<p>A lot of the 1 percent is insecure. Most are wage slaves or small business owners. Duh.</p>
<p>Goru – I like your post until you started bashing on the CEO pay thing. Here’s the problem with that whole thought train – it is basically calling for enactment of laws limiting what people can be paid. That is really dangerous, imo. </p>
<p>If you object to your CEO’s pay, lineup another job, let your current company know how you feel and walk.</p>
<p>So, if even part of the top 1% is also sort of in trouble, which I agree with, and which is also corroborated by the fact that many are falling out of the 1%:
<p>As to the fascinating notion of the reliance on heavy estate taxes, do we know how much is really involved? (I am not saying it is “fair”-that is a whole other discussion, which I prefer that we avoid here-it is kind of obvious what is unpalatable about it)
For example, as we have discovered here, we have to assume some portion of the lower 1% is spending most or all of their assets. So where is the line that demarcates those who will have good sums left to pass on? How much re we talking about???</p>
<p>That is not effective, sewhappy…</p>
<p>I think we need a new definition of “Top 1%.” We might consider the following:</p>
<p>a. If you can fire Steve Jobs, you’re in the top 1%
b. If your annual income exceeds the Estate Tax exclusion amount, you’re in
c. If you can can call the Fed Saturday night and have them wire you money Monday morning, you’re in (“Hey Ben, Goldman is on the line.”)
d. If you’re paying 15% tax on your short term gains, you’re in.</p>
<p>sewhappy- I did not see any bashing of CEO’s by goru.</p>
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<p>As a lifelong academic, I have little understanding of corporate culture. I subscribed to Business Week for years in an effort to grasp how a successful company grows and stays profitable. Yet I still don’t fathom the concept of enormous compensation packages and the belief that talent is directly proportional to pay. Aren’t there enough talented, skilled managers who will work for say, $10 million per year, as opposed to the hundreds of millions that are promised? Of course universities are not immune to this mindset either. They routinely pay huge overscale salaries to big names rather than seeking out the bright rising stars who are just approaching the prime of their productivity. </p>
<p>This is from Professor Domhoff’s web site of the original link, </p>
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<p>Retirement Crisis Closes In on Baby Boomers
by Tom Brown
Monday, November 7, 2011</p>
<p>Like many middle-class American baby boomers, Linda Carmona-Sanchez is anxious about slipping into poverty and says whatever dreams she once had about retirement in her “golden years” have turned into nightmares.</p>
<p>“We don’t value people here in this country, and we value you less if you’re not healthy and strong,” Carmona-Sanchez, 55, said.</p>
<p>“To me it would almost be a welcome blessing to know that I would die rather than to be old and have to live in poverty,” she said.</p>
<p>Her anxiety is widespread. In a recent Gallup poll, 66 percent of Americans ranked not having enough money for retirement as their top financial concern. That was up from 53 percent a decade ago and raised a red flag for U.S. policymakers concerned about distress and downward mobility in the middle class.</p>
<p>As the first members of the post World War Two baby boom generation turned 65 this year, the United States stood on the doorstep of what many experts see as a looming retirement crisis.</p>
<p>It is a crisis that has many implications — whether for U.S. consumer spending, for younger workers as baby boomers stay in the workforce, or for further strains on the federal government’s already ugly budget picture as the elderly seek more welfare. For some companies, such as home builders, prospects of a surge in business from retiring baby boomers may also dim.</p>
<p>“Florida has always counted on a big chunk of the baby boomers retiring down here and buying property over the next 20 years,” said Jack McCabe, a veteran Florida-based real estate analyst.</p>
<p>“We’re not going to see this big influx of full-time senior citizen residents,” McCabe said. “Home builders may need to re-analyze what they see as demand over the next five to 10 years.”</p>
<p>Baby boomers are members of the first generation since the 1930s who will be worse off in their older years than their parents, says Teresa Ghilarducci, a retirement specialist and economics professor at the New School of Social Research in New York.</p>
<p>“According to our projections, it looks like most middle-class workers, not just low-income workers but most middle-class workers, will be living at or near the poverty level in their old age,” Ghilarducci said in an interview.</p>
<p>“This is the first time since the Great Depression we are looking at poverty rates increasing among the elderly.”</p>
<p>The Occupy Wall Street movement, and street protests staged by mostly younger people in major cities across the United States have grabbed the media spotlight in recent weeks.</p>
