Via CNBC comes this news from a Fidelity Investments survey:
More than four out of ten American millionaires say they do not feel rich. Indeed many would need to have at least $7.5 million in order to feel they were truly rich, according to a Fidelity Investments survey.
__
Some 42 percent of the more than 1,000 millionaires surveyed by Fidelity said they did not feel wealthy. Respondents had at least $1 million in investable assets, excluding any real estate or retirement accounts.
…
The average age of respondents was 56 years old with a mean of $3.5 million of investable assets. The threshold for “rich” rose with age.
Suspending snark (for just a moment, I promise), I can actually get a bit of what’s going on here: Taking the usual prudential advice on a low-risk rate of return, one would draw about 4% per year — maybe 5% if you’re a plunger — from a pool of capital one is trying to preserve. That’s how university endowments work, more or less, which is where I’m getting this back-of-the-envelope calculation. $40,000 or $50,000/year isn’t rich.
__
But of course, what’s missing from that calculation is the difference in security between someone with a million in the bank making $50K a year and someone with $3,568.23 in a checking account drawing that same fifty big ones. If rich doesn’t describe the difference, maybe “comfortable” captures what it means not to have to live from paycheck to paycheck. Very comfortable.
And, of course there is what the article does not say, though it strongly implies: there is a difference it’s important to recognize between feeling rich (musn’t hurt our overlords’ fee-fees) and actually being so. By any reasonable definition, $10^6 in the bank = rich.
__
It’s a measure not of straightened circumstances, but of a distorted culture — dare I say it, one intoxicated on legends of Galtian superheroes — in which one finds its most fortunate and, yup, comfortable citizens feeling unsatisfied in their historically unprecedented levels of security and privilege.
That’s all one needs to say, I think, but for my favorite factoid from the study:
Fidelity noted the wealthiest 5 percent of Americans hold more than 55 percent of the nation’s wealth.
With that, over to you, my friends.
__
Image: Hieronymous Bosch, Death and the Miser, before 1516.
dmsilev
Note that the threshold to “feel rich” was roughly double the mean net worth of the respondents. I’ll bet that if they confined the survey to people worth $10-15 million, we’d learn that to “feel rich”, one would need *at least* $25 million in the bank.
dms
cleek
relative wealth is funny. $3M is a lot of cash, for sure. but, it’s really nothing compared to the truly rich. if you have $3M you still won’t be able to live the lifestyle of someone who has $30M or $300M or $3B. you’ll always feel poor, compared to the billionaires.
Poopyman
@dmsilev: Well, of course the answer is always “More!”
Omnes Omnibus
I saw an article on this topic a couple of years ago that put the mindset of rich at about $10 million in net worth. The next level down was described as “comfortably affluent” and covered net worths between $1 and $9.9 million.
Poopyman
@Poopyman: … Which I think pretty much comes with being human. I suppose we’re trained to think that more is better just as some are trained/retrain themselves to think that less is fine.
iPirate
The more they get, the more they want. It’s not a bug, it’s a feature. How do we evolve it into something more sane?
burnspbesq
You miss an important point, Tom. And that point has to do with the effect of liquidity on people’s perception of their economic well-being.
Our household net worth is probably in the 750K – 1M range. But the biggest component of that net worth is the equity in our house. Next are 401(k) and IRA accounts and the 529 account to pay for the kid’s education. Can’t spend any of that.
The real liquid stuff, the stuff you can spend on vet bills, replacing worn-out appliances, and (god forbid) bridging the gap during a period of unemployment? Equal to about seven paychecks, and not growing quickly.
As long as those paychecks keep coming, we’re fine. If they stop …
So yes, it is possible for people in the top end of the income distribution to feel economically insecure. Income is not the same thing as wealth, and no one should pretend otherwise.
piratedan
i guess we need a new definition, “you ain’t rich until you can stop caring about who lives and who dies” but I guess that works for sociopaths too…
arguingwithsignposts
I planned to take a week-long vacation from the shitstorm that is the U.S. political scene this week. Of course, the Japan earthquake/tsunami/nuclear clusterfuck meant I couldn’t stop paying attention to the world, so I’m dropping in to comment on Tom’s post with a photo I took over the weekend that provides the ultimate commentary on our galtian overlords: That’s a nice crypt you’ve got there.
The rich aren’t really that different in the end. I guess that’s the best I can muster at the moment.
danimal
I’m closer to owing, rather than owning, a million dollars. These rich fat cats feeling insecure can kiss the tip of my pitchfork if they can’t appreciate their favored position in life.
It’s infuriating to see so much stupid economic policy directed around the fee-fees of these ingrates.
Shinobi
I’d settle for 7.5 thousand in the bank at this point. That would be like… AMAZING for me.
I hate rich people. And I hate the economy. I’m so sick of hearing about this shit when my boyfriend has been busting his ass to find a job for literally years. Grrrrrr.
arguingwithsignposts
@burnspbesq:
What part of
did you not understand?
Zifnab
I think you could point out that while many of these people are “rich” in the moment, they are not “rich” continuously. If the stock market plunges, their portfolios can lose 20-40% of value. If they get a big medical expense, a lot of that wealth can be wiped out in an instant. If you need to put one or more kids through college, that can eat up several hundred thousand without too much trouble. And once you enter retirement – particularly in this depressed job market – your income days are done. That nest egg has to last you until your final breath, preferably with something to spare for your next generation. If you run out of money, Social Security simply isn’t going to be there to plug the hole.
Rich doesn’t necessarily translate to “secure”. And “privileged” is extremely relative. So if richness is a measurement of safety, it might not be unfair at all to suggest that people with over $1 mil in the bank aren’t “rich” at all.
Phoenix
@burnspbesq
Every example you just gave would be excluded from the survey in question.
ed. I see I’m too slow, already got pointed out
Kirk Spencer
If you were to ask these millionaires if they were middle class, most would have answered “yes.”
That is not a sarcastic statement. I’ve done small group surveys of people making $100,000 to $500,000 per person (not household) and that’s the consistent response.
“Rich” is a mythical condition that applies to people who don’t work. Semantically, people include an implied adjective; idle.
malraux
That’s really the giveaway there though. It’s not people with $1M in total assets, its $1M in the bank, plus other wealth.
I’m sure these people worry about paying bills and occasionally have trouble making the budget balance at the end of the month. Health insurance gets expensive even if you’ve got a bunch of cash; these respondents were likely older people right before retirement, possibly retiring early which means a few years of paying for private insurance for a few years. $1000+ a month adds up pretty quick.
Social Outcast
Having one million in liquid assets is wealthy by any normal standard. But it’s still interesting that the psychology of this can vary depending on the assets involved and annual income levels. For example, many people in the NE have spent decades paying off homes that are now worth $400k-$600K while having household income of $60-$90k. So they are wealthy in assets, but they don’t feel wealthy because they aren’t fiddling around with a lot of disposable cash. Same goes for people who have a few hundred thousand dollars tied up in 401Ks. They can’t spend the money until retirement (without a penalty), even if it still counts toward their net worth.
Compare these kinds of people with bankers and execs pulling down $500k a year in salary and bonus and then spending most of it. At any given moment they might have very little in assets, but their earning power is giving them a lot of goodies every day.
liberal
Relatedly, this is why I get tired of people defining “rich” in terms of income instead of wealth.
“Rich” should refer to wealth, i.e. assets, period. (Yes, I know that it’s harder to get data on assets when studying these things.)
