The looming retirement crisis: 10,000 baby boomers a day turn 65 and most are inadequately prepared for retirement. Half of elderly Americans in poverty without Social Security.
There is a very common number that is thrown out regarding baby boomers and retirement. We consistently hear that every day 10,000 baby boomers hit the typical retirement age of 65. This trend is expected to go out until 2030. What is troubling with this narrative is the assumption that most have enough funds to actually retire. The reality is that most will depend on Social Security as their primary source of retirement income. When we examine net worth figures we find that the single largest asset for Americans is their primary residence. It is good to have a paid off home in retirement but no income is generated from this. You have taxes, insurance, and the costs associated with maintaining a home plus the costs of daily living: food, healthcare, and other expenses. For many, the new retirement plan is a form of working until you pass away.
Is college worth the 172 percent price increase over the last 9 years? The cognitive dissonance between rising tuition and falling wages.
$1.36 trillion. That should sound like a lot of money because it is. How much is $1.36 trillion? Texas has an annual Gross Domestic Product of $1.4 trillion. $1.36 trillion is the amount of student debt that is attached to millions of Americans like a financial albatross. There is an ugly thing about this unrelenting trend given that many students are now unable to payback their loans. It is no coincidence that young Americans are putting off marriage, buying homes, and starting families because of the incredible weight of debt they already carry from their college years. It would be difficult to argue that education is a “bad” thing. To the contrary, getting an education is vital and important. Yet with many colleges charging $25,000 to even $50,000 per year merely to study general education courses, you have to question the value of what people are paying for. The most expensive college seems to be Sarah Lawrence coming in at $65,480 per year for tuition, room and board, and fees. Just as a measuring guide, the median household income in the US is $50,000. There is a growing problem and student debt is growing into a financial avalanche.
There is an economic crisis happening in the housing market. The working class is finding more of their wages sucked into the housing financial puzzle. Stagnant wages combined with rising home prices and rents are putting a lid on household formation. It probably doesn’t help that many young families are caught in the low wage economy. Before purchasing a home, you probably want to ensure a secure paying job. Many are also reluctant to purchase given that they are already carrying a heavy burden of student loans. The housing crisis is being heavily reflected on home prices, rents, and the lack of household formation. When all of this is combined we find that construction spending is a small part of GDP when in most recoveries, it is a sizable portion of gains.
The working few and the inverted pyramid of labor: 1 out of 3 Americans financially carry the other two-thirds.
Last month a record 93,194,000 Americans were counted as not being in the labor force. Counted might be the wrong word since this group is largely erased from any employment figures. In fact, this is a large reason why the unemployment rate has fallen so dramatically. Yet one grim financial reality remains. That reality includes the fact that 1 out of 3 Americans is carrying the country financially by working in the private sector. There needs to be a better balance and the working class is already getting slammed in this so-called recovery. If things were so great, why is the battle cry for the 2016 election all about the working and middle class? The stock market is near a peak. Too bad most Americans own no stocks. Housing values are rising. Too bad more home purchases are going to investors versus single families. Debt is more accessible. Too bad it is for items like cars that depreciate immediately once the vehicle is driven off the lot. The employment situation in the US is largely looking like an inverted pyramid.
The working class Hunger Games: Reality TV show now pits working class against working class family for the chance to earn $101,000.
Reality TV has a nice connection to our growing low wage economy. Reality TV is easy to make, costs relatively little, and can be flushed away if it fails. If a hit occurs, the big profits are frontloaded to the network while “stars” can make money after the cream has been taken away. There is a certain dark psychological draw of watching people in struggling situations (think of shows like Intervention or the morning talk shows). These shows still exist because there is an audience to watch. So it was interesting to see a show called the Briefcase appear on network TV that is couched as an opportunity for struggling families to get a break. The break is the chance to receive $101,000. The catch? Another family is also offered this much and both enter into a modern day version of the prisoner’s dilemma. It is difficult to watch because these families represent the struggles of millions of Americans caught up in the low wage high debt culture and then are put into an emotional predicament. Poor against poor. The choice appears to be seem ruthless and take the money or continue to struggle in your financial misery but show some empathy and likely forfeit the money. All I could think of watching this is that we are entering a new version of the low wage Hunger Games.
Inflation acts as a pickpocket on the wallets of working Americans: Young Americans take a big hit given the small weight given to tuition in the CPI.
Inflation is a very real thing. The Fed continues to downplay the impacts of inflation to support their ongoing easy monetary policy. What this has created is an inflated stock market and hot money chasing into other asset classes including real estate. This wouldn’t be such an issue if your typical working American family was benefitting. Instead, it is assisting larger financial institutions and big investors to pick up assets in all segments of the real economy and consequently crowds out regular buyers. Inflation is the end outcome of all this kind of action. More easy money chasing the same number of goods in the economy. The way inflation is measured is odd and it also understates the impact being pushed onto younger Americans. How is this the case? The CPI gives very little weight to educational costs yet for many attending college, this is by far their biggest expense. Let us look at inflation in various segments going back to 2000.
Are you looking to earn low wages? A college degree might be your ticket. College earning power dwindles over the last 15 years.
We constantly hear the loud drumbeat that a college degree is your ticket to untold fortunes. Of course we never get the detailed report showing students that are drowning in debt and also many that went to for-profit schools or pursued unmarketable majors and guess what? These people would largely have done better by not going to college (you avoid that mega debt). The amount of debt people are taking on to obtain a college degree is at an all-time record high. You would assume that simply having a college degree is sufficient to boost your earnings potential. That is not the case at all. We now have the largest percentage of adults with a college education in history. A good thing right? But we also have the largest number of Americans with unmarketable degrees and many from schools that are one step above a paper-mill. Many would have been better learning a trade (and their earnings would be much higher). One recent report that reflects this big change is the percentage of low wage workers with college degrees (think of the person with the master’s degree serving as a Starbucks barista).