<p>But income inequality, bank bailouts and bad markets are issues resonating throughout the gated communities of traditional retirement havens like Florida as well.</p>
<p>Older Americans, a powerful voting bloc in the 2012 presidential election, are keenly aware of the economic downturn that has left growing numbers living in poverty.</p>
<p>Carmona-Sanchez runs a Miami-based non-profit dedicated to improving the early care and education of pre-school children.</p>
<p>She has traveled the world and once considered herself solidly upper middle class. But she has no pension or retirement savings plan, and soaring medical costs stemming from the prolonged care of a chronically disabled daughter have left her struggling financially as she hurtles toward what once might have been a comfortable retirement.</p>
<p>“No Savings… No Retirement”</p>
<p>Carmona-Sanchez’s ex-husband helps shoulder some of her daughter’s medical expenses. But even on an annual income of $50,000 from the American Federation of Teachers, she says she barely manages to make ends meet.</p>
<p>“I’m lucky if I have $25 in the bank at the end of the month,” she said. “There’s no savings, there’s no retirement, there’s nothing.”</p>
<p>Carmona-Sanchez lives in a sprawling suburban tract, just off the Florida Turnpike, with the small but tidy cookie-cutter homes divided by well-manicured lawns long favored by America’s retirees. She is now fighting to refinance her mortgage so she can keep her house while she continues working.</p>
<p>Linda Carmona-Sanchez tends to her critically-ill and bed-ridden daughter Carmen, 28, at their home in Kendall, Fla. </p>
<p>“It’s not in my contract,” Carmona-Sanchez said when asked about what she now sees as the untenable goal of retirement.</p>
<p>Older workers are postponing retirement plans, or giving up on them completely in mushrooming numbers, because of fears they will outlive their saved money.</p>
<p>“I’m going to have to work until I die,” said Linda Crosnoe, 63, an Orlando-area bookkeeper who recalls her parents retiring in their 50s and living comfortably in retirement for 30 more years.</p>
<p>“It’s a conglomeration of stuff that went down over the years,” Crosnoe said of the difference between her parents’ generation and her own. “It never got better for the little people,” she said.</p>
<p>There are multiple reasons for reversals in gains in fighting elderly poverty, including the impact of the financial crisis on stock prices and interest rates, the end of many traditional defined-benefit pension plans which provided people with a guarantee of retirement income, and the bursting of the U.S. housing bubble. But the trend is in line with statistics showing that median household income fell last year to levels not seen since 1996.</p>
<p>Huge numbers of older Americans are likely to fall below the official poverty line in the coming years, said Jack VanDerhei, research director of the Employee Benefit Research Institute (EBRI).</p>
<p>The last of America’s 79 million baby boomers, who get their name from a surge in the U.S. birthrate in the years after World War Two, turns 65 by 2030.</p>
<p>“The statistics are certainly worthy of the term crisis, there’s no doubt about it,” VanDerhei said.</p>
<p>Clinging to Jobs</p>
<p>EBRI, a Washington-based nonprofit that studies benefit plans for U.S. workers, says confidence about being able to reach a comfortable retirement has reached the lowest level in more than 20 years in a survey it conducts.</p>
<p>That pessimism may be a healthy sign, since it means that Americans are losing a false sense of confidence and learning the virtues or savings and thrift. But it also means that people are working longer, because they cannot afford to leave the workforce and lose much needed paychecks and benefits.</p>
<p>Older Americans are already clinging to jobs at the highest rate since before Medicare - the federal health insurance plan for the elderly and disabled - was signed into law in 1965.</p>
<p>According to Labor Department statistics in an EBRI report, 31.5 percent of Americans aged 65-69 were still in the workforce in 2010, compared to 21 percent in 1990. Of those aged 70-74, 18 percent were still working in 2010, up from 11 percent in 1990. Labor Department (BLS) statistics also show that the workforce of people 65 and older nearly doubled in the last 20 years, rising to 6.7 million in 2010.</p>
<p>Still, many seniors leave the workforce earlier than planned because of health problems or layoffs. And critics say there are simply too many obstacles to building adequate savings for retirement.</p>
<p>“Rapidly rising healthcare costs are gobbling up everything,” said Alicia Munnell, a veteran economist who heads the Center for Retirement Research at Boston College.</p>
<p>Munnell notes that only about half of the private sector U.S. workforce is covered by retirement savings plans. But even among workers who have retirement accounts, along with stocks or stock market mutual fund investments, there is little confidence about building retirement nest eggs.</p>
<p>Less than half of participants in a Wells Fargo/Gallup Investor Retirement Optimism Index survey earlier this year said they were confident about their ability to achieve a comfortable retirement or maintain their lifestyle without working in retirement.</p>