Chris
It cuts both ways. As amazed as I am by how fucking whiny the upper class has gotten in this Depression (even though they’re the only ones who were bailed out), and how little complaining there’s been from the working and lower middle classes. Wasn’t until this union thing in Wisconsin that they really flipped out.
Shinobi
@burnspbesq: Yeah but if there were an emergency you could sell your house, or raid your 401k, sure, you’d pay penalties. But you wouldn’t be homeless.
Some of us are one big bill away from bankruptcy. You are not, that is the difference.
(Also, I really think that people who keep 7 paychecks worth of money stashed away and then complain about not having cash flow should shove it up their ass. I’m sorry, but that is something rich people do, the rest of us, can’t fucking afford to have that much money sitting in the bank. We need to eat.)
Otto Graf von Pfmidtnöchtler-Pízsmőgy (formerly Mumphrey, et al.)
I hate to say this, but every day, I feel like I’m getting nearer and nearer to hating my country.
We have so much going for us, but it seems like the few assholes at the top of the heap are hellbent on fucking it up for all of us. I swear, I’m beginning to feel like we should think about putting those punitive 88% rates back on the top income tax bracket…
burnspbesq
@Phoenix:
Which part of “I understand the mindset” are you being deliberately obtuse about?
Bubblegum Tate
“Comfortable” was the euphemism of choice among the rich people when I was growing up, which always struck me as patronizing false modesty.
Stefan
More than four out of ten American millionaires say they do not feel rich. Indeed many would need to have at least $7.5 million in order to feel they were truly rich, according to a Fidelity Investments survey.
In other news, ten out of ten Americans living below the poverty line say they feel poor. Indeed many would need to have at least $11,000 in income per person a year in order not to be truly poor.
greennotGreen
Doesn’t some of it also have to do with how one grows up? I grew up very middle class. Decent neighborhood, public school, private university where my father had graduated using the GI bill. My own income is in the $75,000 range, and my net worth is about $400,000. My savings account, however, is less than $3000. So, personally, despite the income, I don’t feel that secure.
My parents have done quite well, and I stand to inherit in the not so distant future $3-$4 million dollars. I can’t say that will ever make me feel wealthy, though. If it were ten times that amount, it might. There are two reasons: one, I can’t spend lavishly because I need to preserve and possibly grow the trust for the benefit of my heirs, one of whom has significant health issues; and two, I grew up so typically suburban middle class that it would take a *radical* change in circumstances to jar me from that mindset. Might not the same be true for other modestly millionaires?
beltane
Since these people are not going to feel sufficiently rich no matter what, they may as well be taxed in accordance with their actual wealth and not their fee-fees. Our overlords appear to be suffering from some kind of psychological disorder that used to be couched in terms of sin, namely avarice and gluttony.
These junkies call economic methadone soc1alism so obviously they would prefer a cold turkey approach.
liberal
@burnspbesq:
Agreed. Wealth should refer to net assets.
ThatLeftTurnInABQ
IIRC in Edwardian England the term “Middle Class” meant that you had enough in the way of investments to live off of rents and at that income level could afford to hire domestic servants. In the 20th Cen. US we redefined that term to include working class people enjoying a level of material prosperity which their parents and grandparents living thru the Great Depression could only dream of.
But our middle class was only that (and not working class) by virtue of a social safety net which provided for them the security that Victorian rentiers derived from their investments. On the whole that wasn’t too bad of a deal; for example Social Security was not likely to be suddenly wiped out by a bond market scandal or a war, a risk that 19th Cen. rentiers were exposed to. But the GOP’s war against our social safety net has taken its toll and today a lot of folks who by dint of convention we call “Middle Class” here in the US are no longer that at all; they are working class but it isn’t polite to call them that.
It isn’t so much that these millionaires are lying to themselves about being rich, but rather that we don’t have much of a middle class left, and this is the remnant of it. And pretending that the folks below them are still “Middle Class” is a bigger lie.
Our domestic vocabulary for talking about social and economic class is impoverished, to the benefit of those who don’t want these issues discussed.
Davis X. Machina
@Otto Graf von Pfmidtnöchtler-Pízsmőgy (formerly Mumphrey, et al.): With modern computers, we can have a continuously variable curve, instead of tax brackets, with top marginal rates asymptotically approaching 100% as the income approaches infinity, according to some function or other.
At some point we should give the lucky duckies on the far right end of the curve special robes that only they can wear, and maybe a preposition (sorry, ‘de’ and ‘von’ are already taken) to use before their surnames, so we can spot them, and know they’re really, really important, without using money to keep score.
malraux
@Kirk Spencer: My wife is a doctor, and not a primary care doctor either. Its amazing the number of colleagues that don’t consider themselves high income earners. Or really the number of people in the $100k+ income range that don’t consider themselves high income.
singfoom
Well, when the real rich ones have hundreds of millions or billions, I see where these guys are coming from. At the same time, their lack of self-awareness is astounding.
“Someday I’ll make 8 million dollars a year, and then I’ll stop being middle class…”
Wait, what?
I hope these smaller millionaires continue to be entrepeneurs and help the economy chug along.
/snark on
Though we should make sure not to tax them too heavily, because they’ll take their awesomeness to Singapore, or London or somewhere magical where all the Galtian superheroes go.
/snark off
The Moar You Know
Income does not equal wealth.
My income is decent. I’m finally above the median! Whooo hooo!
My wealth is negative. As is the case for most people in this country. Someone above made a comment about “equity in your house”. Ain’t no such thing. If you owe money on it, your house is not an equity asset, it’s a liability. I would be in far better financial shape NOT “owning” a home than “owning” one.
BGinCHI
Someone needs to break the ideological stranglehold on the idea that the very rich (that top 5%) create jobs and wealth for the rest of society.
liberal
I think a reasonable definition of “truly filthy rich” should
(a) be based on wealth, not income
(b) involve “never having to work again” for life
(c) involve a level of living that’s fairly nice, including the ability to hire labor for menial tasks.
I’m guessing that these days, that puts it somewhere on the order of a few million.
liberal
@The Moar You Know:
I think one pernicious reason to base these measurements on income instead of wealth is that those of us who work for a living have high (or even negative!) income-to-wealth ratios.
Thus, measuring inequality using incomes might understate the degree of inequality.
Steve
Also worth mentioning: 58 percent of those in the survey agreed that they did feel “wealthy”. So maybe that 42 percent is overly anxious, greedy, jealous, disconnected from reality, etc etc.
Stefan
IIRC in Edwardian England the term “Middle Class” meant that you had enough in the way of investments to live off of rents and at that income level could afford to hire domestic servants.
Agatha Christie, who grew up in Edwardian England, said that when she was young she never imagined that she’d be so rich that she’d be able to afford a car, nor so poor that she wouldn’t be able to have household servants….
The Moar You Know
@liberal: I agree, but wouldn’t say “might”, I would say “does”.
Informal poll: Who on the thread owns their home free and clear? (that includes no HELOC or other liens on the property). I bet the number is zero.
Otto Graf von Pfmidtnöchtler-Pízsmőgy (formerly Mumphrey, et al.)
@BGinCHI:
That would be a big help. What would happen if a conservative columnist or a “serious” liberal columnist like Richard Cohen or Joe Klein wrote a lovely, fat piece about that? Would it begin to sink in?
