The summary talks about two "smoking guns" for wealth increase in the oldest age group: home ownership rate and stock portfolio value.
To me, though, these seem like effects rather than causes. In other words, the older age group has enough money to afford these things. I doubt that the oldest age group is somehow vastly better than others at picking stocks to buy; their stock portfolios are larger because they have more money to invest in the same stock market as everyone else, right? And according to the last chart in the paper, on the final page, the home ownership rate of the under 35 group is close to the same in 2022 as it was in 1983, though it dropped lower in 2016.
Thus, I get the impression that the first factor mentioned in the summary, mortgage debt, may be the main driver. In other words, presumably, it's taking much more for the youngest group to pay off their mortgages than it did for the oldest group, because the price of housing has increased significantly. And money going into mortgage payments is money not going into other investments such as stock.
They're causal -- old people predominantly aren't buying new homes or investing in new equities, they collected those assets during their working years when they were cheap, and both of those asset classes have appreciated an extraordinary amount since the middle of their working careers.
> old people predominantly aren't buying new homes
What do you mean exactly by buying new homes?
Obviously the average length of home ownership for the oldest group would be much longer than for the youngest age group. How new were their homes when they were first purchased, and has that number changed over time? I have no idea. But if the value of older homes is increasing, it means that someone is purchasing those older homes.
> or investing in new equities
If I'm reading the tables right, it looks like the oldest group received their largest jump in net worth during 2019-2022 and actually did worse than all other groups in 2016-2019.
I mean that older people have a longer duration of time in their current residence. Their homes have had a longer time to appreciate.
> If I'm reading the tables right, it looks like the oldest group received their largest jump in net worth during 2019-2022 and actually did worse than all other groups in 2016-2019.
I didn't dig into it too much, but the SP500 did better during the former period.
> Their homes have had a longer time to appreciate.
A home doesn't inherently appreciate over time, like a fine wine. Aside from remodeling, the only thing that increases the value of a home over time is increased demand for homes relative to supply, which was my original point: "the price of housing has increased significantly."
> Aside from remodeling, the only thing that increases the value of a home over time is increased demand for homes relative to supply
And it's important to note that a highly significant factor on the demand side is the availability of mortgage loans at low rates because the government prints money to fund them.
And a highly significant factor on the supply side is many highly desirable localities intentionally restricting the supply of housing.
Correct, but in aggregate, (which is what all of these numbers are) they have.
> the only thing that increases the value of a home over time is increased demand for homes relative to supply, which was my original point: "the price of housing has increased significantly."
At the risk of sounding obvious, yes, the value of housing is directly derived from how the market prices it.
When housing prices go up, the net worth of the people who own housing goes up. Most of the time, the prices have been going up. So the people who have the most time in the market are the most to benefit. When boomers were having children, the median home was around $100k. The average boomer who bought a home on a 30yr mortgage, had kids, and is now retiring, has $400k equity.
> Most of the time, the prices have been going up.
That's not particularly interesting though. The rate at which prices go up is crucial, especially in comparison with wages. If the price of housing increases faster than wages, then home buyers will end up with less disposable and investable income than before.
We're not talking about why older people are wealthier than younger people. We're talking about why the gap has increased.
Well, any group that owns more of an asset class will experience more of whatever swing in value it experiences, right? Isn't it as simple as that? 80% of boomers have a house, and only 55% of millennials do. If all homes go up by 100%, the average boomer will have 80% more wealth, and the average millennial will only have 55% more wealth. The gap in their wealth will increase.
Some of them do. Wage earners are not necessarily cash flow positive nor putting money toward hard assets. Plenty of people out there are renting, spending, and not saving. IIRC there's also a good bit of evidence to show that later generations are not saving nearly as much as older generations.
The price of renting is not unrelated to the price of buying. If homes are too expensive or unavailable for purchase, then the rental market will experience high demand, because people have to live somewhere. Buyers and renters may be cash negative for the same reason.
Fair, but most of them are cashing in equity in a previously owned home to buy into a new place, so those wouldn't be contributing to the aforementioned increase in wealth.
I think that’s what the paper was trying to express: That the older cohort got more leverage from the increase in housing prices because they had more invested when prices shot up.
> Summary and Concluding Remarks
> The paper focuses on the slippage in the net worth ratio among households under age 35
relative to all households between 1983 and 2022 and its phenomenal rise among households
aged 75 and over. Based on differential leverage between the two groups (the much higher debt-
net worth ratio among younger families compared to older ones), we would have expected
exactly the opposite – namely, that the net worth of younger households should have risen
relative to older ones. Indeed, the average real rate of return on net worth of the youngest age
group over years 1983-2022 was 5.67 percent while that of the oldest was 3.29 percent. What
factors explain these seemingly perverse results?
> The first is increasing net home equity for the elderly. The increase in the ratio of mean
net home equity to the overall level over 1983- 2022 explains a substantial 38.3 percent of the
relative gain in net worth of the 75 and over age group but very little for that of the youngest
group. The second is surging mortgage debt among the youngest households. This explains 297
percent (.160/.054), of the actual decline in the group’s mean net worth ratio – that, is almost
three times the actual decline. Its relative decline also accounts for a significant 35.2 percent of
the increase in the oldest group’s mean net worth ratio. However, it should be stressed that these
results are not additive across the various factors considered in the analysis
> Third, the homeownership rate might well be close to a “smoking gun” for the oldest age
group. It shoots up by 11.5 percentage points for this group, and the group’s relative wealth
holdings expand by a sizeable 50.4 percent. Likewise, relative to the overall average
homeownership rate, that of the oldest enlarges by 8.9 percentage points from 6.0 to 14.9
percent. The fourth is the fantastic growth in stock holdings among the oldest age group, which
could constitute another smoking gun. The value of the group’s stock portfolio relative to the
overall average skyrockets from 0.56 to 3.47, which accords with the sharp increase in its
relative net worth, and accounts for a staggering 269 percent of its gain in net worth relative to
the overall average.