<p>Pensions and retirement investment portfolios took a major hit during the 2008 economic crisis.</p>
<p>Participants in the Wells Fargo/Gallup survey represented roughly the top third of Americans in terms of investable assets. The survey said the “lack of confidence concerning retirement among this more financially secure group of Americans does not bode well for those not as well off.”</p>
<p>“Day-by-Day”</p>
<p>The “not as well-off” include people like Joe McElwee, a 67-year-old Miami resident and widower, who recently started collecting $1,261 a month in government Social Security payments to live on. Those payments put McElwee well above the official poverty line for a single person over the age of 65, which was an annual income of $10,458 in 2010.</p>
<p>But McElwee, who has been desperately looking for work since he was laid off by a condominium management company more than year ago, pays $850 a month in rent and utilities and $130 in monthly car insurance. His medical bills are covered by the Veterans Administration. But he says he has no real savings to cover food and other basic expenses and is behind on his rent.</p>
<p>“You kind of get by day by day,” said McElwee, who still considers himself middle class and said he was once pretty well off. “It certainly isn’t the way I thought it was going to be,” he added, referring to his increasingly grim prospects for seeing out his days in Florida’s sunshine.</p>
<p>Current average Social Security benefits for retirees are just under $14,200 a year and many lawmakers and deficit hawks are pushing to scale them back for future beneficiaries.</p>
<p>But Social Security has been the leading source of income for about two-thirds of U.S. retirees for decades, and trimming the program will only put more people at risk, as a growing number of companies freeze or eliminate pension plans.</p>
<p>AARP, formerly the American Association of Retired Persons and a powerful interest group for older Americans, recently launched a national advertising campaign urging members of Congress to protect current and future retirees from cuts to their Social Security and Medicare benefits.</p>
<p>“I’m not a number. I’m not a line item on a budget. And I’m definitely not a pushover. But I am a voter,” says the AARP television ad script, seeking to drive home the point about the power of seniors in next year’s election.</p>
<p>“It (Social Security) is sometimes characterized as so generous and it’s not,” Munnell said. “I think we should be very cautious about cutting back on Social Security.”</p>
<p>John Bogle, the 82-year-old founder of Vanguard Group, a mutual fund powerhouse, called the U.S. retirement security system a “real mess,” saying it was in need of deep-rooted reforms.</p>
<p>He also said the current average balance in Vanguard’s 401(k) retirement savings plans was only about $26,000, and that rose to only about $60,000 for the median account of older people, far too little for anyone to build a retirement on.</p>
<p>“We have to have people save more, we have to have corporations pay more,” Bogle said.</p>
<p>That savings message offers little solace to people like Margaret Davis. A 59-year-old Orlando-based Realtor, Davis says she has shelved plans to retire next year after losing 75 percent of her net worth in the economic crisis and Florida’s housing bust.</p>
<p>A daughter of hard-working Cuban immigrants, who retired comfortably in south Florida, Davis is partly disabled and now plans on working for at least another 10 years.</p>
<p>Davis’ $1,200 monthly health insurance premiums are covered through a home equity line of credit.</p>
<p>“I was the American dream. I worked 80-hour weeks as a single mom. I worked like a dog, very successful. I never felt entitled. I didn’t do anything wrong. And my money’s gone,” Davis said.</p>
<p>“I’m devastated. I’m disgusted at how marginalized people are,” she added, referring to what she described as the yawning gap between the very rich and everyone else.</p>
<p>“Whatever the American dream was, it’s now out of reach for the middle class, and that’s why people are scared and ****ed off.”</p>
<p>Well estate taxes only take affect if there is an estate…;)</p>
<p>Performersmom…you have thought about this…what are the answers to your questions?</p>
<p>How about the pay for NBA stars? Movie actors? Pop stars? Do we start regulating that?</p>
<p>The problem with focusing on an overpaid CEO is that it implies that the overpaid CEO is the problem with the economy. And this is absolutely a ridiculous assumption.</p>
<p>Now we will get a series of posts expressing the unseemly size of executive compensation. The overpaid CEOs are not making the economy tank.</p>
<p>But it is a satisfying and compelling narrative.</p>
<p>I did not get that from what goru wrote. Is it a legitimate question to ask when is enough enough? No one said the government should regulate CEO compensation.</p>
<p>“How about the pay for NBA stars?”</p>
<p>Well it’s true that an incompetent NBA team owner may overpay for a player. The problem with CEO pay is that there’s very little oversight. CEOs appoint board members who are then expected to make unbiased recommendations on CEO compensation. This is an unsound arrangement.</p>