Roger Moore
I’m sure that the underlying factor is that people expect being rich to be fundamentally different somehow than just being well off. Since they don’t feel really different, they think it means they aren’t really rich, they’re just better off than they used to be. I’m willing to bet that many of them started off pretty high up the socioeconomic ladder, too, so they have no experience of insecurity, much less true poverty, to serve as a basis for comparison.
I’m reminded of a quote from Branch Rickey:
Substitute “money” for “success” and “rich” for “successful” and you have the situation these millionaires are in. Wealth is always one or two steps up the ladder, never where they are.
malraux
@greennotGreen:
To be blunt, no, ethics or feelings should not define if you are middle class. Income, assets and age should.
Ash Can
This has got to be the dumbest non-story that’s come down the corporate-media crap pike since the last “poor suffering Wall Streeters” turd in the NYT.
Tom Levenson
@burnspbesq: Note that the survey defined as millionaires those who had their million in excess of real estate and retirement accounts. So while I agree that you have lots of illiquid assets, and those do not contribute to the sensation of disposable wealth, that’s not what is being discussed in this survey.
Edit: I see this was already pointed out above. Apologies for being old and slow.
Chris
@ThatLeftTurnInABQ:
So basically, those millionaires who don’t feel rich are the middle class in the Edwardian sense.
Cat
@burnspbesq:
No, you missed the important point. These are people with 1M in invested assets. These are not people whose home equity is the lions share of their net worth, which is is basically everyone else.
liberal
@BGinCHI:
(1) Top 5% isn’t rich by any stretch of the imagination. Yes, sure, it means you don’t have to live paycheck to paycheck unless some nasty medical emergency etc happens; and yes, you’re much much better off in the top 5% than e.g. top 50%. But it still ain’t “rich.”
(2) Some extremely wealthy people create jobs. Some not very wealthy people create jobs. A reasonable rule of thumb is whether the income comes from rent-producing assets like land. Rent collection doesn’t produce wealth or jobs; it’s just parasitism.
(3) The reason why extremely wealthy people tend not to create jobs is that most (not all, but most) of them are rent-collecting parasites; i.e., they got rich and maintain their wealth through government-granted privileges. That doesn’t mean all wealthy people are like that, though.
Davis X. Machina
Spend enough time at enough céilithe, or in enough pubs, and you’ll soon learn that Contentment is Wealth.
A couple days early, but what the hey…
arguingwithsignposts
@The Moar You Know:
I rent. My mom and stepdad own their home outright, but they are retired, and bought a 4-bdrm house in the 70s for $40,000 with 20 percent down.
I “owned” a home prior to the real estate crash, but fortunately sold just before the entire RE market crashed. I’m happy renting.
David in NY
That million dollars is “excluding any real estate or retirement accounts.” That is, it’s spare change. My guess is that the retirement savings of somebody with that kind of spare change is considerably greater.
So these millionaires aren’t really living on that million, and any earnings are probably just reinvested, so in about ten years they have two million, and in 20 four million, etc. (Assuming conservative investments.) Not to cry for them.
But at least this is an honest use of the term “millionaire.” So often I see that term used in a new way, as a person who has income of one million dollars every year. And there are many of these, and people won’t even vote to raise taxes on them. I don’t get it.
benintn
Well, I have heard it said that the first million is the hardest to earn. Not being a millionaire myself, I can only imagine that the challenge of pursuing millionaire status gives a person insights about how the wealthy(er) live, and that maintaining that level of wealth must be very difficult at a time when economic inequality is growing so quickly. Reminds me of what St. Augustine said – When you don’t have something, you’re striving for it, and when you’ve got it you’re afraid of losing it. Life is just one big temptation. Then again, as Jim Elliot said, “That man is no fool who gives what he cannot keep to gain what he cannot lose.”
liberal
@The Moar You Know:
Not me. Bought in June 2008.
Alex S.
Hasn’t there been some research that showed that the feeling of wealth depends on the wealth of the people you socialize with? In other words, relatively rich people will not feel rich if they meet a lot of other rich people.
greennotGreen
@malraux: Sure, but the survey was asking about *feelings.*
Marmot
FSM forgive me for bringing this up, but I’m spending the morning doing some editing and I can’t seem to overlook it.
That’s “overlords’ fee-fees,” unless you’re talking about only one such Galtian genius.
Yeah, I know that’s hopelessly pedantic, and I got called a “word fascist” or something here a few weeks ago. But I feel like I can count on one hand the number of times I’ve seen blogs do plural possessive correctly, and it really does make a difference in how seriously your audience takes you.
(Comments like these invariably include a similar mistake, so hear it is.)
That said, I wish we’d hear more about the wealth gap, but only DFH bloggers really think it’s an important topic. I blame supply-side voodoo.
David in NY
@The Moar You Know:
I’m sorry, I own my principal residence free and clear (purchased in 1982 for $80,000 with a 16 2/3% mortgage, big downpayment). Still have a mortgage on a second place upstate.
Ronzoni
“It’s a measure not of straightened circumstances…”
I would think that not being in dire straits would certainly alleviate any straightened circumstances one might encounter, wouldn’t you?
Loved Measure for Measure, BTW.
Downpuppy
Invested assets aren’t what they used to be. We’ve had a net flat stock market for 12 years, interest rates near 0. So, even people with a million or 2 socked away are starting to suspect that the game is being rigged by somebody else. Even if they haven’t read Matt Taibbi.
I thought the 55/5 seemed low, but it generally agrees with the more detailed work at UCSC.
Marmot
@Alex S.: I was thinking that too. I think you’re referring to Krugthulhu’s recent post on the topic — Inequality Makes the Rich Feel Poorer (or something).
Tom Levenson
@Marmot: Grammar police away, please. Brings back beloved memories of my copy-editor Mum.
Fixt, btw.
cleek
@liberal:
if i wanted $50K/yr for the rest of my life, i’d need $2M in the bank right now. if i’m lucky, the interest or dividends from investment of the $2M would be sufficient for me to increase that $50K/yr enough keep up with inflation.
but that’s $50K, which isn’t enough to hire domestic servants. i could probably get a bi-weekly housekeeper (floors, dusting, bathrooms) with that $50K. it’s about $200/mo in my area, last i looked at the fliers in my mailbox.
but, that’s still just $50K. which is a decent amount of money, but it’s not exactly lavish. maybe $100K/yr would get me to really comfortable. $200K/yr gets me to lavish. and that takes $8M in the bank, right now.
greennotGreen
@David in NY: Me too, me too!
Primary residence purchased in 1987 for $61000, second home used as an art studio purchased for $90,000 in 2006 will be paid off this summer. I bought what I could afford. I always wondered how people fresh out of school could buy $300,000 McMansions; I felt rained on that I wasn’t being paid enough since obviously everyone else was making more. Now I realize that they *couldn’t* afford those houses, but they didn’t have any level heads to counter what the banksters were telling them. Or they could afford them till they lost their jobs.
Amanda in the South Bay
@malraux:
I think that’s because the more you get in the high 5 figure/low six figure salary range (comfortably well to do by any fucking stretch) you are *expected* to spend more. Of course you need a nice house/condo/whatever. Of course you’re gonna buy a new i device from Apple every year, have two cars, have 2-3 kids you’re gonna have to pay for college for, etc.
People don’t know how to live frugally.
Roger Moore
@liberal:
I disagree. You can be rich purely in terms of income, although it has to be a very big one. If your income is high enough that you easily could become rich in terms of assets, you’re rich in terms of income even if you spend all your income on hookers and blow. You don’t get to claim you’re not rich just because you’re so profligate you can spend a massive income.
