me (neither did Sam Walton or Bill Gates for that matter). They don’t deserve to have their legs cut out from under them just because the average American would rather have the latest iPhone than save for retirement. I admire the Shodan’s of the nation. I aspire to be like him one day.
I get your point, but I wasn’t really talking about personal investing, I was talking about the millions of families whose wages are low and not getting higher who can’t save or invest a significant amount. And I wasn’t really talking about me. I’ve put money in 401ks.
You probably don’t work in a place where the wages are really low and aren’t going up, like millions of people do. Those are the people I’m talking about.
But the fact that we are talking about 401ks and people having to contribute to them, rather than pensions that had guaranteed benefits and no employee contribution and are now nearly extinct, supports my overall point.
You have to exclude the top 10 percent. When you do that. Wages are basically flat.
And a wage increase of about 1.50 in 50 years is pretty lame anyway.
And that’s the problem - you have a much worse chance of reaching that goal than in the past.
There is a pretty good reason they went extinct…unfunded retirements where the employee has no skin in the game often fail in the long term. I work for a state government (I know you figured I was some fat cat engineer, but I’ve been a government employee since the dot com bust :p), and in my state contributions to the retirement fund are mandatory…we HAVE to give 11% off the top (the state then matches that, and there is a 5 year vesting process). They don’t ask, they just take it. Now, not only am I good with that but it’s one of the main reasons I actually went to work for these guys (I also put in the max in the government equivalent program to the 401K). In the end, I KNOW my retirement will be there. Along with my own investments (I did 401K to the max in every job it was available since it was basically introduced) and my Social Security I’ll actually have to worry about making more than I do now when I retire, and how to adjust my burn rate so I don’t get hammered with additional taxes.
YMMV, but wishing we’d be back to the good old days when companies paid everything to the retirement fund and it was ‘free’ to employees is just wasted effort…and in the end, people who relied on that ‘free’ retirement ended up getting screwed when US labor became uncompetitive at those higher loaded costs and the jobs were either discontinued, moved to cheaper labor areas in the US or to foreign countries or rendered obsolete due to automation.
“Any” was admittedly a bit hyperbolic. But recognize that “family” means net to the family. 2015 saw college graduates the most indebted ever.
Note that about 38% of spaces in 4-year programs are not in public schools.
If your family has some wealth then more gets taken away but everyone feels the pain.
Even with many parents not only using up savings but taking on debt to pay for college record numbers of young adults have record amounts of college debt for years afterwards, with significant negative impacts on the ability to accumulate wealth.
Anecdotally I can tell you as the parent of four kids, two through college, one in process, one in High School, my income high enough that other than the partial merit scholarship options mine pay full frieght … I have been saving in the 529s and otherwise since they were tiny, have a professional’s income, and it is a stretch. If it is a stretch for me I can only imagine how it is without a professional’s income.
I haven’t really followed income distribution or wage growth because it’s not been a terribly important issue to me, but the average American’s life has gotten significantly better in the last three decades:
[ul]
[li]The homes we live in now are bigger and better than they were 30 years ago (1535 square feet in 1975 compared to 2,169 square feet in 2010, cite).[/li][li]The healthcare we receive is more advanced and keeps us healthier and living longer (life expectancy in 1975 was 72.6 and in 2010 it was 78.7, cite).[/li][li]technology is more available than ever. In 1975, the Internet and cell phones didn’t even exist, now most of us have a computer at home and high-speed internet access (cite) and 64% of adults own a smartphone (cite)[/li][li]crime rates are down (cite)[/li]
[/ul]
By just about every material measures I can think of, the average American is significantly better-off today than 30 years ago.
Some jobs are more fungible than others but most are to some degree, including, as pointed out otherwise to your post, executives. Yes highly inflated premiums are paid for the perceived best executive talent wherever it is found.
Sanders himself is quite clear: it is the complete business model of Wall Street that is based on fraud, not just a few who have manipulated the system and his proposed tax is a tax on all transactions.
That said it is clear that in fact income and wealth inequality (not exactly the same things) have mostly benefited the 0.1%, really the top 0.01%, not the 1%.
