Observations on life

Younger Americans supporting older

  
Source of data: US Census Bureau via fool.com

The numbers are not great in any category, but it’s clear that net worth is skewed to the older population, but that is not surprising given the bulk is in home equity. However, even the red bars show the reality of who has the cash. Now consider who receives the most benefits from government (taxpayers). 

Those blue and orange segments are pretty big and will be growing in the future with fewer and fewer young people to pay the bill. 

Just think what we could do with less going toward interest payments even at today’s low interest rates. We spend $79 billion on education and $283 billion on interest. Not to worry though, Old Bernie wants to provide free college tuition; not by lowering other spending such as debt service though, but by simply raising taxes, taxes, taxes😱

  

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8 replies »

  1. Maybe I missed something here. How is the young supporting the old by these charts? it seem like the 55 to 69 years old have the cash to me. Are you saying the amount of Medicare and social security as percentage of the budget?

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    • The younger people who have the fewest assets are paying their tax dollars to support us older folks who have had a lifetime to accumulate assets.

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      • Are you measuring wealth or income? People confuse them all the time. Taxes are paid on income, we do not have a wealth tax in America (at least, not yet).

        You are not suggesting that older people didn’t pay taxes in their day, are you? And, you are not suggesting that a person’s income taxes vary based on their age, are you? So, unless you are like the D’s and want to tax wealth (they call it redistribute or as President Obama would say, spread it around), it isn’t clear what issue you are focused on.

        Note that while the D’s would like to tax wealth, they dare not speak in those terms (except perhaps Bernie) if they want to get elected. And, woe is us if a majority of voting Americans somehow join the “99%” and assert that the unequal distribution of wealth in America is “unfair” and “government needs to do something about this, or there ought to be a law.” As Jefferson once said: “The natural progress of things is for liberty to yield and government to gain ground.” It doesn’t need any help at aggrandizing power.

        I do believe those who pay taxes should somehow have a greater voice in how those monies are spent when it comes to federal spending not specifically enumerated in the federal constitution. If that seems farfetched, note that even today we are litigating over what “one person, one vote” really means, all the way up to the Supreme Court, over the issue of how to draw congressional districts (who to count in allocating seats – all present in America, or all present who are eligible to vote in America, excluding, for example, illegal aliens). In other words, the concern is that representation only be determined with regard to who will (someday) be eligible to vote, not based on who we are spending taxpayer dollars on.

        My net worth at age 27 was negative. Despite paying MORE than my “fair” share of taxes over the next 36 years, my net worth at age 63 is now significant. With regard to entitlements, the “contributions” I paid, FICA and FICA-MED (when you include contributions deducted from my paycheck, wages I did not receive when my employer paid the other half, both combined and adjusted for interest over the past 47+ years), will far exceed the benefits I receive from Social Security and Medicare (in part because of the Medicare Part B and Part D surcharges and income taxes on Social Security benefits – both of which were added far after I started paying into this system). Further, I have paid federal income taxes (taxes that fund Medicare Part B and Part D) for those who went before me, for 45+ years.

        So, what’s your point!?

        Yes, there are intergenerational transfers of wealth. But, the data show that the wealth transfers (typically at death), the net net number, has always moved money from the old to young. According to a 2010 Met Life study, Baby Boomers still stand to inherit quite a bit between 2010 and 2030, estimated to be $12 Trillion. However, in a 2012 study by Accenture, Boomers (born 1946 – 1964) are expected to leave behind $30+ Trillion, and that during the period 2030 – 2045, 10% of Americans’ wealth will change hands every five years.

        Are you suggesting that the federal government should dramatically ramp up the death tax (in anticipation of these demographic situations) so as to confiscate wealth from those who die (death tax) and use those monies to buy votes by redistributing wealth?

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      • Well based on your figures, the current middle-class should have no worries in the future. The inheritance tax should not exist, it’s an abomination, just like the AMT based on a very few abuses. I

        I believe your assumptions about SS taxes, employer contrib. and the lost wages and interest are only theoretical. In real life neither the compensation nor the saving and steady interest would occur except for a very few people.

        How many employers increased wages when they terminated a pension plan or converted it to say a CB plan or when they suspend or reduce 401k match?

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      • I agree that the young are paying now for the old and when they become old the young will pay for them too. What I see as the problem is that the old are getting more benefits that the system was designed to payout and there are less young people being born. Also the politicians are afraid to raise the taxes to support their promises. The solution that is implied here is to go back before the Square Deal and everybody pays their own way from cradle to grave at which point people will be dying in their homes.

        The other thing the charts tell me is that the 55-69 do not have enough money to retire on. I expect the young to have negative net worth as they have children, buy houses, get cars loans, and pay off student debt. The problem today is that people take on mortgages in their 50’s, get college loans for their children, and just do not save money.

        The younger people in theory have more deductions and are paying on income not wealth just like older people. Older people in theory before retirement should have a higher income and little to no deductions. But government policy is to push home ownership, college loans, and tax your savings. No wonder government is trying to fix the mess they made by giving so many benefits.

        The other issue is the elderly is a very large voting block and they have the pull to vote themselves raises where a lot of younger people do not vote until later in life.

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      • “The younger people who have the fewest assets are paying their tax dollars to support us older folks who have had a lifetime to accumulate assets.”

        You know what, we did the same thing by paying taxes Fed, state, payroll, when we were working, for the government to give to others. The people before us had the same years to accumulate assets. No one wants to fix the system, by raising the taxes on everyone, so the money will be there when the young ones are old. You always say no one is paying enough into Social Security, compared to what they will receive, so if you raise the Social Security tax the same as the COLA it will help balance the fund. And also be more in line with what the young ones will receive when they retire. Social Security is not going away, we need to fix it, for the young ones, as you put it.

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      • The problem among several is that there are fewer people working and paying taxes and more people collecting benefits. Taxes used to be able to pay benefits with some left to invest. That is no longer true and all taxes and interest is needed and in a few years both of those will be insufficient. It’s simple math really. One way or the other the promises must be paid for and now that is not happening.

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  2. Unless you are tongue in cheek here, you maybe are just having a bad day. I can’t remember the last one that seemed so disconnected from reality.

    You say: “The numbers are not great in any category, but it’s clear that net worth is skewed to the older population, but that is not surprising given the bulk is in home equity.” I say: You expect someone who is age 40 to have accumulated a lot of home equity – what, if they have a 30 year loan, they bought at age 18 when graduating from high school? The bigger issue here is that the chart identifies America’s woeful savings rate – where, after a lifetime of income, expense and saving, the average 65 year old (and averages can be deceiving), only have $150,000 or so of non-home equity wealth. Do you have the chart showing the median amounts? I think you would fall over to see the difference – just how skewed this chart is by a small minority of older Americans. 2012 data shows that 47% of Americans have a net worth (assets less liabilities, excluding government entitlements) of 1%, and watch the budget challenge skyrocket. However, the real problem, which you don’t mention, is the reliance on government – the reliance that Bernie is trying to tap into. Where people look to the government, particularly the federal government, to come up with a solution to the issues they face in their day to day lives. What we find is that the feds are incompetent, and unable to even effectively accomplish their limited duties as identified in the constitution.

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