Marmot
@Tom Levenson: :)
The Political Nihilist Formerly Known as Kryptik
Honestly, is there any reason to ever take anything from CNBC regarding the ‘plight’ of the ‘only technically rich’? This from the network who counts Larry “thank god the quake didn’t kill the MARKETS at least” Kudlow and Sick Rantelli?
ThatLeftTurnInABQ
@Chris:
That what it seems like to me. I’m guessing that if you broke down their educational background and professional occupations the analogy is a pretty good one.
But the bigger point is that we should stop calling the folks below on them on the income/wealth scale “Middle Class” when used that way it is really a euphemism for working class people who own their own cars and live in a mortgaged single family house.
someguy
Interesting how people assume that $1 million = $1 million in liquid investments.
If the rich feel un-rich, I suspect that a lot of the “rich” polled are rich in business assets but not so much in cash on hand. I know a fairly successful organic farmer who is probably worth a few million, who has shit on his hands every day, and who probably draws at best $100k/year out of the business – which still puts him in the top 10% of earners, but it’s not like he could just turn around and sell the business for what it’s worth tomorrow, it would be tough to find a buyer because there’s little liquidity in working assets and sales of close hold businesses are tough to pull off due to the unique goodwill and skills that the owners take with them. I know another guy who is a heavy construction contractor and is worth several million but it’s all tied up in equipment, a cement plant, and his business operations. Dude doesn’t take a vacation, own a suit or eat at restaurants that don’t have a drive through window. I’ve never asked him but I’m sure he’d tell you he’s middle class, and his vehicles, house and lifestyle reflect that. I’m sure there’s Monopoly dudes with top hats and monocles out there but suspect they are few & far between and that they’re more like the fuckers that burnt AIG and the rest of the economy to the ground.
arguingwithsignposts
It might be good at this point to separate the people who produce useful products from the hedge fund/bankster types who play cas1no all day. Someone who has shit on his hands every day and makes $100K a year is not the same as someone who wears a Brooks Brothers suit to work and speculates on oil futures.
Emma
So let me see. People who have at least $1 million in the bank IN ADDITION to retirement accounts and homes and other real estate don’t feel rich?
OK, sucker. Let’s trade. I’ll give you my mortgage, my insecure job, and my puny retirement account and my tiny to non-existent savings account. My worries about my parents — who were the canaries in the coalmine of the market crash in the nineties and who now live with me and manage on $1200/month social security FOR BOTH plus medicare, where the copayments keep going up. My breast cancer survivor insurance issues (which is why I cling to this insecure job).
I think this thing has as obscenity filter, doesn’t it? Too bad.
patrick II
It is worse than that, the top 400 hundred own over half of the country’s wealth:The Wealth Report, WSJ
I will just add the one thing than has changed today is security, and to make yourself feel secure you need more wealth than you ever did. My father raised a family of five, but worked at the same job with union benefits and union health care. Good state colleges cost much less than they did today. He could plan and, barring catastrophe, know he could see us through high school and give good help with college.
Today, even with a million dollars, you could lose your job tomorrow. If someone gets sick, you could be broke in a few months. If banks play fast and loose with the law as they have been (see Milbank) you could loose your house without a good lawyer for no other reason than the bank thought you might be vulnerable and suck all the money out of you that they can.
The riskier our life gets, the more greed becomes necessary to assure one’s security. I have lived in countries where the only safe person was the guy with the private army hidden behind high walls with broken glass on top. It wasn’t just that he was greedy, it’s that the hold is so precarious and the fall so far.
Emma
Someguy: If you read the story, this is about people who have at least one million IN ADDITION to homes and retirement accounts.
ruemara
@greennotGreen:
I would trade your insecurity for mine in a heartbeat.
someguy
Oh sorry, You’re right. It’s about Teh Evil Rich.
Holden Pattern
It’s just all about fear, frankly. These people are afraid that they’ll lose the lifestyle they’ve levered themselves into (which is not necessarily a profligate lifestyle — just a secure one). And you know, that’s not an unreasonable fear — as noted above, the market is basically rigged, there’s almost no way to get a return on liquid investments, and there’s no social safety net that stops you above the poverty line.
A couple bad hits in the market, a serious illness (in some parts of the country, an earthquake or other uninsurable event), and they’re fucked. And at a mean age of 56, they will never get it back.
None of this is to underplay the difference between their situation and the situation of people who are truly poor, or truly struggling, but it does make it plain that the fight to climb into the rentier class is a fight for a decent life with some security, and that the current model in the United States is for the truly wealthy to buy enough political influence and create enough insecurity to ensure that everyone else is stepping on each other to try to make that climb instead of making common cause.
The Moar You Know
@David in NY:
@greennotGreen:
God job, guys. You are the only two folks on this thread so far who have real and tangible assets (assuming that you don’t have a monstrous amount of debt lurking somewhere else). I notice that you both purchased your primary residences in the 1980s.
I am hoping that my wife and I may have one of our homes paid off by retirement, but we started late; California is a tough place to get into the housing market. I’d have preferred to have bought more home for a lot less somewhere else, but we’re both tied by our jobs to this state, for better or worse.
arguingwithsignposts
Free me from moderation!
jwb
@The Moar You Know: I don’t think the accounting on this is right. Yes, your mortgage is a liability, but the value of the house is an asset, so it contributes to net worth to the extent the value of the house exceeds the mortgage. It’s only a net liability if your mortgage is under water.
greennotGreen
@ruemara: Please don’t think for a minute that I’m not enormously thankful for my great, good luck. In a former life, I was disowned and so poor that our electricity was cut off and we didn’t have enough to eat. When I finally got a job, I had to hitchhike across town to work because I didn’t have bus fare. So I know what happens when you fall off the precipice. It’s part of the reason I’m a liberal Democrat. (That and the fact that I paid attention in Sunday school and believed it when they quoted Jesus: “What you do to the least of these, you do to me.”)
Martin
@liberal: Most of the really wealthy don’t create jobs. Their employers create jobs, but they don’t. Steve Jobs only creates jobs when he has work done on his house. Apple creates jobs when they open a new store – but that’s not Steve.
The folks that own their own businesses are the exception, but generally they aren’t the top 1% – they’re quite a ways down on the list – often below the midpoint.
batgirl
@The Moar You Know:
Nope, not zero. I own my home free and clear.
I’m rich, at least compared to the vast majority of Americans. I didn’t earn that wealth. It was my grandparents.
My invested assets aren’t quite a million but then again I’m single, no children, own my home free and clear, and have a steady job with decent health insurance.
I don’t make much money. I’m a public librarian. If you looked solely at my income, I’d be solidly middle class. And I haven’t created one job. Though I can happily say that I have helped people find jobs.
BGinCHI
@Martin: That’s exactly what I was getting at.
The whole Horatio Algier myth in this country is fucking killing us.
How about some more stories about what wealth accumulation does to a society? To its culture?
Dennis SGMM
I have in the past lived for months at a time where things were so precarious that one blown tire would have ruined us. In view of that it’s difficult for me to feel any sympathy for anyone who has a million dollars worth of anything – even if it’s Corvairs or baseball cards.
Martin
@cleek:
No, you wouldn’t. You’d be surprised how easy it is to make money when you have it.