> Fifth, among the youngest age group, despite dire press reports, educational loans fail to
appear as a significant factor. As a fraction of overall mean student debt, it actually fell from
2.45 in 2007 (the first date of available data) to 1.66 in 2022, so that the trend is contrary to that
of the group’s relative net worth. Moreover, subtracting the change in the group’s mean
educational debt over 2007- 2022 from its 2007 net worth ratio lowers the group’s mean net
worth ratio by a rather trivial 0.006.
24
References
Bricker, Jesse, Jacob Krimmel, Alice Henri
"Social security" including actual Social Security, Medicare, etc is a wealth transfer from the poorest Americans (young people) to the richest Americans (old people).
And who possibly didn't save since they were relying on benefitting from the Ponzi scheme.
Unfortunately the Ponzi scheme only works if the population keeps growing, but young people can't make families work in part because they subsidize the old.
All my working life, I've assumed I would never collect on SS because it was obviously going to fail, so my "contributions" might as well have been tossed into a fire. It's kind of amazing that they've kicked that can long enough that it's starting to look like I might get a little back after all.
But I still figure the Boomers will bankrupt it just in time for the checks to stop around my 62th birthday, or maybe that's when they'll start bumping the age up to stay ahead.
Covid messed with the math a bit, but it’s amazing how precisely it was designed to run out of money. My entire life since I was a kid people were talking about how it was going to run out of money but none of them did anything. Now that the boomers are retiring, now they will talk about removing the cap, raising rates, lower benefits for future recipients, but they have made damn sure that their own benefits are guaranteed and that they never had to sacrifice anything to pay for them. I remember when Al Gore talked about setting the surplus aside to fund future benefits in 2000 and everyone laughed at him. SNL made fun of him. Instead they voted to cut themselves a check and added more benefits for themselves for their children to pay for.
Are you just going around arguing with everyone in bad faith just because you are convinced of your position? I see you all over this thread just throwing out any reasons you can that it should be removed. It seems like you have your mind made up and are just here to evangelize, not discuss. Hacker News is for discussion and open-mindedness.
It's weird to me because I seem to be replying to people talking from a prescriptive position (ie "social security should care for the elderly"), while I am trying to force the conversation to a descriptive (ie here are the actual observed impacts of social security).
I don't want to discuss should-statements, and I don't think that violates the spirit of HN.
I’m still waiting for the wealth transfer from “stay in school, work hard and you will be able to afford a comfortable life” that was supposed to happen in my 20s and 30s. So I’m not so sure about it happening through SS when I’m 65.
Not the rate things are going. Death rates among younger Americans have been very high and it's well known the government doesn't have enough revenue to sustain this.
It's got to go. It's a shame people were lied to but the reality is we can't keep things the way they are.
I dont think social security will ever be cancelled. The question is what will it actually buy when your turn comes. By this I mean I do not expect it to keep pace with inflation as they print copious amounts of money to keep it solvent.
They can pay everyone $2000 a month, if a loaf of bread is $2000 if you catch my drift.
The tax rate itself is plainly a political choice.
The demographic issues are a consequence of political choices, e.g. the way we prevent working age people from coming to this country to pay into the system. (and now, kick some of them out).. but also, the ways that choose not to enable families to comfortably have children.
That's quite a tall claim to be making about a country built on immigration. The greatest periods of economic growth in the US are correlated with immigration rates.
I don't know what "proof" you have but remember that the economic impacts of demographic shifts are pretty broad, so I would suggest you validate that your source is taking that into account, and isn't intentionally biased for political reasons. The overwhelmingly predominant economic opinion is that immigration is very valuable in growing a country's wealth.
For 15% of women and 12% of men Social Security is the only source of cash in old age owing to a number of factors: low-paying jobs, poor saving habits, divorce, caregiving for relatives, medical bankruptcy, etc.
Young people have all those same cash flow issues, but are also our future (if they have kids). In terms of who to subsidize, it should be the youngs, not the olds.
Young people aren't going to be able to afford a child with a couple percent payroll tax cut. They need healthcare, time off of work, and a decent school to send their child to.
If we cut Social Security young people aren't gonna be able to have children because they're gonna have to spend more time and money taking care of their parents. Social safety nets make it easier for people to live a comfortable life.
Social Security would be completely solvent if we didn't make poor people pay to support other poor people, and instead tax rich people for it. It's built on a regressive tax, and the wealthy don't pay jack shit.
> Let's not make poor youngs (nearly all of them) pay for olds (rich or poor).
The problem is, this implies that whatever system you're advocating for must force people to prove that they're poor. These requirements don't come out of the sky and get magically enacted by some fairy, they're gonna be an active by bureaucratic process. That's a non-starter because then the system isn't universal anymore. It only serves people that are able to reach that bar. The poorest and most destitute among us, lack the ability to produce documentation. Many are disabled, uneducated, destitute, have dementia, or any number of other problems that affect the people who need help the most.
