>> How to beat the stock market: Buy companies with high customer satisfaction scores <<
The Consumerist links to a report that indicates “companies at the top 20% of the the American Customer Satisfaction Index (ACSI) greatly outperformed the stock market, generating a 40% return. From 1996-2003, the portfolio outperformed the Dow Jones Industrial Average by 93%, the S&P 500 by 201%, and NASDAQ by 335%.”
>> Generation gap? About $200,000 <<
“The growing divide between the rich and poor in America is more generation gap than class conflict, according to a USA TODAY analysis of federal government data. The rich are getting richer, but what’s received little attention is who these rich people are. Overwhelmingly, they’re older folks.”
>> Simple pleasures include financial security <<
The more I read from Ben Stein, the more I like him. His advice is great. “Keep it simple, my friends — the burl-wood dashboard and plush leather seats of a Bentley may feel great, but opening up your mutual fund statement and seeing how much you have to cushion you and your family against life’s uncertainties feels even better.”
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This article on how the baby boomers are so wealthy really annoyed me. I am 27, have $33 thousand in student loan debt, and will have to save millions of dollars, because these boomers have bankrupted social security and refuse to do anything about it.
We should have a one-time “save social security tax” that disproportionately taxes these boomers who have grown rich while cutting taxes, and over-spending on military and social programs.
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Same here. At least, in the States, you guys are talking about it. In the cold north, the problem doesn’t even exist.
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Hmmm. First you tell everyone to save their own money for retirement and then get mad at them for having more money than younger people. Doesn’t seem quite fair to me.
Did the people crunching these numbers take into account the “defined-benefit” pensions that people in the 1970s and 1980s used to have to cover their retirement? It doesn’t appear that they did. People back then had less wealth, because they needed less wealth to survive retirement…which was shorter (people died younger) and often funded by real-life pension. Today’s boomers who are now heading into retirement lucked out in so many ways…generous social security benefits, good economy, great returns in the stock market, and better health care that allowed them to work longer. Is it unfair to the upcoming generation? Probably. Do social security benefits need to be cut. Probably.
But it really bothers me to read articles criticizing people for doing exactly what we tell everyone they ought to be doing…saving, investing, building net worth so they can take care of themselves during their retirement.
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Kathryn, you have a valid point. Perhaps I should have editorialized more. I was just trying to point out an interesting article about personal finance!
It is true that older people do have more money because many of them have saved for their retirement. The article says: “Older people have always been wealthier than younger ones. What’s changed is the disparity between the generations. Old people have been racing ahead, helped by government retirement benefits. Young people are running in place, partly because they’re delaying careers to get more education.”
I think the piece explores a number of interesting issues, and is worth reading. But you’re right: we shouldn’t condemn older people for saving for their retirements!
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Mostly blathering–I almost deleted this. Feel free to skip this comment.
First, I have a problem with the article going on and on about how the “baby boomers” are richer when really it’s people over 55 who are richer. Disclaimer: I am technically a baby boomer but only 44 and thus do not fall into the category they are describing.
These two quotes struck me:
“Younger generations now delay the start of wealth accumulation. They postpone careers to get more education. They marry later (delaying the financial benefit of a shared household), have children later (delaying the arrival of lower-cost, kid-free days) and inherit money later (their parents live longer).”
I did get more education, I’m still not married but I’ve always had a roommate, thus always having the financial benefit of a shared household, I’m not having kids, and I’m not inheriting money (good thing you can’t inherit debt!).
I have a net worth of $220,000 which is closer to the median net worth of people ages 55-59 than to the $48,940 for people 35-39, and that’s just my half of the household. Yet, that doesn’t seem all that rich to me (because I want to retire in 7.5 years). My income at $39,000 is near the US median.
“Younger people may not look poor. They have more stuff than ever — more valuable houses, cars and other assets. But they are so much deeper in debt than their parents — student loans, credit cards, mortgages, car loans — that their net worth has shriveled.”