I am not sure what to think about a financial transaction tax. It is not a new idea and one is supposed to launch in the EU sometime this year. If it is of the same magnitude as the EU’s it could indeed both raise significant funds, decrease volatility, and tax the 0.01% the most while sparing the long term investors from any significant impact.
Oh, come on. They failed because 401ks are cheaper to provide and shift all the risk to the worker.
Do you? Is a 401k gauranteed by the government like pensions are?
Yeah, but now that pensions are gone, those jobs are back, right?
Can I ask the panel here to specifically address the impacts of “free” public college for all if it could magically occur and be funded by similar magical means.
That’s about 62% of available 4 year college spots becoming free.
Impact number one: much more competition to get in as many who currently choose to attend a private school would not choose to do so given the choice of free. Likely many private colleges and universities would collapse, excepting of course the very high prestige ones. Some who currently can afford public university education would not qualify against the greater competition but could not afford private college costs.
Free does not mean one gets in or completes. Sweden, Denmark, and the Netherlands all have lower college completion rates than does the U.S.
I’m not sure what the big deal about making college free is. You still have the costs of transportation, housing, food, and beer money. Public colleges are currently heavily subsidized already. I’d like to see more hybrid / apprenticeship forms of education combined with learning through the Internet.
No, he wouldn’t. The financial model doesn’t change if you spend more than you make.
Now if you meant to say Sam Walton would still be wealthy if he spent the same amount as MC Hammer that would be true but MC Hammer would still be rich if he spent what I spent. Therefore, Sam Walton would still be wealthy because he budgeted his money.
My parents came out of the Great Depression. Their level of poverty had very little safety net compared to the financial downturns that followed. Their lifestyle was much more austere because of this and they lived comfortably because of this. By comfortable I mean a house and food on the table.
They were never wealthy. They accomplished this by budgeting their money. My father built his first house. He carpooled to work. They rarely ate out. He repaired every item in the house from the family TV to the car. He did this with a high school education and a ridiculously basic set of tools.
My mother ran the house. She cooked, cleaned and most importantly raised her family. We were taught the skills needed to survive.
Poverty is a non-skill. It’s the result of adult care-givers whose only skill is the ability to procreate. It has little basis in wealth or the lack of it.
I doubt it. If they do, then they’re using a very misleading term. Those are the 0.1% or maybe even 0.01%. The mega-rich, to use I term I don’t particularly like. Surely the folks in the 5% are rich, and those the ones you mention in your first sentence.
Because it costs money and we’re 19 trillion dollars in debt. We’re passed kicking the can down the road. We’re now lobbing financial hand grenades at the next generation.
making college free doesn’t cut the cost of education. In fact, it removes any financial incentive by colleges to reduce costs.
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Oh, come on. They failed because 401ks are cheaper to provide and shift all the risk to the worker.
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As I said, my work has a pension, so patently this is not the case. What’s different is, again, that our pension isn’t unfunded…every employee has skin in the game.
How did those unfunded pensions work out? Doesn’t look very good to me. My 401Ks performed very well, and the money market funds I rolled them into have as well. Is it guaranteed? No…nothing in life really is if you look at the fine print except death and taxes. But I’m diversified enough that, unless the entire economy goes completely tits up I will have a retirement when I want it. If the entire economy does go tits up then I seriously doubt your old school ‘guaranteed’ pension will be there either.
Probably too late for that now. Companies who do manufacturing in the US use automation heavily now, so the days of those semi and unskilled good manufacturing jobs making good salaries and good benefits are probably gone for good. Oh, they still need workers, but they are very vertically skilled and specialist labor…and there are always shortages of those folks, which is why they command better salaries and benefits. But there are far fewer of those jobs in the manufacturing sectors because of that reliance on automation and expert systems, and that is unlikely to ever change. In fact, my WAG is that we’ll see automation continue to make inroads into many service sectors in the coming years, further displacing workers in those sectors…and that a push for higher minimum wage will probably prompt many companies to accelerate this trend and automate further. I’ve noticed, for instance, that every single grocery store in my town now has automated checkout lanes. It used to just be the really big Walmart, but they all have them now, and several of the stores are dedicating over half of their check out lane space to automated checkouts now…meaning that they now have one employee to watch the maybe 10 or even 20 machines, whereas in the past you’d need clerks and baggers for those lanes. Same goes for restaurants…more and more have WiFi kiosks where customers can order drinks, appetizers, deserts and even regular food anytime, plus pay when they want to leave. We are just at the tip of the ice berg on this, but it’s the trend, and I won’t be surprised to see every restaurant and maybe every fast food place with something like this in the next 5 years. It’s an unstoppable trend at this point, so even if we tried to reverse things and eliminate the minimum wage or whatever it’s too late to save those kinds of jobs.
