Seniors and the generation wealth gap

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.

Shame on Jonathen Chevreau: “A retirement rule that hurts us all” MoneySense, Feb/2015l

This is another stupid article from MoneySense*. Jonathan Chevreau claims that current regulations requiring seniors to annually withdraw minimum amounts from their registered plans are unfair in this era of low interest rates and longer lifespans. Using simple math he illustrates that the averaged retiree’s registered plan will be reduced to near zero by age 90-95. And he’s right. But it’s not a problem.

It’s not a problem because the hypothetical retiree’s savings are not reduced to near zero. It’s his/her registered savings that are reduced. The non-registered savings are increased as funds are transferred from the registered plans.

The regulations that Chevreau complains about don’t require the retiree to dispose of the funds in the retirement account – the requirement is to withdraw a proportion of funds from the registered account and pay tax on that portion. The after-tax balance still belongs to the retiree.

Chevreau knows better. I’m at a loss to explain why he failed to explain that the “retirement rule” is no more than a phased-in taxation of the amounts that have been tax-sheltered for many years.

* the last stupid article was the one that understated senior’s housing expenses and failed to distinguish between home owners and renters.

Tip to Young Homebuyers: Rent! (or be born in 1946)

How myopic is the following quote – from a study by The Urban Institute, cited initially in the NYT and debunked in the Ecomonitor.com article cited.

“If a person delayed the purchase of a home to age 40 instead of buying at age 30, that might result in a $42,000 loss in home equity by the time she reaches 60, given trends in wealth accumulation over the past few decades.”

Trends in wealth accumulation over the past few decades were driven by Boomers.  Those days are gone.  The party is over. The good ship Aloha has sailed.

Ecomonitor provides some solid rationale for renting, not buying, a home.

via EconoMonitor : EconoMonitor » Bizarre New York Times Article on Lousy Finances of the Young Gives Undue Prominence to Housing as an Investment.

How Baby Boomers ruined the world | Canadian Investment Review

This article  by George Athanassakos (Canadian Investment Review) sums things up pretty well. “The children of the Baby Boomers will have to pay the price for their parents’ luck.”

I’m in agreement with the causes and the symptoms he described.  He anticipates that a time of reckoning is at hand, “an economic and political confrontation which may require similar sacrifices to those made by their parents and grandparents.”  He cites two two pressures:

  • Indirect: “The children of the Baby Boomers will have to pay the price for their parents’ luck.”  Well, as a selfish Boomer, that doesn’t sound so bad – ‘I’m alright, son.’
  • Direct: “When Boomers get anxious, uncomfortable and unhappy, monetary authorities around the world bend over backwards to accommodate them.”  Well, that doesn’t sound so bad either.

Like the author, “I don’t expect this to end well”.  Also, like him, my crystal ball isn’t sufficiently well tuned to identify the means of reckoning, but here’s a thought: the low interest bubble triggers inflation, pushing up the cost of financing government debt. Governments print and borrow even more money to pay the interest. Massive inflation wipes out the millions of boomers on fixed incomes, encouraging them to join with the “Occupy” sentiments as they call for a return to “fairness” in the distribution of the national wealth – a Jubilee Year, if you will.

via How Baby Boomers ruined the world | Canadian Investment Review.

“Equality issues” – this is rich

Ageism accepted, national poll shows – perverse plague will worsen as boomers age”  That’s the gist of an article in the Ottawa Citizen of November 3, 2012.  The article  provides an overview  of a report, Revera Report on Aging.  The reference to “equality issues” comes from Dr. Jane Barrett, Secretary General of the International Federation on Aging, co-producers of the report.  She describes a “perverse and sinister” plague.  “While we’ve been combating race and gender, in terms of equality issues, the new player on the scene is ageism”.    That’s rich.

Boomers have been stacking the deck in their favor for sixty years and now they are the disadvantaged demographic? Give me a break.

The report results tell me that a lot of people aren’t happy with the mess that they have been left with and they’re not keeping their displeasure a secret.

  • Six-in-ten (63%) seniors 66 years of age and older say they have been treated unfairly or differently because of their age
  • One-in-three (35%) Canadians admit they have treated someone differently because of their age; this statistic goes as high as 43% for Gen X and 42% for Gen Y
  • Half (51%) of Canadians say ageism is the most tolerated social prejudice when compared to gender- or race-based discrimination
  • Eight-in-ten (79%) Canadians agree that seniors 75 and older are seen as less important and are more often ignored than younger generations in society
  • Seven-in-ten (71%) agree that Canadian society values younger generations more than older generate
  • One-in-five (21%) Canadians say older Canadians are a burden on society

Gee, boomers must be pretty sad about getting older, right.  Wrong.  They’re all set.  It’s the younger generation with not much to look forward to:

(from page 11 of the report)

After lamenting the sorry state of boomers, the report recommends three ways to reduce the “inequality”:

  1. Invest in technologies that can help older people live independently for longer
  2. Raise awareness about ageism so that it is as socially unacceptable as other ‘isms’, like sexism and racism
  3. Provide more government funding of healthcare solutions that address the specific needs of an aging population

I’ve got no problem with No. 2, but Nos. 1 and 3 are just another way of stacking the deck: directing limited resources of the general population to the solve the boomers’ “problems”.
Let the boomers look after themselves, please.

Wealth Gap? It’s due to politics.

In a largely uninspiring article on Old vs. Young, The New York Times Sunday Review (June 22, 2012) describes the significant disparity in the wealth of the boomer generation and our kids”

“The wealth gap between households headed by someone over 65 and those headed by someone under 35 is wider than at any point since the Federal Reserve Board began keeping consistent data in 1989. The gap in homeownership is the largest since Census Bureau data began in 1982. The income gap is also at a recorded high; median inflation-adjusted income for households headed by people between 25 and 34 has dropped 11 percent in the last decade while remaining essentially unchanged for the 55-to-64 age group.”

The reason? Less political power:

“Younger adults are faring worse in the private sector and, in large part because they have less political power, have a less generous safety net beneath them. Older Americans vote at higher rates and are better organized. There is no American Association of Non-Retired Persons. “Pell grants,” notes the political scientist Kay Lehman Schlozman, “have never been called the third rail of American politics.””

Politics?  Really?

Ill-gotten Gains

Ill-gotten Gains

“It’s only fair that older people are better off than the young. They’ve earned it.” The Guardian (UK) (column)

This is nuts. The article overlooks the fact that many older people have become rich at the expense of younger people and have stacked the deck against these same young people to preserve the new status quo. The comments/responses to the article are instructive.