It should be easy for anyone who's paid into Social Security to get their benefits back out of Social Security. They shouldn't need to prove anything else.
The easiest situation is to just force people who make more than $176,100 to pay their fair share.
The fact that the income is guaranteed is an important part of being an effective safety net. Nets with holes in them don't work -- you don't want to create just another retirement plan that can fail and leave grandma homeless. Otherwise you're back to square one with the same problem.
Boomers might have a bunch of wealth on paper when you count the value of their deferred-maintenance post-war home, and their 401k that is invested in a tech bubble -- but if their home burns down and the markets crash, even 'rich' boomers need a rent check on the first of the month.
Not to mention, that means testing also places burdens on the poorest among us that can be insurmountable for some.
A social safety net that doesn't catch these people is worthless, as it fails the entire point of having one instead of relying on private retirements.
I can tell you one thing for certain, declining birth rates across the entire western world are not due to Social Security and payroll taxes on Americans alone. And the fact that it is happening everywhere, is pretty good evidence that it's not Social Security's fault here.
There's a lot of research out there that answers that question. There are many reasons for declining birth rates, and those include cultural changes, changes an expectations of the standard of living, changes in family planning priorities.
If you really want to know the true answer to this, you don't need to ask a tax advisor or a politician, you need to ask a sociologist.
While you're not wrong, focusing on social security instead of the massive bankster handouts for the past 40 years is fighting over scraps and really distracts from discussing the actual problem of monetary inflation driven wealth centralization. Nobody is getting rich from social security - it basically covers living expenses, if you're lucky. And the 15% income tax isn't responsible for destroying personal financial situations - rather it's the extreme asset inflation and corresponding rampant hyperfinancialization (eg ballooning rent, insurance) that have made so many people effectively poor.
It's a textbook example of the classic political problem (and I don't just mean in democracies, every system is vulnerable to this) where subsidies and handouts are extremely sticky and almost impossible to get rid of, even when the underlying condition has changed and the original motivation for the subsidies no longer applies. Social Security made sense in a world where you had a 10:1 worker-to-dependent ratio and people rarely lived for very long after retirement.
But right now it's exactly the opposite: the dependency ratio is cratering, people can live on SS for decades, and the Boomers are hugely rich while their grandchildren can't afford a house. We desperately need to completely invert Social Security and instead have massive wealth transfers from the old to the young. But that's politically quite impossible, so this perverse situation remains.
Everybody pissing and moaning about the old folks better save their money as they’ll be old in a small number of decades. The us has lowered its tax regime over these decades without lowering the costs associated with being old. And it’s replaced defined benefit pensions with defined contribution. Those who could and did save have done well. Those who didn’t, well, with luck they have a roof over their head and food.
As a data point, the typical social security from somebody who was in a pink collar profession is like $1500-2000/month. Somebody who maxed out social retiring at 70 gets like $5100/month. Assuming they can cover expenses until 70. These numbers are partially taxable.
>without lowering the costs associated with being old
Not exactly accurate. The costs of being old at the same QoL and for the same lifespan as a 65+ person in 1935 is probably cheaper than it's ever been.
The problem is we're living much longer and our QoL is higher and "healthcare" to achieve that is stupendously expensive.
Other countries reduce the cost of meds or services for people above a certain age, or have age/income relatd tax benefits and payments. The us is the wealthiest country in the world, so doing so would have been a mere exercise of political will. Instead, pushing money to the top has been the goal.
>reduce the cost of meds or services for people above a certain age
Show me the demographics of these countries. Are babies being born at rates assumed by their old-age social safety nets? Or even above replacement rate?
Canada does, and the population has grown due to immigration. Google says Germany does this. You can probably find what other g20 countries do this. There are also supplemental pensions and/or tax credits or deductions based on age and income.
Editing as I can’t reply to reply below. Births are drains on the system for 18-28 years. Canadian immigrants must pass a points based system that biases towards needs. such people can pay their taxes from arrival. Refugees aren’t quite the same, but I don’t know the correct labels for the difference.
I thought us Medicare is somewhat comparable to normal healthcare in the other g20 countries? Sufficient to show how others handle the problems and possible strengths and weaknesses. Never used it, not familiar with its details. Readers can comment.
This is just another version of the same thing we see on the front page a couple times a week at this point because it's a OECD-wide trend...
“Wealth is aging.” in some manner over and over and over again... OECD, academics, ECB etc showing the thing, older cohorts control a seriously disproportionate share of national wealth. Doesn't matter if it's USA, Canada, NZ/AUS, EU etc.. Homeownership is flat for the young, rising for the elderly. Rising mortgage leverage for the young, falling for the elderly. Debt-to-income ratios are very high for younger cohorts, again on the front page it shows up weekly in some flavour of the U.S. and U.K. with student loans + mortgages- in Canada it’s primarily mortgages + consumer debt. Everywhere globally, younger folks are face considerably higher prices (inflated?) relative to income, an environment of tighter lending, and again... much higher student debt in us and uk (I suppose education less so in parts Europe and Canada, yet consumer debt there is rampant).
And young people are not having kids at all.
What's to be done? I really ask: What's to be done about it?
> What's to be done? I really ask: What's to be done about it?
There's a document that gets posted every so often here called The Return Rate on Everything. In it, it says that the returns on capital outweigh economic growth, meaning capital gets more concentrated, at all times except during war.
So the answer to your question would seem to be 'war'.
So we need the old transfer some wealth to the young. The old mostly have assets like stocks and houses. The young can’t earn enough to accrue assets.
