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About that money they've put by...
May 21st 11:18:22 AM
From USA Today:
The growing divide between the rich and poor in America is more generation gap than class conflict, according to a USA TODAY analysis of federal government data. The rich are getting richer, but what's received little attention is who these rich people are. Overwhelmingly, they're older folks.
(...)Social Security and Medicare increasingly are functioning as a transfer of money from less affluent young people to much wealthier older people.
Because the older generation hasn't set aside enough money to cover promised government benefits, young people will have to make up the difference or older people will face benefit cuts. The financial shortfalls of Social Security and Medicare over the next 75 years are so large — $340,000 per household — that they dwarf the wealth of every age group. This hidden debt will make it a challenge for young people to accumulate as much wealth late in life as their parents have.
Posted by Ryan Lynch
Comments
Somehow I think you missed the part about how the biggest reason for lacking wealth in people under 40 is DEBT.
If most of us didn't start out in debt with student loans, we might be creating wealth for ourselves instead of the lenders.
Unlike our parents, we can no longer expect to get decent jobs without a college degree. Good jobs require grad school. Then you come out with so much debt you can't repay it in 10 years (that was the original plan they sold me when I started taking these loans). So you have to stretch it to 20. If you took unsubsidized loans the interest started accumulating while you were a student. After a 6 month post graduation grace period, you have to start repayment. You can defer, but interest will still accumulate.
For borrowing slightly over $40,000 for school, stretching the repayment over 20+ years, as of now I will end up repaying nearly $90,000. That's roughly $40,000 that I could have invested in a home, etc.
So maybe the whole student loan thing is where you are getting screwed. Social Security doesn't need to be fixed just from payroll tax. Didn't they borrow from the trust fund? Well, the government can just pay it back.
Of course that requires more taxes...
Posted by skeptic on May 25th 12:04:30 AM
You're right about debt (see below), but I'm confused about your last series of comments. Yes, Congress has "borrowed" from the trust fund. More accurately, Congress has spent the surplus money generated each year by the Social Security program. When Soc Sec stops running a surplus and starts running a deficit in 2017, the government is going to have to make up the deficit somehow. Raising taxes and cutting benefits are two options, though it is strange considering the financial situation that you and many others of our generation have experienced that you would be at all tolerant of Social Security reaching even further into your pocket.
From the USA Today article:
"Younger generations now delay the start of wealth accumulation. They postpone careers to get more education. They marry later (delaying the financial benefit of a shared household), have children later (delaying the arrival of lower-cost, kid-free days) and inherit money later (their parents live longer).
Younger people may not look poor. They have more stuff than ever — more valuable houses, cars and other assets. But they are so much deeper in debt than their parents — student loans, credit cards, mortgages, car loans — that their net worth has shriveled.
What's not clear is whether today's younger people will catch up. Will they reap financial rewards late in life as their parents did?
'Young people have a great future ahead of them, but the rules of wealth creation have changed,' says economist Kay Strong of Bowling Green State University in Ohio. She says young people will have to work longer and switch jobs more often than their parents for financial success.
'The baby boomers were the last generation able to ride the old industrial economy that let you hold one job for a long time and retire with a pension,' says Strong, 54. 'The new economy is going to require people to adapt, hold more jobs over a lifetime and give up the concept that you will retire at 62.'"
Posted by Ryan on May 25th 12:10:52 PM
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