Rising riches: 1 in 5 in US reaches affluence


#1

sfgate.com/news/politics/article/Rising-riches-1-in-5-in-US-reaches-affluence-5047261.php


#2

[quote="Maxirad, post:1, topic:347603"]
sfgate.com/news/politics/article/Rising-riches-1-in-5-in-US-reaches-affluence-5047261.php

[/quote]

This is nothing earth shattering, all the article is doing is looking at the top 20% of the income distribution in the US and calling them rich. A better measure in my opinion would be some level of wealth, because there are plenty of people with an income of over a $100k who have little wealth because their consumption increases faster than their income.


#3

100k is not affluent in a good third of the country, which I don't think the writer realizes.


#4

This is an issue that is not going to go away. I have no issue with people attaining wealth through their own honest efforts, but I am concerned with the continuing disparity between top and bottom. If one follows history, conditions like this have quite often resulted in extreme unrest and even open warfare.

I'm not saying that we are on the verge of any such thing, but perhaps a little honest discussion could help us avoid such dire possibilities. That I support wholeheartedly.

John


#5

Apparently I am a 7%'er.....so why don't I feel like or live like one?

These figures are designed to spike envy and consumption methinks.


#6

[quote="VanSensei, post:3, topic:347603"]
100k is not affluent in a good third of the country, which I don't think the writer realizes.

[/quote]

I always laugh when the well-off claim "I'm not rich" or "100K isn't really that much". It seems that people want to reserve to word "rich" for rolling around in gold coins like Scrooge McDuck.
Get real, if you are in the fifth quintile of earners you make more tha 80% of the rest of the rest of the population. Does it mean you live in a mansiion and spend your vacations on a yacht? No. But I'll never understand why the wealthy are laways poor-mouthing and bellyaching.

Here's a graph of IQ distribution:

http://t0.gstatic.com/images?q=tbn:ANd9GcQFYxh_kVYKDLeFsGFQUh7eXdCnjQw5YBzYpJRBspVSQUhF5MTlcg
Now if you had an IQ of 135 would you deny you were smarter than most of most other people? I didn't think so.


#7

[quote="didymus, post:6, topic:347603"]
I always laugh when the well-off claim "I'm not rich" or "100K isn't really that much". It seems that people want to reserve to word "rich" for rolling around in gold coins like Scrooge McDuck.
Get real, if you are in the fifth quintile of earners you make more tha 80% of the rest of the rest of the population. Does it mean you live in a mansiion and spend your vacations on a yacht? No. But I'll never understand why the wealthy are laways poor-mouthing and bellyaching.

Here's a graph of IQ distribution:

http://t0.gstatic.com/images?q=tbn:ANd9GcQFYxh_kVYKDLeFsGFQUh7eXdCnjQw5YBzYpJRBspVSQUhF5MTlcg
Now if you had an IQ of 135 would you deny you were smarter than most of most other people? I didn't think so.

[/quote]

On 100k my (then) family of five would have qualified for government aid in Westchester county NY.


#8

Didymus does have a good point.

BUT, what isn't taken into account is that many urban areas have a higher cost of living, and the people making higher salaries are not rich and are not living like they are rich. Unlike IQ, income is relative.

Here in the DC area, there are a lot of people who retire from the military or government and then continue to work while they receive their retirement. Add a working spouse, and the household income can be very high. Accumulated wealth is also high.

Why do I mention this? Because the businesses here know that, and price products and services accordingly. It's expensive to buy a house, rent, buy groceries, and everything else. I feel very sorry for the people making middle income wages around here. I am not retired military and my wife doesn't work full time, and we are not living an affluent lifestyle.

Our household income would be impressive in many areas of the country, but, frankly, we wouldn't be making it in many areas of the country.


#9

[quote="VanSensei, post:3, topic:347603"]
100k is not affluent in a good third of the country, which I don't think the writer realizes.

[/quote]

And, as a previous poster said, there is no correllation between high income and wealth.

Of possible interest, I recently calculated the difference in net disposable income between a person making $40,000/year and one making $100,000/year. All other things being equal, the actual difference (after taxes and Obamacare) between their net disposable incomes is not $60,000, but only about $10,000.

Collectivist governments seem to hate the upper part of the middle class more than anyone else, including the very rich. In most such governments, the very rich are needed as a source of money for the politicians.