So tax the wealthy / old higher. Increase social safety nets. Increase wages. Give all employees equity. Stop share buy backs. Force CEO to median / lowest employee comp maximums. Break up monopolies. Make school cheap / free. Build more housing. Stop monocropping.
I can go on and on with ideas but I think the political will / capture prevents this so I guess we’ll just topple over instead.
Wealthy people of any age have most of the money…. Check the prices of assisted care to see where home equity will go for the old. And ignore the yowls of the kids looking for the inter generational transfer of wealth.
As far as stocks and bonds go, I thought the HN readership was into that. Can’t penalize somebody who has the advantage of time re equity growth on the basis of age. If you want to be fair, again, tax wealth.
Removing the step-up in cost basis at death and actually taxing estates would help quite a bit. Unfortunately the wealthy write the rules so don’t expect either of those to change.
> What's to be done? I really ask: What's to be done about it?
property/estate taxes which will be directed to safety nets for youth: medical insurance, education, childcare, foodstamp and 1br with public transit to business centers. This will propel access to opportunities for youth by XX times, and also crash housing market and cool down stock market.
The survey defines the top one percent as "Net worth of $13,390,060 or more," which sounds greatly skewed versus what I assume is a lower median net worth at the 99th percentile. I don't think 1 in 100 Americans have over $13 million in assets.
Not sure what "a lower median net worth at the 99th percentile" means (median is net worth level at the 50th percentile), but 1 in 100 American households (not individuals) indeed have over $13 million net worth: https://fred.stlouisfed.org/series/WFRBL99T999309
This threshold has about doubled since 2010, which should not be too surprising as house prices more than doubled and the S&P500 increased six fold in the last 15 years.
~"Minimum Wealth Cutoff for the 99th to 99.9th Wealth Percentiles" in that link reads to me as 1 in 1,000 households have a net worth over $13 million, not 1 in 100.~
No, that would be the the maximum cutoff, not the mimumum. That maximum, which is also the minimum cutoff to enter the 99.9 percentile (the 0.1%, or 1 in 1000) is almost 50 million dollars: https://fred.stlouisfed.org/series/WFRBLTP1311
That doesn't seem unreasonable to me. Any middle-class boomer who was planning to retire and paid off their mortgage can expect to be in the 7 digits of net worth.
Net worth is a weird number for many people to interpret because it is pretty intangible -- most can't cash it out.
A lot of boomers are sitting on 7 figure homes that they refuse to downsize from that’s adding to their “net worth”. Most of these homes are in disrepair and need six figure upgrades before they are even up to code, but on paper they’re all millionaires.
I feel as if I've been reading some variant of this for the last 30 years (not just American, UK too).
But then what of it? I had more money at age 20 than I did at 15, more at 25 than 20, more at 30 than 25, and so on and so forth.
When I'm 70 I'll have more in real terms than I do now. Each year, barring some sort of disaster, most people work and bring in enough to survive whilst the surplus stacks up.
The main difference in my mind driving the rate of change in the proportions is just that the median person is more aware of things like the stock market, real estate, etc, now.
Basically, people are acting more efficiently. I'm more savvy than my parents were; they are/were proper working class "spend it as soon as it comes in, it might be gone" whereas I'm more like "never touch the capital, diversify".
(There are some issues, like how in the UK pensioners are given _extremely_ generous benefits, but I don't think that's relevant to the global picture).
The summary talks about two "smoking guns" for wealth increase in the oldest age group: home ownership rate and stock portfolio value.
To me, though, these seem like effects rather than causes. In other words, the older age group has enough money to afford these things. I doubt that the oldest age group is somehow vastly better than others at picking stocks to buy; their stock portfolios are larger because they have more money to invest in the same stock market as everyone else, right? And according to the last chart in the paper, on the final page, the home ownership rate of the under 35 group is close to the same in 2022 as it was in 1983, though it dropped lower in 2016.
Thus, I get the impression that the first factor mentioned in the summary, mortgage debt, may be the main driver. In other words, presumably, it's taking much more for the youngest group to pay off their mortgages than it did for the oldest group, because the price of housing has increased significantly. And money going into mortgage payments is money not going into other investments such as stock.
They're causal -- old people predominantly aren't buying new homes or investing in new equities, they collected those assets during their working years when they were cheap, and both of those asset classes have appreciated an extraordinary amount since the middle of their working careers.
> old people predominantly aren't buying new homes
What do you mean exactly by buying new homes?
Obviously the average length of home ownership for the oldest group would be much longer than for the youngest age group. How new were their homes when they were first purchased, and has that number changed over time? I have no idea. But if the value of older homes is increasing, it means that someone is purchasing those older homes.
> or investing in new equities
If I'm reading the tables right, it looks like the oldest group received their largest jump in net worth during 2019-2022 and actually did worse than all other groups in 2016-2019.
I mean that older people have a longer duration of time in their current residence. Their homes have had a longer time to appreciate.
> If I'm reading the tables right, it looks like the oldest group received their largest jump in net worth during 2019-2022 and actually did worse than all other groups in 2016-2019.
I didn't dig into it too much, but the SP500 did better during the former period.
> Their homes have had a longer time to appreciate.
A home doesn't inherently appreciate over time, like a fine wine. Aside from remodeling, the only thing that increases the value of a home over time is increased demand for homes relative to supply, which was my original point: "the price of housing has increased significantly."
> Aside from remodeling, the only thing that increases the value of a home over time is increased demand for homes relative to supply
And it's important to note that a highly significant factor on the demand side is the availability of mortgage loans at low rates because the government prints money to fund them.
