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Not Their Fault

Richard Quinn

“THE REALITY IS THAT most working Americans will continue to struggle to achieve retirement security because the ownership of financial assets is highly concentrated among the wealthiest,” wrote Dan Doonan, executive director of the National Institute on Retirement Security, for Forbes.com.

I read and re-read that statement, especially the word “because.” It seems Doonan has concluded that the great wealth held by the top 1% somehow inhibits the rest of us from saving and investing. How can that be true? It can’t be unless there’s a finite pool of assets to be had and only a few have grabbed them.

The fact that many Americans are not saving for retirement, are not financially literate and choose to place short-term wants ahead of long-term goals is indeed a problem. But it isn’t one created by America’s billionaires. In fact, considering the jobs and opportunities created by many of the super-wealthy, I’d argue that the opposite is true.

I played a game of “what if” and looked at where I would be financially if I’d made modest investments in the early days of Microsoft, Apple, Amazon and a few others.  With $100 here and $1,000 there, plus years of stock splits and dividends, I’d be well ensconced in the top 1% and I’d be booking a world cruise (but maybe not this year).

Like most people, I wasn’t savvy enough or a big enough risk-taker to grab those rewards. But the opportunity was there. On the other hand, like tens of millions of other Americans, I did fund my 401(k) and IRA. I bought a few stocks and bonds, and I reinvested my dividends and interest payments. I did this in small increments over many years and, during all those years, I never gave a thought to how others were accumulating billions—but I did enjoy using my iPhone, getting bargains via Amazon, and maybe someday I’ll help the environment and buy a Tesla.

There are some Americans, perhaps 20% or so, who live pretty much paycheck-to-paycheck and struggle to cover life’s necessities. But for the majority, there’s opportunity to amass wealth. That ability to do so has nothing to do with the level of wealth of any other American.

A year ago, I wrote about ways most of us can save money and accumulate wealth. A little earlier, I wrote about setting priorities for spending the money we have. In both cases, it boils down to the choices we make. For most Americans, there’s simply no excuse for failing to save enough for retirement.

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Bob Tourdot
Bob Tourdot
1 year ago

It’s not black and white. The billionaires don’t preclude others from saving, but they do rig the system in their favor. A fact that might support this is the growing wealth inequality. It’s the golden rule – the people with the gold make the rules.

My wife and I started with little, but we went through college, had decent careers and are looking at a comfortable or better retirement, precluding some black swan event. We’re fine, perhaps in part due to reading people like Jonathan Clements.

The wealthy make campaign contributions and employ lobbyists to get the laws made in their favor – i.e. carried interest deductions, capital gains deductions, step up on death, inheritance tax reductions, and hundreds of other provisions I don’t know about. There was recent article about Senator Ron Johnson saying he would not vote for the the republican tax cut until a provision was put in that made a campaign contributor millions, so it got put in. That’s just one recent example.

R Quinn
R Quinn
1 year ago
Reply to  Bob Tourdot

No doubt great wealth also can mean power and influence, while the numbers are vastly different, those tax provisions apply to everyone and a close exam of the IRC will reveal many provisions that benefit everyday Americans.

Last edited 1 year ago by R Quinn
Newsboy
Newsboy
1 year ago

Three words: Faith, Patience, and Discipline

Faith in free markets and their long-term rewards (with dividends reinvested) provided to equity share-owners.

Patience – in up markets and down markets alike – focusing on the long-game and the inevitable miracle of compound interest.

Discipline – keep dollar-cost averaging new money into an IRA (or an employer’s TQ plan) every month (via payroll deduction or direct transfer from a checking account) – whether it’s $500 a month or just $25 a month is of little consequence…the key is establish this crucial behavior early and often during our working years.

Sadly, these three simple concepts are not instilled in today’s youth with any consistency; they are inevitably learned (typically by trial and error) for most later on in life, when the benefit of compounding is still helpful but signficiantly less impactful. The result is a hard worker who, absent these 3 fundamental behaviors, inevitably gravitates to the instant gratification of short-term consumption and long-term debt accumulation.