So, I’m in an odd spot. My salary is about half the median for my city, but thanks to a lot of work and a lot of luck, I’ve got about half a mil in liquid assets – enough to pay off the house and still have about 200 large in the bank. Do I feel rich? Yes and no. My problem is that my income is so marginal and looking to go down rather than up being a state employee, that my investments are subsidizing my job, which is depressing beyond measure because I feel like I’ve really fucked something up there. I don’t know if those investments will continue to go up, or if like 2008 they’ll go down. In 2008 I lost about 3 years income and in 2009 and 2010 I got it all back and then some. I slowly cash some out to cover the annual expenses but it’s been growing faster than I’ve been taking out, so things are good. But that might change out of my control.
When people talk about what you can earn in income out of a pool of assets, they tend to think of CDs, etc. But if you have that kind of money, you can spread it out across a series of large cap, high-dividend stocks. They’ll pay out 4-5% annually in dividends, and then if they increase in value that increases the base on which the dividend is calculated. When you combine the two, quite a few of these are paying 10%-20% annually. It’s a little risky when you only have enough money to invest in one or two companies, but once you get up in the solid 6 figures, you can really do a lot with that kind of money. And if you can do that while you are also drawing an income and reinvest some of those dividends, well – you’ll be amazed at how quickly you can go from having a car’s worth of investments to a house’s worth – even in a flat market.
That’s why they say that first million is the hardest, because once you get enough to play with, unless you’re stupid – you can’t help but make money without doing much.
Chris
@The Moar You Know: Another owned-home here (paid off the mortgage back in 2005 or so).
It generally takes about $10M in invested assets today to get someone into “the club”, as it were. The exact amount varies depending on one’s habits and location. Having $1M in invested assets gets one a “privilege bump” (extra attention and various perks from investment firms) but it’s around 10 times that where you suddenly get serious “personal attention”, as it were. You can also use a guaranteed 3%/yr income stream from half of that (via bond and/or CD ladders) to get you $150k/yr, which leaves you with $5M to invest in higher risk / higher return items while not hurting at all in terms of (passive) income.
The distinction between net worth and income is also important, as several people above note.
The thing that worries me, even as a non-Galtian non-overlord who’s nonetheless rather, er, “comfortable”, is more that those setting the agenda today are destroying the safety nets in order to hang on to a few percent of income, and in the process, are setting things up for an October Revolution or other similar highly-undesirable event. It’s a new Gilded Age, but gilded ages end, and the landing can be very rough.
Ohio Mom
Someone upthread commented that we don’t have enough words to describe all the nuances of class/income/wealth, and I heartily agree.
I think there’s a huge difference between say, an attorney married to a heart specialist — who together would certainly have a very nice income and probably lots of assets, and who would seem “rich” to most of us here — and the Waltons and Koches of the world. The difference is, are you able to bend the world to suit yourself?
For instance, the entire movement to end the estate tax is an effort of 18 families http://www.seattlepi.com/business/268001_estatetaxes26.html
According to the link, between 1994-2005 they spent 500 million on this little project, with the understanding that it could save them a combined 71.6 billion. And they’ve made very good progress in realizing this goal.
That’s a different kind of rich than the lawyer/doctor couple. It needs its own name.
The Moar You Know
@jwb: I wish that were the case. If the bank came to me tomorrow, and said “pay up, sucker”, I couldn’t do it. And then the bank seizes the house and I have jack shit. They can do that, by the way, whether I owe $500,000 on the place or $5,000.
And I don’t have the resources to fight them in court, so to my mind, if your creditor has the ability to take your house and you have no practical legal recourse, then that house is nothing but a de facto liability.
@batgirl: Also, congrats. You are extraordinarily lucky, and have the good grace to realize it.
@Martin: I know a few people in this situation. The saying about the first million really is true. It just snowballs from there unless you’re an idiot. I’m working on my first $100,000. At the rate I’m going, that will take another 8 years.
@Chris: Also, congrats! When did you buy? (I have a theory about housing prices and disposable income and two of the three “free and clears” on this thread have bourne it out)
MagicPanda
Which of these people is rich?
a) Someone with $1M of investable assets
b) Someone with an iron-clad pension that guarantees $50k a year
If you said that (a) is rich but (b) is not, I’d like to understand why.
Fucen Pneumatic Fuck Wrench Tarmal
@The Moar You Know:
i do.
and back in early 2000 when i put 50% down, the realtor i had been “working with” thought i was crazy, the bank that ultimately wrote the loan thought i was crazy, hell they really thought i was crazy when i was making double payments(single, no kids) on a 15 year fixed.
not rich at all, in fact i have been poor enough at one point to redefine luxury, and necessity, and not fall into the considerable trappings of leased luxury autos and whatnot.
my take from the post, these millionaires look at 300k per year as enough to live rich. i bet i can do it on less.
that is all i am saying.
Chris
@batgirl: I haven’t “created any jobs” in terms of hiring someone full time either, but you and I (and indeed everyone here) has certainly “created jobs” in another way.
Consider: last year I hired a couple of guys who do tree trimming. I will hire them again this year. They own their own business. I pay them a couple grand a year, which, duh, is not their entire income (it would barely cover the cost of running their equipment) … but me plus all the other people who hire them are why they have jobs. Meanwhile, I buy groceries and clothing and so on, and this hires everyone from the people who stock the store to the cashiers to the folks who make and grow the stuff that the stores sell.
This is the story that the Republicans refuse to acknowledge: demand, not supply, is what creates jobs. It’s the demand-side, stupid!
Emma
Chris: Yes. My father, the uber-Republican, is freaking about because he figures that sooner or later people will be pushed so far, or the economy will get so bad, that there will be no way out except for a really, really undesirable event.
David in NY
@The Moar You Know: Thanks for the praise. Let me say that being really economically conservative and living within one’s means and having (usually) a steady job, are all very helpful. We bought a house in what they call a “marginal” neighborhood in Brooklyn (we were willing to live near black people, that is), and we never had big debt. I wonder sometimes whether we should have paid three times as much for a place in Park Slope that would be worth a couple of million now, but there were some times over the years when not having a big mortgage was very consoling.
@Fucen Pneumatic Fuck Wrench Tarmal:
Yes, we put down nearly 50% on the house in 1982. People say you’re nuts, but not having a big debt load is a real cushion.
Villago Delenda Est
@batgirl:
No, you’re not rich. You’re at least not a member of the parasite overclass, which seems to need to know that others are starving in order to enjoy their meals.
You’re a decent person who recognizes how fortunate you are through the greatest of all entitlements…an inheritance that gives you a very nice buffer from economic distress.
TuiMel
@burnspbesq:
I don’t think anyone is pretending otherwise. These millionaires are investment millionaires – exclusive of real estate and retirement assets.
What I take away from this article is what I have already observed in the world. Those who have wealth will never have enough, and the world is pleasantly inclined to see that their unending striving to arrogate more power and more wealth to themselves is generally rewarded. Our wealthy have learned to co-opt just about everyone: toss a few scraps to those who might keep a few shillings from you and voila, your greed has far fewer obstacles. Another good idea is to divide the huddled masses against each other. While they are squabbling over the trivial shit like who gets to keep his/her house or what union benefits are too much, they won’t notice you walking away with the crown jewels. What continues to amaze me is this “The rich don’t feel rich” stuff is reported as if it were actually newsworthy.
The Moar You Know
Dammit I’ve been modded. Went over four links. My important question:
@Chris: When did you buy? (I have a theory about disposable income and housing prices and so far two of the three “free and clears” have bourne it out, and the one outlier was lucky enough to be one of the 9% of Americans who get any inheritance at all)
Emma
Magic Panda: If you are trying to bring in the famous “public employee” pensions, please remember that those employees have usually traded lower salaries for a more secure retirement (at least that is how it works for the teachers and librarians in public institutions). They probably have considerably less in savings and investments. The people in this study have one million or more IN ADDITION to real estate and retirement accounts.