And a highly significant factor on the supply side is many highly desirable localities intentionally restricting the supply of housing.
Correct, but in aggregate, (which is what all of these numbers are) they have.
> the only thing that increases the value of a home over time is increased demand for homes relative to supply, which was my original point: "the price of housing has increased significantly."
At the risk of sounding obvious, yes, the value of housing is directly derived from how the market prices it.
When housing prices go up, the net worth of the people who own housing goes up. Most of the time, the prices have been going up. So the people who have the most time in the market are the most to benefit. When boomers were having children, the median home was around $100k. The average boomer who bought a home on a 30yr mortgage, had kids, and is now retiring, has $400k equity.
> Most of the time, the prices have been going up.
That's not particularly interesting though. The rate at which prices go up is crucial, especially in comparison with wages. If the price of housing increases faster than wages, then home buyers will end up with less disposable and investable income than before.
We're not talking about why older people are wealthier than younger people. We're talking about why the gap has increased.
Well, any group that owns more of an asset class will experience more of whatever swing in value it experiences, right? Isn't it as simple as that? 80% of boomers have a house, and only 55% of millennials do. If all homes go up by 100%, the average boomer will have 80% more wealth, and the average millennial will only have 55% more wealth. The gap in their wealth will increase.
You seem to be overlooking the elephant in the room, which is that working people add to their wealth via wages, while retired people do not.
Again, this is why the inflation rates of housing vs. wages is crucial.
Some of them do. Wage earners are not necessarily cash flow positive nor putting money toward hard assets. Plenty of people out there are renting, spending, and not saving. IIRC there's also a good bit of evidence to show that later generations are not saving nearly as much as older generations.
The price of renting is not unrelated to the price of buying. If homes are too expensive or unavailable for purchase, then the rental market will experience high demand, because people have to live somewhere. Buyers and renters may be cash negative for the same reason.
>old people predominantly aren't buying new homes
This is not true at all. People over 60 bought ~46% of homes.
https://www.nar.realtor/research-and-statistics/research-rep...
Fair, but most of them are cashing in equity in a previously owned home to buy into a new place, so those wouldn't be contributing to the aforementioned increase in wealth.
Great point.
I think that’s what the paper was trying to express: That the older cohort got more leverage from the increase in housing prices because they had more invested when prices shot up.
> Summary and Concluding Remarks
> The paper focuses on the slippage in the net worth ratio among households under age 35 relative to all households between 1983 and 2022 and its phenomenal rise among households aged 75 and over. Based on differential leverage between the two groups (the much higher debt- net worth ratio among younger families compared to older ones), we would have expected exactly the opposite – namely, that the net worth of younger households should have risen relative to older ones. Indeed, the average real rate of return on net worth of the youngest age group over years 1983-2022 was 5.67 percent while that of the oldest was 3.29 percent. What factors explain these seemingly perverse results?
> The first is increasing net home equity for the elderly. The increase in the ratio of mean net home equity to the overall level over 1983- 2022 explains a substantial 38.3 percent of the relative gain in net worth of the 75 and over age group but very little for that of the youngest group. The second is surging mortgage debt among the youngest households. This explains 297 percent (.160/.054), of the actual decline in the group’s mean net worth ratio – that, is almost three times the actual decline. Its relative decline also accounts for a significant 35.2 percent of the increase in the oldest group’s mean net worth ratio. However, it should be stressed that these results are not additive across the various factors considered in the analysis
> Third, the homeownership rate might well be close to a “smoking gun” for the oldest age group. It shoots up by 11.5 percentage points for this group, and the group’s relative wealth holdings expand by a sizeable 50.4 percent. Likewise, relative to the overall average homeownership rate, that of the oldest enlarges by 8.9 percentage points from 6.0 to 14.9 percent. The fourth is the fantastic growth in stock holdings among the oldest age group, which could constitute another smoking gun. The value of the group’s stock portfolio relative to the overall average skyrockets from 0.56 to 3.47, which accords with the sharp increase in its relative net worth, and accounts for a staggering 269 percent of its gain in net worth relative to the overall average.
> Fifth, among the youngest age group, despite dire press reports, educational loans fail to appear as a significant factor. As a fraction of overall mean student debt, it actually fell from 2.45 in 2007 (the first date of available data) to 1.66 in 2022, so that the trend is contrary to that of the group’s relative net worth. Moreover, subtracting the change in the group’s mean educational debt over 2007- 2022 from its 2007 net worth ratio lowers the group’s mean net worth ratio by a rather trivial 0.006. 24 References Bricker, Jesse, Jacob Krimmel, Alice Henri
"Social security" including actual Social Security, Medicare, etc is a wealth transfer from the poorest Americans (young people) to the richest Americans (old people).
But also it's insurance for the many older people who didn't benefit from any of the accumulated gains their age peers made over their lifetimes.
And who possibly didn't save since they were relying on benefitting from the Ponzi scheme.
Unfortunately the Ponzi scheme only works if the population keeps growing, but young people can't make families work in part because they subsidize the old.
All my working life, I've assumed I would never collect on SS because it was obviously going to fail, so my "contributions" might as well have been tossed into a fire. It's kind of amazing that they've kicked that can long enough that it's starting to look like I might get a little back after all.
But I still figure the Boomers will bankrupt it just in time for the checks to stop around my 62th birthday, or maybe that's when they'll start bumping the age up to stay ahead.
