Dec 7 2014

Social Security helps keep half of elderly Americans from poverty: Social Security has become the de facto retirement plan for millions of Americans.

Social Security was never designed as a long-term retirement plan for millions of Americans.  Yet Social Security has become the default retirement plan for many elderly Americans.  In fact, if it were not for Social Security roughly 44 percent of elderly Americans would be in poverty.  This is calculated by how many Americans receive Social Security and the standard poverty income cutoff created by Census figures.  The middle class continues to struggle and falls further behind the curve.  Since Social Security is adjusted via the CPI, it is problematic when the CPI fails to account for bigger changes in prices.  As we’ve highlighted before, inflation is here in big ways.  For older Americans healthcare costs are soaring and this eats deep into their monthly budgets.  Social Security in various forms is now being received by 64million Americans.  This is a big deal especially with so many Americans hitting retirement age in the years to come.

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Dec 2 2014

No inflation they say: Increases from 2007 include rent going up by 27 percent, food increasing 12 percent, health insurance 42 percent.

Inflation has a slow methodical pattern of crushing every little dollar you have in your wallet.  Even a moderate level of inflation is an enormous change when incomes go stagnant.  There is talk about how spending this year isn’t all that great.  This is a big deal considering that our economy runs on non-stop spending and a large part of spending happens during the holiday months.  But Americans are still constrained from the Great Recession’s echo impact.  The lingering financial problems remain and many Americans have swapped good paying jobs with many in low wage service jobs.  The end result should not be a surprise but there is less to spend even with credit card access and more debt being thrown on cash strapped households.  We keep hearing about how controlled inflation is but in reality, we are seeing price increases in many important segments of our society.  No inflation they say.  Let us look at some key items.

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Nov 28 2014

What happens when 100 million Americans are not in the labor force? More pressure is being added on the one-third of working Americans supporting two-thirds of the population.

It is hard to believe but we have over 92 million Americans not in the labor force.  I’ve paid close attention as to how the media presents this group and they usually attribute it to older Americans retiring.  The problem with this narrative is that it gives the impression that many have the means to retire and also, that many of these are older people.  That is not true.  Many older Americans are dropping out and fully relying on Social Security so they do not fall into a life of financial destitute.  Many others including younger workers are oscillating in and out of the low wage economy.  This entire shadow group which is getting close to one-third of our nation is largely discounted in the media.  The unemployment rate looks fantastic because every month, we have more Americans simply being erased off the financial ledger.  At this current rate, we will have 100 million Americans not in the labor force by 2020.

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Nov 24 2014

Economic goals of young and old pulling in diverging directions: times will only get tougher for young Americans.

Older Americans tend to vote in larger numbers and are more interested in politics than younger Americans.  In the past the older voting cohort was not as large so politicians were cautious about deviating too far for one group alone.  Today, we are having a large number of older Americans living longer into old age.  Social Security has become the default retirement plan for many older Americans.  It should come as no surprise that priorities of the young and the old diverge dramatically.  Younger Americans are interested in education while older Americans are interested in Social Security and military defense.  Yet each group needs each other to accomplish their goals.  The young fight wars and Social Security is paid out via current payroll taxes.  Education requires teachers and those willing to enlighten future generations.  Unfortunately people vote myopically and in many cases, setup systems that are detrimental to their own children.

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Nov 20 2014

Multi-generational living is here to stay in a low wage economy: Over 57 million Americans live in multi-generational households.

The Great Recession might be officially over on paper, but the social impact continues to be felt today. The structural changes are deep and profound and have caused a major rise in multi-generational households. Many young Americans burdened by low wage jobs and college debt may have no other option but to move back home with parents. The number of people living in such households has doubled since 1980. More than 18 percent of the population now lives in this arrangement. A large push has come from those 25 to 34 given that 1 in 4 now live in a household with multiple generations. Money is tight and rising living expenses including rents have kept many from venturing out on their own. The economy has been adding jobs but many of these jobs are coming from the low wage sector and are simply not providing a base for moving out. This latest election was driven by people unhappy with the economy but also wanting higher wages.

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Nov 17 2014

The mega inflation in college tuition: Since 1985 college tuition costs have soared by 538 percent. No surprise that total student debt is now over $1.22 trillion.

There was a time when college tuition was reasonably priced in the United States. In fact, college was downright cheap. These were the days when people worked a few hours a week at minimum wage jobs and were able to pay off their tuition on a semester basis. Too bad most of the new jobs in our economy are now low wage jobs and this is truer for those with no college degree. A Catch 22 for many. The per capita annual income in the U.S. is $26,000. You have many schools charging $30,000 or even $40,000 per year in tuition. Keep in mind the per capita income is based on the entire spectrum of workers, including those already with college degrees. So try imagining a student working at McDonald’s trying to carry the entire tuition burden of many schools. It just doesn’t work and that is why we now have a total of $1.22 trillion in outstanding student debt. Student debt is now the largest non-housing debt sector in the U.S. Student tuition has risen by 538 percent since 1985. This current generation is going to college at the most expensive time in history.

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Nov 15 2014

Winging it through retirement: 30 percent of Americans have no retirement savings.

Planning for retirement does not happen overnight.  You need to diligently plan and sock away savings like a squirrel stocking up for the season.  Many Americans have no retirement savings and more troubling, many near retirement face a compressed timeline where they will need to save or face a massive decline in living standards in their later year.  Retirement has become a sort of idealized vision of doing nothing.  Many think that once retirement hits, all expenses will go away and that they will have unlimited funds to purchase Margaritas and spend time at a beach with crystal blue water in some part of the Mediterranean.  Instead many will be working deep into older age and will be fighting off the cold because the heating bill is eating into their Social Security check.  Many Americans are fully unprepared for retirement and despite the massive surge in the stock market since the Great Recession ended, many Americans are looking at retirement and are planning to wing it.

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