<p>I think the ratio of CEO pay to factory worker/middle manager pay is directly relevant to the size of the middle class. Europe is a good example, CEO’s live very comfortably but so does the custodial staff. </p>
<p>But @sewhappy, could you elaborate on how our poor education system has contributed to current economic disparity?</p>
<p>Doct…i posted that link elsewhere…i agree with you…that is a good link that explains where we are…</p>
<p>I would compare CEO compensation and oversight by their Board of Directors to be comparable to public sector unions compensation and oversight by the democrats (although locally the R’s are in their pocket also).</p>
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<p>I want to see the Occupiers camping out in front of Brad Pitt’s house!</p>
<p>btw, all the socially responsible movie stars have been pretty quiet about OWS, haven’t they? or did I just miss it?</p>
<p>I just don’t think outrage over how the few get paid at the top is going to get us anywhere. The insinuation that a few in this country are taking all the money from the rest is just stupid, imo. We are losing to other countries, emerging markets, outsourcing. The world economy is changing and in that change many in our country are ending up in bad situations. We are all less secure.</p>
<p>Probably the only way to correct CEO pay is from within corporate America. Regulators can change things like who can be on a corporate board, which votes on such CEO-related things. Shareholders (pretty much institutions these days) can sell shares, pushing down PE valuations, protesting use of profits for CEP comp and packages, asking for more responsible use of corporate capital.
The worlds of CEO’s are not all the same, but hiring is affected by (perceived) supply and demand. The number of those with CEO or even pre-CEO experience is limited, successful ones, even more so. I say it is incredibly hard to be a CEO, let alone a successful one. BUT I fully agree that the comp packages are bubblicious, as is comp for a lot of jobs on Wall St and in PE. The market mentality bids things up so much in these areas. </p>
<p>I do not have the hard numbers on the assets and COL of the 1% so as to carve out an estimate of where they start to have estates, dstark. But I think it would be a good thing for us to learn.</p>
<p>Another point about the 1% is that the COL varies enormously by region in the US. As do personal lifestyle preferences. One way to downsize is the change regions, but that is very stressful: starting over in a completely new place is not easy to do after age 50-55, when one hopes to keep working (here, to find new work), to save, to be healthy, not necessarily go into a retirement community, if that is even affordable.
These are very high-class problems.
There are so many more serious individual problems.
But if the 1% is supposed to take care of itself, even be the engine for the economy and provider of social welfare, so it bears looking at. (I am sure we would all be thrilled if the 1% became the 50%, too!)</p>
<p>Look, this should not be a an “us vs. them” situation. That does not really help. This is a systemic problem. We are all getting hurt, if not to similar degrees. Grabbing what is good for you as an individual may not be the best approach, though it should be ok. Something is wrong.
The pie is shrinking. We can discuss this here on CC.
The system is not working- probably not a topic for CC, as it is too political.
Let us just agree that the conventional ways to solve economic problems are not really working.
Somebody has to pay the piper if the pie here is shrinking.
And we are not just fighting over pieces of a shrinking pie, but we are trying not to pay for irresponsibility or mistakes or poor decisions we feel we did not make.
That is where the blame game starts.
All symptoms of a shrinking pie. And perhaps a symptom of a maturing economy that was supposed to have built-in safety nets. Not sure we can have it both ways anymore: growth and safety nets.</p>
<p>Much of the growth and irresponsibility in the last two booms was based on liberal monetary policies, not so much real profitability. I think that, unwittingly, in those years we borrowed from these years. It is very hard to fix that.</p>
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<p>[Estate</a> Tax](<a href=“http://www.irs.gov/businesses/small/article/0,,id=164871,00.html]Estate”>http://www.irs.gov/businesses/small/article/0,,id=164871,00.html)</p>
<p>Is this correct? Up to date?</p>
<p>JHS may know a bit about this…? Although he may specialize in corporate taxation, as I think about older threads.</p>
<p>I am going to be really shocked if the 1%ers don’t understand all about this and how it affects their children. Or maybe themselves if they have living parents. Is this a way to get the money the country needs for health care, education, etc? Or is it a pittance regardless how it is taxed? I was raised to believe these taxes are very evil so this is quite a radical change for me to question the idea of inheritance rights.</p>