Covid messed with the math a bit, but it’s amazing how precisely it was designed to run out of money. My entire life since I was a kid people were talking about how it was going to run out of money but none of them did anything. Now that the boomers are retiring, now they will talk about removing the cap, raising rates, lower benefits for future recipients, but they have made damn sure that their own benefits are guaranteed and that they never had to sacrifice anything to pay for them. I remember when Al Gore talked about setting the surplus aside to fund future benefits in 2000 and everyone laughed at him. SNL made fun of him. Instead they voted to cut themselves a check and added more benefits for themselves for their children to pay for.
Social Security is a progressive tax. Workers with lower wages get a relatively larger portion compared to the workers that had a higher paycheck.
It should be strengthened and available to everyone.
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Are you just going around arguing with everyone in bad faith just because you are convinced of your position? I see you all over this thread just throwing out any reasons you can that it should be removed. It seems like you have your mind made up and are just here to evangelize, not discuss. Hacker News is for discussion and open-mindedness.
It's weird to me because I seem to be replying to people talking from a prescriptive position (ie "social security should care for the elderly"), while I am trying to force the conversation to a descriptive (ie here are the actual observed impacts of social security).
I don't want to discuss should-statements, and I don't think that violates the spirit of HN.
It should be strengthened for the bottom and eliminated for the top. No need to cash in the checks from your 5th million dollar vacation home.
Just charge the rich more in taxes, that covers the fairness. If you only leave the benefit for the poor, then the rich will scrap the system.
Ladies and gentlemen: the duality of Man.
Except all the money taken from my check each and every payday. So yeah, wealth transfer...
One day you will be old and get to benefit from that wealth transfer
I’m still waiting for the wealth transfer from “stay in school, work hard and you will be able to afford a comfortable life” that was supposed to happen in my 20s and 30s. So I’m not so sure about it happening through SS when I’m 65.
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Not the rate things are going. Death rates among younger Americans have been very high and it's well known the government doesn't have enough revenue to sustain this.
It's got to go. It's a shame people were lied to but the reality is we can't keep things the way they are.
Raising the income cap for social security contributions would provide enough income for the foreseeable future.
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No, actually, I won't. Social Security will implode long before I ever see a penny of it.
Likely not. I don't think it will be solvent by that time.
I dont think social security will ever be cancelled. The question is what will it actually buy when your turn comes. By this I mean I do not expect it to keep pace with inflation as they print copious amounts of money to keep it solvent.
They can pay everyone $2000 a month, if a loaf of bread is $2000 if you catch my drift.
Only if politicians choose to intentionally make it so.
This isn't a political choice, but rather a demographic reality. Plus the usual corruption, etc.
The tax rate itself is plainly a political choice.
The demographic issues are a consequence of political choices, e.g. the way we prevent working age people from coming to this country to pay into the system. (and now, kick some of them out).. but also, the ways that choose not to enable families to comfortably have children.
Mass immigration has proven to be a net cost.
That's quite a tall claim to be making about a country built on immigration. The greatest periods of economic growth in the US are correlated with immigration rates.
I don't know what "proof" you have but remember that the economic impacts of demographic shifts are pretty broad, so I would suggest you validate that your source is taking that into account, and isn't intentionally biased for political reasons. The overwhelmingly predominant economic opinion is that immigration is very valuable in growing a country's wealth.
The point of social security is not to prop up average wealth, but a guarantee to prop up the poorest individuals.
Is that what it actually does today in the US?
For 15% of women and 12% of men Social Security is the only source of cash in old age owing to a number of factors: low-paying jobs, poor saving habits, divorce, caregiving for relatives, medical bankruptcy, etc.
See https://www.aarp.org/social-security/americans-depend-on-soc...
Young people have all those same cash flow issues, but are also our future (if they have kids). In terms of who to subsidize, it should be the youngs, not the olds.
The assumption is that if you’re 25 and you need money you’re likely healthy enough to work 40+ hours a week. Much less likely if you’re 67+.
Does the assumption that hard work = ability to raise a family match the reality of what 20s are experiencing today?
Young people aren't going to be able to afford a child with a couple percent payroll tax cut. They need healthcare, time off of work, and a decent school to send their child to.
Sure, but are you making the argument that we shouldn't do something because in fact we'd also need to do even more too.
Yes do all of those things. Demographics are destiny. We need young people to have kids.
If we cut Social Security young people aren't gonna be able to have children because they're gonna have to spend more time and money taking care of their parents. Social safety nets make it easier for people to live a comfortable life.
Social Security would be completely solvent if we didn't make poor people pay to support other poor people, and instead tax rich people for it. It's built on a regressive tax, and the wealthy don't pay jack shit.
>poor people pay to support other poor people
So we actually agree. Let's not make poor youngs (nearly all of them) pay for olds (rich or poor).
I think we should eliminate this sub-optimal situation immediately based on the harm to the payors.
> Let's not make poor youngs (nearly all of them) pay for olds (rich or poor).
The problem is, this implies that whatever system you're advocating for must force people to prove that they're poor. These requirements don't come out of the sky and get magically enacted by some fairy, they're gonna be an active by bureaucratic process. That's a non-starter because then the system isn't universal anymore. It only serves people that are able to reach that bar. The poorest and most destitute among us, lack the ability to produce documentation. Many are disabled, uneducated, destitute, have dementia, or any number of other problems that affect the people who need help the most.
It should be easy for anyone who's paid into Social Security to get their benefits back out of Social Security. They shouldn't need to prove anything else.
