Dean Baker explains wealth
Published by marco on
The article Time to Bury Pew Report on Wealth by Age Group by Dean Baker (CEPR) hits the nail on the head. Pew put together a report a few years ago on the wealth of various age groups in the U.S. This report has since been misused by many journalists to show that the wealthy elderly are exacting inter-generational warfare on the young. The report stated that “the median household over the age of 65 had $170,500 in net worth [while] households under age 35 had [a] median net worth [of] just $3,700”.
Though I’m going to pull out the highlights I found interesting, it’s well worth your while to read Baker’s full article (it’s not that long).
“The bulk of people who are now turning age 65 do not have a defined benefit pension. […] This means that the only income they have is their Social Security check, which averages a bit over $1,200 a month. Right off the bat, $100 a month is subtracted to pay for their Medicare Part B premium. This means that our high living seniors have an income of $1,100 a month, plus their $170,500 in net worth.
“Is this rich? My guess is that 90 percent of the reporters who have covered this Pew study have no clue what net worth means. […] Do the reporters covering this story really think this is a picture of affluence? Will they be happy if they have a retirement where their entire income is their Social Security check?”
The $170,500 in net worth is at that point most likely tied up in illiquid assets like cars or—most likely—a home. As Baker also points out, “the median house price is roughly $180,000”, which means that most people over the age of 65 also have most of their net worth bound up in an asset that they would have to sell in order to use it to buy food. But then they’d have to start paying rent, and so on and so forth. Still not looking very rosy, by any means.
Baker goes on to summarize the situation:
“When David Rosnick and I did our projections we took this as evidence that most seniors and those soon to be retired (the situation looks worse for those near retirement) were likely to be struggling to make ends meet in their old age. Remarkably Pew has managed to convince the country’s top reporters that $170,500 in assets can make a person rich, even when it takes $400,000 in annual income to make a person rich when we are talking about raising taxes. This is truly incredible. (Emphasis added.)”
The truly rich are not acknowledged as such—to the point where the New York Times writes articles sympathizing with families that are barely scraping by on a quarter of a million dollars per year combined income—while the nearly income-less elderly are reviled for gouging the young out of their futures.