This is a great analysis of the big and growing wealth gap between us Baby Boomers and our kids.
Author Tamsin McMahon attributes this generational wealth gap to a combination of “financial discipline, public policy and good timing”.
- “Good timing”? Better to call it luck, as in winning the “ovarian lottery“.
- “Public policy”? “Turnout among younger voters is notoriously low, so politicians naturally target their campaigns to the seniors who actually show up on election day.”
- “Financial discipline”? With good timing and public policy on our side, we Boomers didn’t need no stinkin’ financial discipline. That was for our parents.
Seniors and the generation spending gap.
In this column for Bloomberg View, Megan McArdle presents a variety of arguments in favor of (and against) the idea of forcing people to save for their retirement. The most interesting aspect to me was the description of how the challenges of home ownership and raising a family make retirement savings increasingly difficult “The conundrum for responsible parents who want to get their kids into a good school and also save 20 percent for retirement is that the prices will be set by the most foolhardy.” Ouch.
Ever hear the advice to buy the worst house in the best neighborhood you can afford? I know a lot of 40-something parents who give (and practice) this advice. You get access to the best possible school districts by sacrificing something in the way of home amenities.
However, I hear a fair amount from parents who have tried this strategy and found that it’s not quite as cheap as they imagine. They carefully calculated their mortgage payment and how long they could live with the hideous ’80s black-and-white kitchen. They forgot to factor in the special property tax assessment because the school district is overcrowded and a new building needs to be built. Or what all the add-ons would do to their budget in a town where the average household income is at least $100,000 higher than theirs. All the kids’ friends are on travel teams that cost thousands of dollars a year. The French class wants to go to Paris instead of a local French restaurant. It is theoretically possible to say no, but doing so means that your kid will be sitting home playing video games while their friends are out developing essay-worthy skills. Then everyone’s friends are going away to small liberal arts colleges and can you really tell yours to live at home for two years and rack up credits at community college before transferring to State?
What’s easiest to shortchange? Not the house — you’re already in the cheapest house in town. Maybe the cars — defiantly drive that 1992 Toyota for another 10 years. That still leaves a lot of parents in the hole, and what they choose to cut back on is retirement. The conundrum for responsible parents who want to get their kids into a good school and also save 20 percent for retirement is that the prices will be set by the most foolhardy. If one parent is willing to zero out their retirement contributions, they will set the price for homes in good school districts, leaving other parents with the choice of either doing the same or consigning their children to a less desirable school
Very interesting review of a Financial Times opinion piece by Simon Kuper “Priced out of Paris“. and asserts that Paris is not alone – it’s a global phenomenon. This isn’t news, but the analysis in the original article is interesting.
Reviewer Emily Badger points out, idealistically, that it doesn’t have to be this way.
Yes, the more desirable a place becomes, the more expensive it is to live there. But cities also become unaffordable when zoning regulation limits the supply of new housing, or caps the height of new construction. Cities become out of reach when no policies are in place to maintain affordable or mixed-income housing.
Kuper diagnosed the problem, but he didn’t identify the causes – or the slightly more optimistic view that if our intentional choices about how to design and govern cities make them unaffordable, we might also attempt to actively prevent that from happening.
Yeah, like that’s going to happen.
Are Global Cities Really Doomed to Become ‘Citadels’ for the Rich? – Emily Badger – The Atlantic Cities.