They have MORE STUFF THAN EVER. Those people who are age 55 and up were born before World War II. They bought 1000-square-foot houses and had one car per family. Credit was not easy to get. They were lucky to get bad color TV (everyone on TV looked green or orange). Computers were the size of buildings.
Apparently I have been able to gather their wealth by living like them. I have a small house, an old car (comparable in cost to half a normal car), and I have a computer and high-speed internet but no TV or cable. I went into debt for college, my first car, my house, and a few cash-flow problems after that, but will not take out any more loans in the future.
Those older people have been paying into Social Security for decades and now that it’s their turn to take some out, there’s not enough. That’s not fair either. Of course, the age should have been moved up from 65 not to 67 but to some other age that is actually old. Sort of like age inflation.
On the other hand, there is some major educational inflation going on now. You need a college degree to get the kinds of jobs that used to require a high school diploma, and you need a couple of postdocs for jobs that used to require just a PhD. And those educations are costing a LOT more money now–we do not have enough schools to keep up with the demand.
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As far as the “wealth gap” goes,
It has been shown in many studies that (generally) people become wealthier as they become older. It makes sense since ( assuming you are capable and WANT to) most acquire experience, new skills,seniority raises,etc.
It has also been shown that most people occupy most or all of the quartiles/quintiles over their life time. In other words, if you look at the people in the poorest 20% now, chances are in 10 years most of them will no longer be there. The rich are not immune to dropping down, either.
Most of the class warfare “poor are getting poorer, rich are getting richer” commentary is based on a very flawed premise.
That is, assuming you are comparing the same poor people and same wealthy people. But this is not the case. All that REALLY matters is: Are the actual individuals in these sub-groups “getting poorer?” Usually not as it’s not the same people.
Maybe there is more of a “gap” between the transitory groups “rich” and “poor.” But the reality is, if I start today “poor” there is not a very strong likelihood I will remain poor, let alone grow “poorer” over time.
To me this mentality is a cheap way to make people think they are doomed to a terrible poor existence that is out of their control ( that’s just the way it is, rich get richer, poor get poorer, must accept terrible fate and/or find some class/political/ethnic group to blame) and exploit it for political/other reasons.
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I also dont mind my student loan debt because I know it will help me make a lot more money ( well, it certainly helps. It’s still up to me to put it to work). Perhaps even ONE YEAR of increased earnings will pay for it all. I can pay it over 20 years at a very low cost deductible rate. If I take the maximum ( I went back to college last year and still have some time left) lifetime amount, my monthly SL payment will be about half the average car payment. Not a big deal to me, considering the value.
And all the loans and financial aid I received ( except for a couple scholarships lost years ago) are available to anyone with a pulse- which actually CONTRIBUTES to the inflation of education cost. So the access is there.
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None of that USA Today Net Worth article should be surprising to anyone who reads this site on a regular basis – JD’s gone over the power of compounding many times.
For a boomer who has a net worth of $200k in year X, in year X+1 and at an interest rate of 10%, the person will have a $20k gain, almost 50% of the youngies’ $50K total net worth. in X+2, the boomer will have approx $50k in gains, with no additional inputs. The youngie, over the same 2 year time period, will only go from $50k to $61k or so. It will take another 9 years to go from $50k to $200. Compounding is powerful stuff.
Which also explains why (I believe the originator is) Dave Ramsey’s net worth formula is a pile of crap, and should be thrown away.
His formula is (age * salary) / 10 = net worth;
Using some examples, at age 25 and income of $50k, you should have a net worth of $125k.
At 40 and same income, it should be $200k, $250 at 50, and $300k at 60. Now, tossing aside the amazingly high starting net worth at 25, figure the interest rate that you are earning to double your money in 25 years. Use the rule of 72 also discussed in other posts. Pretty pathetic, right? So, even as a rule of thumb, anything that dismisses the power of compounding (which is finance rule #1) should be tossed to the curb.
It would make more sense to just toss out an arbitrary starting point and compound at a realistic interest rate: Net worth is $0 at 25, $30k at 30, $70k at 40, $160k at 50, and $300k at 60 if you are aiming for median for example.
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