Chris
@The Moar You Know: Bought in California in 1995 (I saw the coming housing bubble), then sold it in 2002 (I worried about the end of the bubble), trading for a house in Utah. This let me pay off the Utah house really fast.
The upside of living in Utah is, the scenery is great. The downside is, the weather is not as good as coastal Calif (not as bad as further east, mind you), and while Salt Lake City proper has some liberal attitudes, the state as a whole is so very very red. :-)
Tom Levenson
@Ohio Mom:<<<---- This. Rajahs covers it, I think.
Martin
@MagicPanda: Well, I’m using having half of ‘A’ to try and ensure that ‘B’ happens. Nobody in the public sector has an ironclad pension any longer, except the legislators and governors trying to take away everyone else’s ironclad pensions.
But even assuming that I felt my pension was ironclad, I’d still need to get to retirement. If not for the investments, I’d probably have quit my job 5 years ago just to make ends meet. That pension never would have been realized. At least with the $1M, where you go is much more under your own control and not a bunch of teabaggers that feel like you’re fucking up the country.
jwb
@The Moar You Know: They might be able to do that, but if your valuation is fair (meaning what you could readily sell the house for in say 60 days) and you are not underwater, you should be able to sell the house, pay off the mortgage and pocket the excess of the sale price over the mortgage. The problem is the valuation, which remains a guess until you actually have a buyer in hand.
srv
@Holden Pattern: This and what greennotgreen said.
Those who have saved a lot of money (6 or 7 figures) didn’t get there because they throw money around easily and live lavish upper class lifestyles. They’re into building a nest-egg, hoping for a comfortable retirement without catfood. Now, there are a lot of questions about what that nest egg will really be worth when they need it. Everyone can imagine losing their position in a few years now, getting sick, and seeing that wealth go to health care.
I agree with others’ above – at my age, I wouldn’t feel any ‘safer’ unless I had 3-4M in the bank.
Niques
@Ohio Mom:
Moneychangers.
wenchacha
The life I’ve always wanted
I guess I’ll never have
I’ll be working for somebody else
Until I’m in my grave
I’ll be dreaming of a live of ease
And mountains
Oh mountains o’ things
To have a big expensive car
Drag my furs on the ground
And have a maid that I can tell
To bring me anything
Everyone will look at me with envy and with greed
I’ll revel in their attention
And mountains
Oh mountains o’ things
Sweet lazy life
Champagne and caviar
I hope you’ll come and find me
Cause you know who we are
Those who deserve the best in life
And know what money’s worth
And those whose sole misfortune
Was having mountains o’ nothing at birth
Oh they tell me
There’s still time to save my soul
They tell me
Renounce all
Renounce all those material things you gained by
Exploiting other human beings
Consume more than you need
This is the dream
Make you pauper
Or make you queen
I won’t die lonely
I’ll have it all prearranged
A grave that’s deep and wide enough
For me and all my mountains o’ things
Mostly I feel lonely
Good good people are
Good people are only
My stepping stones
It’s gonna take all my mountains o’ things
To surround me
Keep all my enemies away
Keep my sadness and loneliness at bay
I’ll be dreaming, dreaming…
Dreaming.
Tracy Chapman “Mountains O’things”
The Moar You Know
@Chris: 1995 would have been a great time to buy in California, particularly in Southern California. But you’ve fucked up my theorem’s timeline, so I’m going to have to go back and look at wages and housing costs again.
I suspect that nobody who bought in Cali from 2000 on is ever going to get their mortgage paid off, unless they got lucky like I did and bought from parents at an exceptionally reduced price. Even so, I am thinking it will be 50/50 odds that my small home will be paid off by retirement – I don’t think the wife and I are going to pull that off with our main residence without selling my small one, but the wife’s not ready to go there yet.
ThatLeftTurnInABQ
@Ohio Mom:
The link to Krugman which Marmot at #58 posted above is very instructive. We have achieved an extraordinary concentration of wealth within only the top 1%, and our income distribution is starting to look like a fractal Devil’s Staircase. Nick Taleb has coined the term “extremistan” to describe this world of knowledge based work in which rewards and benefits are distributed in a very non-linear fashion because of network effects (i.e. fad and fashion) on demand. Politically this is working because the uber-rich have managed the trick of setting the working class and the rentier middle class at each other’s throats while they walk away laughing with roughly half of our national wealth.
It seems to me that one of the major tasks of the progressive movement 100+ years ago was to reform and tame the worst apsects of industrial capitalism so the benefits and risks were more broadly shared. Today we face the same problem with the emerging “extremistan” info-based economy but we are still in the very early stages of doing so, which is why today feels like a trip back to the 1890s.
cyntax
I dunno, I don’t see it as a call to feel sorry for those people (which would be absurd), but more a measure of “rich” being a moving target. If I inherited/won/whatevered into a $1MM, I wouldn’t stop working. As cleek pointed out, the interest on that would gross about 50K before taxes (maybe up to 90K, depending on risk aversity).
So the significance of the term “millionaire” has changed, that’s my takeaway.
liberal
@Martin:
What the hell is paying out that much these days? I can imagine maybe utilities or (shudder) REITs.
schrodinger's cat
@Ohio Mom:
Rentiers (that’s what Keynes called them in his General Theory)
liberal
@ThatLeftTurnInABQ:
I have absolutely no data to back this up, but I assume that the lopsidedness at the very top has a lot to do with the fact that the fraction of GDP going to the FIRE sector has increased stupendously since the early 1980s.
cyntax
@The Moar You Know:
Not the case in SF. Everyone I know who bought before 2003 is still well above water.
Martin
@The Moar You Know: We bought in 1996, traded up in 1998 when it appeared the market was about to move (which it did), then traded up in 2003 to a place that was less susceptible to price drops. One of the benefits of coastal SoCal is that some properties are in sufficient demand that they don’t see precipitous drops – the market for them may get smaller, but it’s still larger than the number of available properties, so prices hold. We’ve lost about 15% from the peak, but we’re still up 25% from when we bought.
The key to SoCal real-estate is taking advantage of the run-ups to trade from more volatile to less volatile properties. Started in a condo, moved to a zero-lot line detached in a marginal neighborhood, moved to a fully detached in a highly desirable neighborhood that needed some TLC, and I do almost all the work myself to upgrade the place.
When my wife and I got married, we had 2 incomes. We put one income in the bank along with part of the 2nd. Lived in a shitty 1BR apartment, walked to work, ate peanut butter sandwiches for lunch every day. Saved enough for that first full downpayment (20%) and went from there. Borrowed from our retirement for the added downpayment on the 2nd house (paid the retirement back within 2 years.) By the 3rd house we put 60% down – almost all due to equity gains in the previous two. Our decision to buy the first home was increasing rents, increasing commercial rents. Within 6 months we were paying less in P&I and taxes and maintenance on the first house than in rent for the apartment we left because rents had climbed so quickly. Since then, we’ve remained below rent level on our mortgage + taxes.
In each property we did significant work to increase the value of the home. Couldn’t have justified that if we didn’t have cash on hand. But we do 90% of the work ourselves. My wife’s job is basically to plan that work, and find the materials and components at lowest cost. It’s all good stuff – but it takes a lot of time. But we’ve done bathroom remodels for under $1000. I replaced my last fence for no cost – just a lot of time.
