Why are middle class conservatives dying without life insurance and savings?

This ^.

Speaking as a moderate lefty who fucked up his family’s finances a decade ago, this could be about me. Except my overspending was on a house, and when the shit hit the fan I only blamed myself.

This, too ^.

Probably - but I sure didn’t.

I didn’t know this was a thing. Well, let’s see how generous my family and friends are! :rofl:

I kind of have to reject your entire post here–I see no evidence it is based on anything aside from anecdote. And even that anecdote is weak, some people may seek to raise supplementary funds related to an unexpected death through a GoFundMe even if the deceased had a 401k or life insurance plan. What is the actual % of Americans that carry such a high life insurance amount that it would be expected to replace their future earnings? For a 40 year old that would mean around 25 years of earnings–or around $1.8m. How many Americans are carrying life insurance to that level at age 40? How many are conservative or liberal?

With 401ks, as you well know the nominal increase in value goes up quite a lot as the years go on. In your 30s when you’re expected to have IIRC 3-4 years salary in a 401k, that might “only” be a couple hundred grand. So annual increases might be $15k or so. It adds up over time. In your 50s when you have $1m+ then your percentage gains are producing bigger nominal amounts. Someone aged 40 wouldn’t be expected to leave behind a 401k so large that it would represent easy money to retire on for the surviving spouse. Now, someone who is a bit better than just middle class, who has a fat 401k match and is contributing up to the personal contribution limit every single year, and has been doing so for 18+ years by age 40, might be in a pretty plum spot. Most middle class people won’t be hitting that level of 401k building due to base income not being high enough and having to pay for things like living expenses, raising kids etc.

I don’t know that those stories are accurate; they are the unsubstantiated claims of the families of people who spread misinformation for a living. If their families have latched onto that strategy, there is no particular reason to believe their purported struggles are real.

If you want a rationalization for why conservatives would die without sufficient life insurance and savings (like most liberals, I would imagine), they would say it’s for the same reasons that some liberals might say. The system failed to provide them the opportunities to succeed.

Liberals might want affordable education accessible, universal health care, chances to buy affordable housing, reasonably-regulated financial products to invest in, paid medical and family leave to protect against disaster, equal access to job opportunities without illegal discrimination, and a clean environment to safeguard their health. The government should provide a social safety net so people can take some risks without an error leading to a lifelong disaster. If liberals have trouble succeeding, it’s in part because the system doesn’t give them these things. .

Conservatives would say they can’t succeed because the system has also failed to give them the opportunities that they want to thrive. College is too expensive because the government gives so much money to the poor for school that universities can jack up the price for the middle class that don’t get need-based scholarships. Health insurance is too expensive because the government requires men to buy coverage for birth control and everyone to buy coverage for pre-existing conditions caused by people’s life choices like smoking, being obese, doing drugs, catching HIV, or having children. Housing is too expensive because it’s so hard to build with all the government safety requirements like fire alarms, grounded wiring, and lead-free pipes. They can’t invest in the things they want to invest in because the guy down the street with a million dollar idea couldn’t just ask his friends and family for money without paying a lot of accountants and investment bankers to make sure he disclosed every last risk. Their employers don’t pay them what they think they are worth because the employers offer a bunch of paid sick leave that our hardy never-been-sick-a-day-in-my-life conservatives will never take (until they do). Their employers can’t pay a decent wage because affirmative action means sub-par employees keep the company from truly succeeding while sucking up all the advancement opportunities. All those pesky environmental regulations mean that even starting a company that strips and repaints old windows or fixes old cars is too expensive to do in accordance with the law. If conservatives have trouble succeeding, it’s in part because the system doesn’t give them these basic things. Worse yet, if the government wasn’t spending so much of their money to fund all their misguided priorities, conservatives could save and invest a bigger portion of their income to meet these needs.

The financial services industry causes many Americans to have less success in long-term investing. Actively-managed mutual funds and professional wealth managers siphon off a bigger share of growth than most clients realize. The low-information consumers mentioned in the OP are the targets of glitzy ads and delberately confusing documentation. (There are of course exceptions, e.g., Vanguard).

