Thursday, December 17, 2015

Boomers gettinng wealthy, millennials getting poorer



Marginal Revolution:
The biggest winners since 1971 are people 65 and older. This age group was the only one that hada smaller share in the lower-income tier in 2015 than in 1971. Not coincidentally, the poverty rate among people 65 and older fell from 24.6% in 1970 to 10% in 2014. Evidence shows that rising Social Security benefits have played a key role in improving the economic status of older adults. The youngest adults, ages 18 to 29, are among the notable losers with a significant rise in their share in the lower-income tiers.

 Noah Smith says:
A far better comparison for entitlement benefits is U.S. Treasuries, which can also fluctuate in value according to interest rates, but which are generally the safest thing around. Treasuries maturing in 30 years now yield about 3 percent, which makes their expected return about as good as the one Feldstein calculates for entitlement benefits. That means America’s poor are getting an OK rate of return, as long as their risk appetite is low -- which it should be, since the absolute level of risk tolerance generally increases with wealth. If entitlements were replaced with individual medical and retirement accounts, as Feldstein suggests, many poor people would be forced to take on much more risk than they otherwise would choose to.
So then, why are retired people wealthier and working people poorer?  Because Noah does not count adapted statistics.   Retired people are getting their 3% return, not poor people.  Look, Noah, the return  on the 30 year bon d has been declining.  That means current retirees are cashing in great returns and working people saving at lower returns.

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