Chris
@liberal: AT&T and Verizon are paying 5+%. They’re both a little iffy (I own some T, but not too much).
3% is much more reasonable as an expectation today though.
Note that with inflation down around 1%, 3% is still pretty decent. When inflation was at 3%, 5% nominal return got you 2% real return; so 3% nominal still gets you 2% real.
Martin
@liberal: Yeah, a few utilities do. If you look internationally, you’ll find quite a bit more. Europe is generally a good place to look. Telefonica was paying 7% pretty recently. AstraZeneca was as well. Europeans are much more measured about their investing. They don’t seem to be under the delusion that everyone should be aiming to unseat Warren Buffet.
Lol
I think the biggest and best decision I made was to live at home and go to an instate public university. It was before tuition skyrocketed. My summer job covered the cost and I took out no student loans.
Not having any debt hanging over me has certainly made my life a lot easier compared to my peers and a large part was made possible by having a stable middle class family.
arguingwithsignposts
But nobody can approach even 3 percent wo playing the ponies. Savings dont build wealth at all. You’d be better off stuffing money in a mattress.
ThatLeftTurnInABQ
@liberal:
Some of it is the cancerous growth in the FIRE sector, which Kevin Phillips tracks in his books (Wealth and Democracy is older but more on topic in this case) but there are also structural issues with income distribution in just about every branch of the info economy. Consider book publishing for example, and compare the income of J.K. Rowling (I pick her as an example because she is not exactly your stereotypical top-hatted and monocle twirling capitalist fatcat whom everybody loves to hate) with everyone else below her. It appears that a power-law distribution of incomes is a recurrent feature in info-based economic sectors and our tax policies have not adjusted to deal with that reality. Eventually they will, I think, but also I think that this will not happen without violence, just as the struggle to tame late 19th Cen. industrial capitalism was violent. The uber-rich are not going to give up that easily.
AAA Bonds
Obama’s policies have courted big donors for 2012. Will this hurt the small donations that elected him in 2008?
http://www.publicintegrity.org/articles/entry/3020/
From the Center for Public Integrity, with help from American Public Media’s Public Insight Network.
Mnemosyne
@arguingwithsignposts:
People don’t like to talk about it, but the reason we ended up with a housing bubble was exactly that — people couldn’t get a decent return on their investments anymore, so they turned to something they could get a good return on — real estate.
AAA Bonds
@Lol:
The same. After undergrad, I had a choice between a top 10 private law school on loans and a more specifically-targeted professional program at a public university on fellowship.
A tough choice for a naive young person, but the terrible job market in law tipped me the right way, and just in time, too.
Martin
@cyntax: It depends a LOT on area. My neighborhood is a little older, but it was built with really generous amenities. Lots of pools, neighborhood schools, etc. Because the association has invested well, the costs of living there are very low.
You go one neighborhood over – about 2 blocks – and it’s a development which is much newer. Very few amenities and while the homes are larger, the lots aren’t, so they’re just packed in there. Their prices have plummeted while ours have held. Bigger homes aren’t that hard to find, but the amenities, the nearby schools, are hard to find.
A friend of mine lives near the water in Long Beach. His home has held its value but the house right behind his, on a less desirable street, with worse access to the water and views has fallen 50%. The house next door to his is a reverse mortgage, held by a bank in the midwest that will go on the market any day now. He expects that the comps will show that the house is worth half of what it really is because nothing on his street has sold but a lot of the less desirable ones have. He’s planning on making a ‘generous’ offer directly to the bank, who won’t know any better, and picking the house up for about half of market value and then flipping it.
cyntax
@Mnemosyne:
I think Elizabeth Warren explained it as wages being flat since the mid 70’s while housing, healthcare, and education skyrocketed, which pushed people to use their houses as ATM’. And of course the exotic mortgage instruments are what enabled the housing bubble.
Martin
@arguingwithsignposts: Ah, and here’s where having equity can get you. My friend who lives in LB uses his parents as his mortgage lender. He pays 5%-6% and gets a lender that will be flexible if he needs to shift payments around a bit, and his parents get 5%-6% return on their money.
Roger Moore
@The Moar You Know:
I don’t know about that. I bought within the past year, and I feel reasonably confident that I’ll be able to pay my mortgage off on or ahead of schedule. Of course it helps that interest rates were very low, so the monthly payment is reasonable even though the principal is rather high. And if we ever get the inflation the money types seem to be so worried about- I know, a remote risk- it’ll make paying those loans off a lot easier.
Joel
This isn’t especially surprising, if you really think about it.
Consider a similar question asked in a different context: Take a group of male (3:10 qualifying time) or female (3:40 qualifying time) Boston Marathon qualifiers. They’re not only faster than the vast majority of the American public, they’re faster than most active runners. Ask this group of qualifiers what they would need to run to consider themselves “fast”. I guarantee that most would pick a time that’s faster than the one they currently run.
ThatLeftTurnInABQ
@cyntax:
IMHO this is due to the bad bargain implicit in neo-liberal free trade policies. The cost of offshore manufactured products has dropped or kept roughly constant relative to wages, but the cost of services which are locally bound and thus cannot be offshored (construction, healthcare, teaching are good examples because they all have to be done on-site) have risen much faster than wages*.
It was predictable that lifting tarrif barriers would make purely domestic goods and services more expensive relative to products whose production could be moved to lower wage areas. This has created a nasty crunch for the working class because the former are more in the way of necessities than the latter. So in return for cheap TVs and cell phones and iPads (which we can live without), we can no longer afford as much in the way of things that like shelter and healthcare which we cannot live without.
*i.e. wages taken for the working class population as a whole, including wages in those sectors which have been exposed to global competition.
ETA: in other words, we have become a land of cheap luxuries and expensive necessities.
Martin
@Joel: That’s a great analogy.
cyntax
@ThatLeftTurnInABQ:
Absolutely, and the weakening of labor in the late 70’s early 80’s, was a big part of what enabled that off-shoring, which further weakened labor. And at this point you actually need $1MM to keep up with the rising costs of those expensive necessities.
ericblair
@ThatLeftTurnInABQ:
This is exactly precisely right. It’s also convenient for scapegoating, since your average Limbot can babble on about “argle bargle iPHONE YOUNG BUCKS” at the supermarket and get a bunch of sage nods from other boneheads who haven’t absorbed this particular facet of modern life.
The middle and working class have had thirty-plus years of every possible risk being dumped from the commons onto individual heads, and having their pockets cleaned out by the banks, drug companies, and universities. I don’t know where this is going to end.
cyntax
@Martin:
Very true, the neighborhood is everything and as you say even then, it’s placement within that neighborhood that really makes a difference. And your friend’s situation is one argument for why large national banks have some inherent disadvantages trying to function efficiently in a market as localized as mortgage lending is.
Don
I can’t find where I last ranted and raved about this so I’ll keep it short: Every time we have this discussion about defining ‘rich’ – an inherently meaningless term – we play into the hands of the people trying to kill progressive taxation. Because you cannot have a debate about a meaningless term without it turning into a feeling-fest rather than a concrete comparison.
Yes, it sucks to have to cede this battle when so much of the media turns on sound bytes but this is how the anti-tax nuts manage to completely work against the interest of the middle class yet keep so many of them on their side.
ThatLeftTurnInABQ
@ericblair:
I think a homeless person with a cellphone is the perfect metaphor for our economy.