This financial “road less traveled” is not popular in our modern world, but in the long term, it makes all the difference.

parkslope
parkslope
1 year ago

My interpretation of the study is very different from yours. First, I would note that your cherry-picked sentence doesn’t reflect the fact that the actual study does not blame the wealthy for the wealth gap or the fact that this gap is strongly related to the lack of retirement assets for a large share of Americans. Instead, it discusses reasons why the growing number of Americans why growing inequality is reflected in growing retirement insecurity. Reasons include a lack of retirement plans for many workers, the lack of stock ownership by many Americans, and the fact that it is more difficult to save when you have less disposable income.

Looking at the relationship between growing inequality and growing retirement insecurity from your perspective, it can be noted that the failure or inability of so many Americans to save is one of the reasons for the growing gap in wealth.

After documenting the growing problem of retirement insecurity, the report goes on the discuss several possible ways of addressing the problem.

Regardless of where the blame lies, the fact remains that we have a growing retirement security crisis. While you may prefer to blame those who aren’t prepared for retirement and leave it at that, thankfully there are many more thoughtful people who are working on ways of improving the ability of more Americans to save for retirement.

R Quinn
R Quinn
1 year ago
Reply to  parkslope

As you read the article lots of factors are raised, but the reasons you mention are not new and have nothing to do with inequality, but rather individual choices and behaviors at a variety of levels.

The sentence containing “because” was highlighted in the Forbes article and the headline was Stark And Growing Economic Inequality Fuels Retirement Insecurity.

There is no fueling of retirement insecurity by way of inequality, but by factors existing long before inequality was the new buzzword.

I designed and conducted retirement planning and investing seminars decades ago, little has changed, except perhaps a higher disregard for ones financial future.

The valid points regarding poor preparedness for retirement could and should have been made without the divisive headlines and intended misuse of “because” IMO

Last edited 1 year ago by R Quinn
parkslope
parkslope
1 year ago
Reply to  R Quinn

To reiterate, Stark And Growing Economic Inequality Fuels Retirement Insecurity does not imply that the wealthy are to blame for retirement insecurity, which is how you chose to interpret the headline.

R Quinn
R Quinn
1 year ago
Reply to  parkslope

I’m all ears, how do you interpret the headline? Specificity what does “fuels” mean?

parkslope
parkslope
1 year ago
Reply to  R Quinn

Do you think the wealthy are solely responsible for the growth in inequality? Given your criticism of the savings habits of the majority of Americans I think you would agree with the notion that the failure of so many people to save and invest is a major cause of the growth in inequality.

One can also view the negative effects of inequality as an unintended consequence of the ability of a small number of people to amass great wealth. I don’t think many people believe that the wealthy accumulated their wealth so that they could make things difficult for those who are less successful. Thus, it makes perfect sense to take the position that the growing concentration of wealth in a few hands has negative effects without blaming the wealthy for having accumulated their wealth.

Last edited 1 year ago by parkslope
Bill Patience
Bill Patience
1 year ago
Reply to  R Quinn

With due respect to Mr. Parkslope, I think it’s pretty clear that the headline just about directly states that the Inequality (between the wealthy and not wealthy) is the cause of retirement insecurity. What other inequality could the headline be referring to?

jim jack
jim jack
1 year ago

Thank you for this article. The message needs wider exposure as it’s seldom heard from most of the major media and from many politicians.

Jackie
Jackie
1 year ago

Richard,
Often I agree with your remarks. Not today.
I agree that strictly speaking, the existence of billionaires does not prevent others from saving. Also, I agree with your previous posts that vastly increasing entitlements is probably not a good long term solution to the coming poverty-in-retirement problem. But your conclusion that “For most Americans, there’s simply no excuse for failing to save enough for retirement” is baloney.