No idea what that will all mean for my kids generation or their kids wrt what work they will be doing. All I can say is that we’ve gone through all of this stuff multiple times in history and when technology has disrupted labor sectors in the past there have always been new things that people to move too that uses that idled labor, and there are hints at what that might be even today. But those old jobs? They aren’t ever coming back, no.
A 401k is not a pension, if that’s what you meant. But I think I just misunderstood you.
You may be lucky enough to have a pension, but most workers today don’t have pensions.
Having “skin in the game” is completely irrelevant. A pension works better than a 401k, even without employee contributions.
Really? You’re saying its the pension’s fault that employers failed to fund them?
That was the employers screwing their workers, before they screwed them more by dumping pension altogether for 401ks!
True, but a pension is guaranteed in the technical sense - it has a defined benefit that doesn’t drop if the stock market drops, and if it were to fail entirely, the Pension Benefit Guaranty Corporation would bail out the workers. There’s no 401k Benefit Guaranty Corp.
Sure, disaster can happen, but 401ks will suffer first.
Ask any financial advisor and they’ll tell you a pension beats a 401k.
[QUOTE=lance strongarm]
A 401k is not a pension, if that’s what you meant. But I think I just misunderstood you.
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I work for a state government…we have a pension. I formerly had 401Ks and I’ve rolled those into other things. In addition I additionally contribute to a 457 plan. Just clarifying. The majority of my retirement will be coming from these investments btw, not my pension.
No, they don’t. They do have access to other things, such as IRAs or 401K plans. No, they aren’t pensions, but they still exist.
I disagree. Pensions don’t work better than 401Ks across the board. Many unfunded pensions where employees didn’t have skin in the game have proved disastrous to the employees who thought they had something only to find out they don’t. This has happened to both public (government) workers pensions and private industry pensions as well.
Fault? I think it’s a flaw in those plans that employees aren’t contributing and thus can and have been screwed when the company or government agency is strapped for cash and decides they can’t fund it all anymore and thus cut back.
I disagree with this assessment and also your assertion that this is where 401Ks came from.
Tell that to all the folks who lost their pensions when things changed. Like I said, this has happened to both public and private pensions.
Uhuh. In the 30+ years I was involved in the plans it hasn’t happened yet. By the same token, many private and public pensions have folded. So, not sure what you are basing this off of. But I can see you have serious reservations and issues with the 401K program, which tells me a lot as to why you can’t possibly find any funds at all in your budget to join. Personally, I think it’s foolish, but different strokes for different folks. At least, hopefully, your fallback plan that IS funded (a.k.a. Social Security) will be there for you in the end so you have something. Guess we shall see who is better off come retirement.
My financial adviser says ‘diversity is the key’, and that your across the board statement is ludicrous. I’m speaking to her right now in fact. 
My road map to retirement is pretty solid. How about yours?
In any case, do what you like…we have strayed pretty far from the original topic of the thread so I’m going to leave it there wrt the quasi-hijack. To recap wrt to the topic, I don’t think that Wall Street is the ‘main cause of U.S. income/wealth inequality’, and I think Sanders is a nut…basically the equivalent of the various RW Republican circus candidates. The only up side is that while the Dems have one left wing loony nutter running, the Republicans have a whole clown car full, and at least the Dems have a sane candidate to counter balance things…and one I can vote for. There isn’t anyone on the Republican side I’d trust to wash my car.
401ks are more risky. That’s the bottom line. No guarantee or insurance backing them, no defined benefit, and you might contribute more.
And back to the larger point, which is that many workers don’t have the spare cash to contribute their “skin in the game” in the first place.