Fucen Pneumatic Fuck Wrench Tarmal
@David in NY:
amazing what being personally conservative can yield, and how many conservatives are the personal finances equivalents of tax-and spend liberals they stereotype.
AkaDad
Of course they don’t feel rich. They don’t have those lavish benefits and perks that teachers have.
Nutella
@liberal:
I guess no one is rich then? The word means nothing? Or it means ‘anyone who has money than I do’ so only one person in the world is “rich”?
Linnaeus
Ugh. Reading this makes me feel more f’ed than I did when I woke up this morning.
shargash
Rich to me means able to live comfortably without working. If you have a $1,000,000,000, you don’t have a job, and you expect to live 20 years or so more, you are not rich.
The problem in all of this is the definition of rich. My wife and I have some hundreds of thousands in our two 401Ks (after 30 years of contributions). Given negative real interest rates, which will likely be with us for a long time, there is no way we can live the rest of our lives on that money after retirement without a significant drop in our standard of living.
Now, don’t get me wrong. I am not complaining. We have way more economic security than most people. But we are not rich (at least not in money).
Savings (including 401K plans) in lieu of pensions are really cash streams designed to last the rest of your life. They should fairly be compared to a pension, because they are the Reaganomic replacement for pensions. I think if you were to compare the cash flow from 1 million dollars over 20-30 years to the cash flow from the pension a UAW worker with 30+ years experience (remember to count health care), you would find them to be roughly equivalent. Would you call the retired UAW worker rich? If so, I think rich has lost all reasonable meaning.
Ruckus
@Dennis SGMM:
Over the last 2 weeks I had to put $130 in my 13 yr old truck to keep it running. That comes out of the food budget. I’d like to own something that gets better than 13mpg but that’s not going to happen. I walk or ride a bike as much as possible because of $4 gas. Someone up thread said that the poor would like to have the problem of having $11,000 per year to spend. So that makes me officially poor. Not middle class like I was supposedly born into and that my feeble brain would like to imagine I’m still in. And that’s part of the problem that I see, we imagine ourselves to be something, even if it is not close to true. If my fortunes had gone the other way and I had the reasonable/very comfortable life, would I still feel that I was middle class? Probably.
Barry
@MagicPanda: If you haven’t noticed, for the last couple of decades a major goal of the people running this country has been to destroy all ‘cast-iron’ pensions, with the exception (for now, IMHO) military pensions.
They’ve been rather successful at it, and they seem to be accelerating.
Ruckus
@Ohio Mom:
They have a name. Assholes.
IrishGirl
Rich is a very relative thing. To someone living month to month in an apt with no savings someone with retirement funds, a house and several months in the bank is rich. However, to someone living subsistence level in a 3rd-world country, the first person in the apt is rich.
Americans are basically full of shit when they talk about being rich and wealth because they have so little interaction with the truly poor and so little understanding of how the majority of the 7 billion people on this planet live. Remember if you have enough money to maintain a checking account, that alone puts you in the top 1%. Think about that.
AAA Bonds
@shargash:
From this description, I would conclude instead that “rich” still doesn’t have any reasonable meaning to Americans, because we’re so much richer than so many people.
Don’t get me wrong – I agree with you on near everything. Conservative work to undermine social responsibility in this country has raised the threshold of financial security incredibly high, dragging us away from the rest of the developed world in terms of inequality. Nowadays in America, you are either so rich that money is meaningless, or your nest egg is completely at the mercy of that first group, their whims, and their campaign donations.
But I think the best argument to raise against further Reaganomics may be: we are all still really rich, compared to the rest of the world, and our democratic state is comparatively strong, and that’s not a coincidence. So do we really want to keep heading in the direction of places where a UAW pension could purchase a small town and an army to oppress it?
BC
The poll doesn’t surprise me any. I was working in White Plains, New York, in 2007 with people who knew millionaires. One thing they told me – people with $100M but not $1B felt poor because they weren’t in the billionaire range. Only person who feels rich nowadays is Bill Gates.
AAA Bonds
@Don:
“Rich” is not a meaningless term. “Rich” is a relative term. The distinction between those two is very, very important.
Ruckus
@ThatLeftTurnInABQ:
we have become a land of cheap luxuries and expensive necessities
This is spot on.
Jim Pharo
You guys sure have a lot of experience with managing wealth and steady income. I’m not hearing a lot from those who are poor and/or have had significant gaps in their earnings.
Lack of job (income) security is the root of all of this, and that is directly tied to our unwillingness to make businesses invest in jobs rather than in paying dividends. A higher corporate tax rate would have the effect of reversing the pendulum’s swing and start creating a better labor market (and a worse investment market).
Even those who spend foolishly, or make bad real estate choices, or get sick, would be able to weather those storms if they could rely on some modest level of income. It’s what other civilized societies do.
jwb
@ThatLeftTurnInABQ: I think there’s another factor at work and that is the rise of global upper class of sufficient size and a transportation system that is sufficiently global and cost effective, that this upper class now constitutes an effective global mass market. If we take the world population as being 7 billion, 1% of that is 70 million and 5% is is 350 million, roughly the market of the US. So, assuming transportation costs remain low, you can get fairly decent economies of scale just selling shit to the top 5%.
MagicPanda
@Emma: FWIW, my point is the opposite. I’m not trying to undermine support for public pension holders. I agree with everything you say about public employee pay, etc.
If anything, my point is this: in the 60s, most people had some sort of pension agreement with their employer. Or at least that’s the picture I have of it. I wasn’t around at the time. I don’t think anyone thought that a person with a middle class income and a good pension was a rich jerk or anything.
Nowadays, very few of us work for 30 years and then get a pension. In this new world, you have to create that pension for yourself. In order to do that, you need to save roughly $1M to create a $40k pension for yourself.
So given that, I just don’t think it’s funny to laugh at people who don’t think that 1M makes them rich.
Footnote: yes, I know that the article said not including retirement savings, but I’m assuming that all that means is that you subtract out specific vehicles like IRAs and 401(k)s from your portfolios. But because those vehicles have annual contribution limits (5k/year for IRA and 15k/year for 401k) there’s only so big those accounts can typically go)
mclaren
More to the point, 3.5 million dollars in investable assets nowadays means you have no assets — not with the gross fraud and flagrant creative bookkeeping practiced by American corporations, Moody’s bond rating agency, Wall Street banksters, the various oversight agencies which actually perform no oversight, and so on.
In short, if your ivestment broker tells you that you have a portfolio of 3.5 million dollars in gold bullion, AAA bonds, and blue-chip dividend-paying Dow Jones stocks, chances are you actually own a drawer full of old socks, an armadillo scraped off the tarmac as roadkill, and three pairs of dirty underwear with skid marks on ’em.
Anyone who invests in any asset class today is a fool. The colossal amount of all-pervasive fraud in the American financial systems assures us that all financial reports are lies, all assets are vapor and bogus, all financial institutions in America are currently insolvent (regardless of their claims to the contrary), and all real assets are so absurdly overvalued as to qualify for an episode of Rod Serling’s The Twilight Zone.
Frank
My 85-year old mother does not feel rich, but qualifies as a millionaire on these criteria. she lives on social security supplemented from about $50k in savings that provides meager interest. But she has a home in San Francisco that she bought for $40k in 1970. It is certainly worth more than 1 mil now.
In California there are lots of people with expensive homes that are millionaire in name only. They are certainly not poor, but not living lifestyles of the rich and famous.