  1. 50% of the population has below average intelligence – thus making good decisions much more difficult. My step-brother was unfortunate to be born on the other half of the intelligence bell curve. He’s a good guy and a hard worker. But he occasionally screws up at work and gets fired or is forced out of jobs. He makes poor financial decisions with the money he does make. Yes, I would help him but he doesn’t want help because of that intelligence issue.
  2. There is little-to-no financial literacy taught in schools.
  3. Pensions, especially those that increase with cost of living have almost disappeared.
  4. Productivity increases (robots, AI, globalization) have eliminated millions of decent paying jobs.

Until the recent labor shortage, what was left were low paying service sector jobs. In chatting with clerks and day-care workers, I learned that most had 2 jobs. These people are not living large when they should be saving money They don’t have time to live large when they are working 60 + hours per week. They are paying rent and buying groceries. You try to live on near-minimum wage.

You seem very sure of yourself with your generous pension and non-physical work that enabled you to have a long career. Try working to 67 in a physically demanding job. Your intelligence was a gift – not earned.

Congratulations on your financial success, but I find your smugness distasteful.

Last edited 1 year ago by Jackie
Bill Patience
Bill Patience
1 year ago
Reply to  Jackie

Saying that 50% of the population has below average intelligence is a sentence that just states the mathematical definition of average. If you have an average, about 50% of your sample set are above and 50% are below. The question is how intelligent do you have to be to understand basic financial concepts.

Newsboy
Newsboy
1 year ago
Reply to  Bill Patience

Wow – seriously? 50% of workers are of “below-average” intelligence? Perhaps include a source for this rather disheartening stat? So there is no hope (through education) to “lift up” these mental “unfortunates” I’m assuming?

With respect, the reading of this rather specious percentage of “low intelligence” among the general population evokes bad memories of Margaret Sanger and the eugenics movement that was quite fashionable during the late 19th / early 20th century. That movement, as we all know, did not end well.

From my view, evoking this mindset regarding one’s fellow man/woman is as at least as dangerous (or more so) than the “mercantilism” nonsense promulgated in the cited Forbes article.

R Quinn
R Quinn
1 year ago
Reply to  Jackie

None of this is about me.

I think you underestimate the American people.

There was certainly no financial literacy taught when I went to school and yet living within ones means without massive credit card debt was the norm. That does not seem the case today.

I worked with thousand of union workers doing strenuous and risky work and handled their disability claims. I am fully aware of the toll that kind of work can take, but I am also aware that many of those folks were prudent and quite savvy with their money.

The majority of Americans never had a pension. In fact, when it comes to saving and investing there is more opportunity today and for the last 20 years than ever before.

For the great majority of Americans I see no excuse for the way they handle their money today and for the future and I certainly don’t buy the below average intelligence argument if for no other reason than average and above intelligent people still make imprudent money decisions.

We will have to agree to disagree on this one.

Newsboy
Newsboy
1 year ago
Reply to  R Quinn

Hang in there, Dick – we’ve agreed to disagree before, but your interpretation of this Forbes article is spot-on. Doonan’s article reflects a classic “19th century mercantilism” mindset – Charles Dickens could have written it’s sad headline: a world where where only a finite amount of economic opportunity exists and those who are enjoying success are doing so at the expense of those who aren’t (article’s subtext: those who Can’t).

Constant business innovation and resulting increased productivity are non-starters with this mercantile mindset group.

And BTW – I don’t recall any boxes asking me my race or ethnic origins when I opened up my first IRA at age 24…and at $25/month back then, this “delayed gratification” decision represented about 5% of my annual income.

Keep fighting the good fight, and pay little heed to those who might question your tone or intent at the expense of heeding your salient message.In truth, I speak from personal experience on this last point. ;^>

Last edited 1 year ago by Newsboy
philip durand
philip durand
1 year ago

Too bad such a common sense and logical explanation of how wealth can be created by the average American does not seem to win votes. The narrative that the average American is a victim of capitalism is so much easier to sell as it caters to our worst inclinations – to envy and be jealous of success.

Mik Cajon
Mik Cajon
1 year ago

NAILED IT…no boogeyman victims.

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