And the plutocrats are fine with the arrangement. I think maybe Bunker Hunt, for all his faults, said it best. When asked why he was unpopular with the elites he responded "Because they can't stand the thought of a fat boy from Texas making any money."

This article seems to be of the "anti-Kulak" sort, at least by suggestion.


#10

[quote="Ridgerunner, post:9, topic:347603"]
And, as a previous poster said, there is no correllation between high income and wealth.

[/quote]

I think the survey of consumer finances would dispute that.

Of possible interest, I recently calculated the difference in net disposable income between a person making $40,000/year and one making $100,000/year. All other things being equal, the actual difference (after taxes and Obamacare) between their net disposable incomes is not $60,000, but only about $10,000.

I would like to see your math on that.


#11

Much of our family income is taxed at a higher tax bracket. Our daughters did not qualify for college financial aid, so we paid the entire $200,000 plus cost. People making less than $100,000 often limit their tax liability to the 15% bracket and qualify for varying degrees of financial aid. As PaulinVa suggested, our expenses in Northern Virginia exceed average living costs in most areas in America. I'm not complaining because, in fact, we lead a fairly affluent lifestyle. Like others, I'm simply pointing out that income alone cannot be considered without addressing expenses, geographic location, tax brackets, college subsidies, etc.

I remember my college days with great fondness, notwithstanding the fact that I never had more than $50 in my wallet at any given time. Less money, lower expenses, more fun.


#12

[quote="stinkcat_14, post:10, topic:347603"]
I think the survey of consumer finances would dispute that.

I would like to see your math on that.

[/quote]

I'll go back and redo it if I find the time. Hate math, though.

In the meanwhile, what, exactly, does this survey say? Does it control for age? Wealth increases with age on average, as (oftentimes) does income. But that does not mean the income was the determining factor. I realize this is anecdotal, but it has been my observation that most wealth for ordinary people is due to action early in life (usually consuming below one's means and early investing) combined with the passage of time.

Again, this is anecdotal, but it has been my observation that acquisition of productive assets is often dependent on being willing to borrow within reason early in life in order to acquire those assets. I know that's anathema to many, but I am a firm believer in it.


#13

[quote="Ridgerunner, post:12, topic:347603"]
I'll go back and redo it if I find the time. Hate math, though.

In the meanwhile, what, exactly, does this survey say? Does it control for age? Wealth increases with age on average, as (oftentimes) does income.

[/quote]

They found the typical results, high wealth people tended to have higher incomes, lower wealth people tended to have lower incomes with a smattering of everything in between. The then controlled for age and the basic relationship did not change.

federalreserve.gov/pubs/feds/2009/200913/200913pap.pdf

I realize this is anecdotal, but it has been my observation that most wealth for ordinary people is due to action early in life (usually consuming below one's means and early investing) combined with the passage of time.

I agree with you here. The right decisions made when young can make a huge difference in the final outcome. Unfortunately financial illiteracy is a real problem in our society.

Again, this is anecdotal, but it has been my observation that acquisition of productive assets is often dependent on being willing to borrow within reason early in life in order to acquire those assets. I know that's anathema to many, but I am a firm believer in it.

Prudent borrowing when young can definitely facilitate wealth accumulation. You can achieve a fair amount of wealth without borrowing though as well. Obviously with the right asset(s) wealth can be generated much more quickly with borrowing, the trick is in picking the right assets. There was a story of a young guy in California who had about $800k from from stock options and invested it in houses with mortgages. He ended up losing it all when the market crashed.


#14

[quote="stinkcat_14, post:13, topic:347603"]
They found the typical results, high wealth people tended to have higher incomes, lower wealth people tended to have lower incomes with a smattering of everything in between. The then controlled for age and the basic relationship did not change.

There was a story of a young guy in California who had about $800k from from stock options and invested it in houses with mortgages. He ended up losing it all when the market crashed.

[/quote]

First, let me thank you for the cite. I'll read it when i have more time. Definitely.

However, (and it's always safer to speculate in ignorance, which I'm doing here) which is the chicken and which the egg? Naturally, people with high wealth will have higher incomes than people without it, all other things being equal, because most of the time wealth generates income.


#15

We can’t really say much about the direction of causation from this data. Like you said, people with more wealth do tend to have higher incomes. Also, people who have higher incomes can save more, which in the long run generates more wealth. On the other hand, some don’t save much, so that is why there are so many different possible outcomes.


#16

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