A possible reason this would disproportionately impact conservatives (not that I’m convinced from the data presented that it actually does) could be a tendency to reject criticism of the financial sector as anti-capitalist.

When Michael Lewis’s Liar’s Poker came out in 1989, I had numerous conversations with conservative friends who dismissed out of hand the book’s claims that the nation’s finances were in the hands of such irresponsible frat boys. Spy magazine quoted the late Republican National Committee chairman Lee Atwater as declaring that he knew from reading the first page that it was a worthless book.

Thirty years later–and after a near meltdown of the economy due to those frat boys’ doings–it’s no longer a fringe view that the financial industry is willing to screw regular, hard-working Americans to make a buck.

People committed to their position by ideology may have been hit harder than the average person.

Great and thoughtful post!

John, what about all those people whose careers (and pensions/401Ks) went to shit in 2008?

Don’t you think that explains some of it? The people I talk to, mind you they are mostly conservatives past mid-life, constantly rail about how the recession screwed up their finances. Permanently.

I’m sure if you went back to 1940, before the war mind you, plenty of Americans would tell you how the crash of '29 screwed up their finances. Permanently.


A recession only screws up your finances if you actually sell. That’s an easy concept to know but it’s an extraordinarily hard concept to follow. I hate to toot my own horn but Spring 2020 is a prime example because when others were panic selling I was buying and I was recommending to everyone I could to either buy or sit tight. Hell, I was one of the few on these forums saying it was unwise to lock in a loss. However, it’s hard for people to behave where a paper loss is not a real loss. They panic and want to “preserve” their money. They should know better but many folks can’t force themselves to do what they know what is right which is to buy. There was no loss in 2008 until the assets were sold in which case the loss was now real. This is not knowledge based decision making for most people who invest this is behavioral.

The problem is that adults can make decisions that impact them for their whole lives in an instant. And anyone and any institution that is supposed to be responsible and impartial can be captured or regulated by the corrupt or self-serving. A legal instrument one owns but can’t touch and reflects the state of the total economy and can’t be touched by any other institution yet pays dividends periodically in one’s life is one potential mitigation. But we bristle at being managed in such a way.

Finances are very similar to weight control and are actually easier because they are a bit more abstract in that the rational math is easy. It’s 4th and 5th grade math. But the behavior is very very difficult and requires setting up one’s life in such a way that emotion is bypassed.

I’m actually ideally wired for managing money because I don’t let emotions impact my financial decisions and I’m happy with my standard of living. So if I were to manage money professionally I could undercut practically any competition.

Assuming, of course, that the owner of the asset has the option to not sell. I know you’re talking about securities, but lots of people (like me) were forced to sell their homes at steep losses in the 2008 aftermath because the alternative was either draining our savings or being foreclosed. It was anything but an emotional decision.

Right. People have to liquidate houses and vehicles all the time and that is unfortunate. In many ways buying a house is not a great idea with regards to long term financial diversification. Studies suggest that renting is a winner and is less risky. One issue is that housing markets being local and the job one has is typically local means that if a large employer or a region go into decline so does the real estate market. It’s risky. If we lived in an area that didn’t have a diverse economy we’d be renting. That said, we also lost a bit of money selling our previous house. That happened due to buying at a top of a known bubble and selling after the bubble collapsed. People knew that there were poor fundamentals in the housing market.

It is interesting that you bring up having to sell. In every transaction there is a buyer and a seller and someone ought to do well in the transaction. So for every seller losing something a buyer is getting something. It seems like it ought to be zero sum but it isn’t. As the economy grows and wealth accumulates managing your assets properly ought to allow one’s net worth to grow somewhat proportionately to the rate of growth of the overall economy.

That has me concerned with the current market. The growth is too high in equities. I think asset inflation is very real because I’m not seeing corresponding productivity growth domestically. Not adjusted for purchasing power at least. All these folks happy with businesses needing to jack up wages and municipalities demanding wage floors are going to be in for a rude awakening if productivity doesn’t ramp up dramatically.

These two quotes are related. FUS is correct - expense ratios and advisor fees add up, and more people should be aware of how much they’re paying and what they’re paying for. But Max S’s quote is a reminder that, left to their own devices, people make extraordinarily bad decisions for themselves. The percentage of people who panic sold at the bottom of the market is directly proportional to the percentage of people who operate without an advisor. Vanguard themselves, the gold standard for the do-it-yourself crowd, values an advisor at about 3% of net return - a number far greater than expense ratios and advisor fees combined.