The easiest situation is to just force people who make more than $176,100 to pay their fair share.
Sounds like they need to pull themselves up by their bootstraps.
Approximately. The pension payout is disproportionately weighted toward people with low lifetime earnings relative to what they pay into it.
The caveat is that your pension payout reflects lifetime earnings, not your income when you are elderly.
Yes, the poor and elderly in the US overwhelmingly rely on Social Security for their basic needs.
Undoubtedly true. Is it only people who are (poor AND elderly) or are (elderly)?
The fact that the income is guaranteed is an important part of being an effective safety net. Nets with holes in them don't work -- you don't want to create just another retirement plan that can fail and leave grandma homeless. Otherwise you're back to square one with the same problem.
Boomers might have a bunch of wealth on paper when you count the value of their deferred-maintenance post-war home, and their 401k that is invested in a tech bubble -- but if their home burns down and the markets crash, even 'rich' boomers need a rent check on the first of the month.
Not to mention, that means testing also places burdens on the poorest among us that can be insurmountable for some.
A social safety net that doesn't catch these people is worthless, as it fails the entire point of having one instead of relying on private retirements.
A social safety net that destroys the payors (younger generations) is worthless.
Everything has a cost. The cost of social security outweighs the benefit.
We'd have literally millions of starving and homeless elderly people without social security. Young people are not being destroyed by 6.2% SS taxes.
Something(s) have destroyed young people. It's plain in the birth rates across the western world.
Also SS is 12.4% (employer + employee) and medicare is another 2.9% (employer + employee).
I can tell you one thing for certain, declining birth rates across the entire western world are not due to Social Security and payroll taxes on Americans alone. And the fact that it is happening everywhere, is pretty good evidence that it's not Social Security's fault here.
There's a lot of research out there that answers that question. There are many reasons for declining birth rates, and those include cultural changes, changes an expectations of the standard of living, changes in family planning priorities.
If you really want to know the true answer to this, you don't need to ask a tax advisor or a politician, you need to ask a sociologist.
While you're not wrong, focusing on social security instead of the massive bankster handouts for the past 40 years is fighting over scraps and really distracts from discussing the actual problem of monetary inflation driven wealth centralization. Nobody is getting rich from social security - it basically covers living expenses, if you're lucky. And the 15% income tax isn't responsible for destroying personal financial situations - rather it's the extreme asset inflation and corresponding rampant hyperfinancialization (eg ballooning rent, insurance) that have made so many people effectively poor.
It's a textbook example of the classic political problem (and I don't just mean in democracies, every system is vulnerable to this) where subsidies and handouts are extremely sticky and almost impossible to get rid of, even when the underlying condition has changed and the original motivation for the subsidies no longer applies. Social Security made sense in a world where you had a 10:1 worker-to-dependent ratio and people rarely lived for very long after retirement.
But right now it's exactly the opposite: the dependency ratio is cratering, people can live on SS for decades, and the Boomers are hugely rich while their grandchildren can't afford a house. We desperately need to completely invert Social Security and instead have massive wealth transfers from the old to the young. But that's politically quite impossible, so this perverse situation remains.
> ...instead have massive wealth transfers from the old to the young...
Free public schooling through 12th grade is one such transfer.
Totally agree. Distributed costs, concentrated benefits.
Everybody pissing and moaning about the old folks better save their money as they’ll be old in a small number of decades. The us has lowered its tax regime over these decades without lowering the costs associated with being old. And it’s replaced defined benefit pensions with defined contribution. Those who could and did save have done well. Those who didn’t, well, with luck they have a roof over their head and food.
As a data point, the typical social security from somebody who was in a pink collar profession is like $1500-2000/month. Somebody who maxed out social retiring at 70 gets like $5100/month. Assuming they can cover expenses until 70. These numbers are partially taxable.
>without lowering the costs associated with being old
Not exactly accurate. The costs of being old at the same QoL and for the same lifespan as a 65+ person in 1935 is probably cheaper than it's ever been.
The problem is we're living much longer and our QoL is higher and "healthcare" to achieve that is stupendously expensive.
Other countries reduce the cost of meds or services for people above a certain age, or have age/income relatd tax benefits and payments. The us is the wealthiest country in the world, so doing so would have been a mere exercise of political will. Instead, pushing money to the top has been the goal.
>reduce the cost of meds or services for people above a certain age
Show me the demographics of these countries. Are babies being born at rates assumed by their old-age social safety nets? Or even above replacement rate?
Canada does, and the population has grown due to immigration. Google says Germany does this. You can probably find what other g20 countries do this. There are also supplemental pensions and/or tax credits or deductions based on age and income.
Editing as I can’t reply to reply below. Births are drains on the system for 18-28 years. Canadian immigrants must pass a points based system that biases towards needs. such people can pay their taxes from arrival. Refugees aren’t quite the same, but I don’t know the correct labels for the difference.
>due to immigration
so not births.
Immigrants as a group in both Canada and Germany are net negative "taxpayers"
It was net positive in all the studies I found. Here’s some for Germany
https://www.bertelsmann-stiftung.de/en/topics/latest-news/20...
https://www.econstor.eu/bitstream/10419/306683/1/GLO-DP-1530...
In Canada, economic immigrants are net positive while refugees and sponsored (family reunion) immigrants are net negative.
https://mpra.ub.uni-muenchen.de/102505/1/MPRA_paper_102505.p...
I mean, Medicare is pretty good.