I’ve been contributing to my 401K for 25 years. I loved the recessions, because it meant stocks were at a discount. I would have contributed even more to my 401K (during the recessions) if I could.

Hate to say this, but I hope there’s one or two more before I retire.

If you keep your money in the market, recessions can make you a lot of money. Just make sure you switch over to more secure things when retirement is coming near.

You don’t need to be politically conservative to be very reluctant to confront the fact of your own mortality.

That issue is by far and away the biggest obstacle to the salesman of traditional life insurance.

If you look in a certain direction, and squint a little, term insurance really does look like a scam. Only a small percentage of people die before the policy expires. (Of course, that’s why it’s so cheap, but a lot of people overlook that.)

I know you’re kind of joking, but there is a way of measuring the value of life insurance, IIRC the benefit times the probability you use it. It doesn’t just apply to life insurance but to the value of any project doing cost avoidance not cost reduction, which included most of the projects I managed when I was at Bell Labs.

First, your view on people making irrational economic decisions has been verified experimentally lots of times. Those making policy based on the assumption of rational economic actors either are deluded or know what they are doing, and see a benefit in the average person losing money.

I believe productivity went up during Covid. Some part of inflation today is due to supply chain problems, but some might be due to the fact that wages have not been keeping up with productivity for a long time. If the disruption causes them to raise to what their proper levels - based on productivity growth which I agree is the crucial factor - it might seem inflationary in the short run. But the average person has been ripped off by the wealthy for a long time now, and inflation sure beats a revolution.

Another exception to this is when people were forced by their employer to put their retirement assets into bets-on-bets type securities which were at the center of the 2008 crash. I had friends who held onto their assets, only to find that the funds no longer existed.

My money was in the federal government’s Thrift Savings Plan and Vanguard index funds, which did take quite a hit. But they were grounded in tangible equities, so they eventually recovered.

Which goes back to my point about the financial industry defrauding clients (in this case, with the likely help of their employer) by forcing or luring them to invest in houses of cards.

Eddie would have been vaccinated.

His entire thinking was fact- and science-based, and his only trouble with the vaccine would be that the government had anything to do with it.

But then there’s religion, which Eddie rejected. I’d like to see a correlation between those who reject vaccination and their [irrational] religious beliefs.

mrAru had most of the guys in his division or his shore duty basically laughing at him - we went househunting in 1990, back when realtors were pushing the get the max mortgage they will allow, so a lot of people with our combined income level were getting quarter million dollar mortgages. We calculated how much we could afford based solely upon his military income, and going with how much we actually had in savings for the assorted costs [points, closing, lawyer fees, inspection fees, whatever.]

We ended up with a nice property, 2.75 acres for $91K. Nice barn, tolerable small house of 800 sq feet.

And our penuriousness had been effective - with me fading in and out of jobs as the job market had its ups and downs [had 3 different customer service jobs dumped us for over seas operations, and one decided to close the service center here. In retrospect, I could have moved to Texas and remained making my CT pay, and done geographic bachelor for mrAru’s final 2 years in the Navy. It wasn’t like we were not accustomed to be separated while he was deployed. Financially that would probably been our best option.] While we have never been able to save boatloads of cash, we have been able to stay afloat and have a comfortable modest lifestyle. Our biggest splurges are the vacations we take every 5 years [we use his retirement pay from the Navy for that.]

A mortgage that size is hardly unusual or a sign of irresponsible spending for many middle-class couples. Whether or not it makes sense for you is another story, depending on where you live and your total income. Generally speaking, the kind of place where you can buy 3 acres and a house for $90k are not the same kind of place where you buy for $300K.

Eastern CT, very expensive and annoying to find anything decent in the 90k range that isn’t a small condo. We were also just barely within the 30 minute recall time for the military base requirement. We got seriously lucky - the owner had bought 3 properties to flip and had some sort of financial issue, so we got it for what he got it for from a foreclosure auction. Have to love a desperate seller.