I thought us Medicare is somewhat comparable to normal healthcare in the other g20 countries? Sufficient to show how others handle the problems and possible strengths and weaknesses. Never used it, not familiar with its details. Readers can comment.
This is just another version of the same thing we see on the front page a couple times a week at this point because it's a OECD-wide trend...
“Wealth is aging.” in some manner over and over and over again... OECD, academics, ECB etc showing the thing, older cohorts control a seriously disproportionate share of national wealth. Doesn't matter if it's USA, Canada, NZ/AUS, EU etc.. Homeownership is flat for the young, rising for the elderly. Rising mortgage leverage for the young, falling for the elderly. Debt-to-income ratios are very high for younger cohorts, again on the front page it shows up weekly in some flavour of the U.S. and U.K. with student loans + mortgages- in Canada it’s primarily mortgages + consumer debt. Everywhere globally, younger folks are face considerably higher prices (inflated?) relative to income, an environment of tighter lending, and again... much higher student debt in us and uk (I suppose education less so in parts Europe and Canada, yet consumer debt there is rampant).
And young people are not having kids at all.
What's to be done? I really ask: What's to be done about it?
Good reading: https://www.nobelprize.org/uploads/2018/06/modigliani-lectur...
> What's to be done? I really ask: What's to be done about it?
There's a document that gets posted every so often here called The Return Rate on Everything. In it, it says that the returns on capital outweigh economic growth, meaning capital gets more concentrated, at all times except during war.
So the answer to your question would seem to be 'war'.
Wow, how have I missed this. Intuitively makes sense since capital still can't fight wars, so "labor" commands a premium.
You weren't kidding: https://hn.algolia.com/?q=The+Return+Rate+on+Everything
I'd not seen it, thank you kindly for sharing. :)
> So the answer to your question would seem to be 'war'.
As the saying goes, it’s easier to imagine the end of the world than the end of capitalism.
So we need the old transfer some wealth to the young. The old mostly have assets like stocks and houses. The young can’t earn enough to accrue assets.
So tax the wealthy / old higher. Increase social safety nets. Increase wages. Give all employees equity. Stop share buy backs. Force CEO to median / lowest employee comp maximums. Break up monopolies. Make school cheap / free. Build more housing. Stop monocropping.
I can go on and on with ideas but I think the political will / capture prevents this so I guess we’ll just topple over instead.
Wealthy people of any age have most of the money…. Check the prices of assisted care to see where home equity will go for the old. And ignore the yowls of the kids looking for the inter generational transfer of wealth.
As far as stocks and bonds go, I thought the HN readership was into that. Can’t penalize somebody who has the advantage of time re equity growth on the basis of age. If you want to be fair, again, tax wealth.
Removing the step-up in cost basis at death and actually taxing estates would help quite a bit. Unfortunately the wealthy write the rules so don’t expect either of those to change.
> What's to be done? I really ask: What's to be done about it?
property/estate taxes which will be directed to safety nets for youth: medical insurance, education, childcare, foodstamp and 1br with public transit to business centers. This will propel access to opportunities for youth by XX times, and also crash housing market and cool down stock market.
The survey defines the top one percent as "Net worth of $13,390,060 or more," which sounds greatly skewed versus what I assume is a lower median net worth at the 99th percentile. I don't think 1 in 100 Americans have over $13 million in assets.
Not sure what "a lower median net worth at the 99th percentile" means (median is net worth level at the 50th percentile), but 1 in 100 American households (not individuals) indeed have over $13 million net worth: https://fred.stlouisfed.org/series/WFRBL99T999309
This threshold has about doubled since 2010, which should not be too surprising as house prices more than doubled and the S&P500 increased six fold in the last 15 years.
~"Minimum Wealth Cutoff for the 99th to 99.9th Wealth Percentiles" in that link reads to me as 1 in 1,000 households have a net worth over $13 million, not 1 in 100.~
edit: seems like I'm wrong
No, that would be the the maximum cutoff, not the mimumum. That maximum, which is also the minimum cutoff to enter the 99.9 percentile (the 0.1%, or 1 in 1000) is almost 50 million dollars: https://fred.stlouisfed.org/series/WFRBLTP1311
More stats (including other decile cutoffs, mean and median with within the deciles) can be found here: https://fred.stlouisfed.org/categories/33001
That doesn't seem unreasonable to me. Any middle-class boomer who was planning to retire and paid off their mortgage can expect to be in the 7 digits of net worth.
Net worth is a weird number for many people to interpret because it is pretty intangible -- most can't cash it out.
A lot of boomers are sitting on 7 figure homes that they refuse to downsize from that’s adding to their “net worth”. Most of these homes are in disrepair and need six figure upgrades before they are even up to code, but on paper they’re all millionaires.
I feel as if I've been reading some variant of this for the last 30 years (not just American, UK too).
But then what of it? I had more money at age 20 than I did at 15, more at 25 than 20, more at 30 than 25, and so on and so forth.
When I'm 70 I'll have more in real terms than I do now. Each year, barring some sort of disaster, most people work and bring in enough to survive whilst the surplus stacks up.
The main difference in my mind driving the rate of change in the proportions is just that the median person is more aware of things like the stock market, real estate, etc, now.
Basically, people are acting more efficiently. I'm more savvy than my parents were; they are/were proper working class "spend it as soon as it comes in, it might be gone" whereas I'm more like "never touch the capital, diversify".
(There are some issues, like how in the UK pensioners are given _extremely_ generous benefits, but I don't think that's relevant to the global picture).