Those of us in the middle class know that the recent economic recession has been bad. We just didn't know how bad until this past Monday when the Federal Reserve revealed that the median net worth of families plunged 39 percent in just four years from $126,400 in 2007 to $77,300 in 2010. Flannista hasn't been paying much attention to politics or current events this year, but the dollar amounts and percentage decline caught her eye: they are almost precisely the amounts and percentage her income has plunged in just the past six months. Since 2005, my income has collapsed nearly 72 percent, and I haven't yet retired.
The data from the Federal Reserve also revealed how:
- The promise of retirement built on the inevitable rise of the stock market proved illusionary.
- Homeownership, once a pathway to wealth, became an albatross.
- The recession set back Americans 20 years to 1992.
Fewer families are carrying credit card balances, which is good news, but more families are taking out education loans. Nearly 11 percent said they were at least 60 days late in paying a bill, up from 7 percent in 2007. The median value of stock-market-based retirement accounts declined 7 percent, to $44,000. In six months in 2008, Flannista's retirement account lost half its value. It is only now back to where it was four years ago, this after Flann has invested an additional $100,000 from bank savings. The $36,100 she withdrew from savings in March to invest into her retirement account has been wiped out and then some with this year's feeble market.
The biggest factor for the economic collapse, however, is the median value of homes which fell by 42 percent between 2007 and 2010, to $55,000. Americans like the Sassistas! had hoped to rely on our housing for a larger part of our net worth. Now we're weary of spending much money on anything to shore up what we have left of our net worth.
By contrast, the wealthiest families' median net worth rose slightly.
Flann is hoping that the market will go back up, but that continues to seem illusionary. How long will it take to go back up? How long will it take for the value of our homes to go up? Will we ever be able to retire? Or will we continue to see those increasing number of media stories about the value of working until we die?
It's been quite a while since I wrote a post while I was fuming. I probably should have left up Christie and ChristianMingle.
I feel like I've been drinking the kool-aid about how ANYone can make it in America -- buy a lovely single-family detached home with a garage and then retire when they are between 60 and 65 (like every single retired person in my storytelling presentation yesterday) if they just work hard enough.
What a load of bullsh!t. The American Dream -- at least the version that was jammed down my throat when I was growing up and making a career for myself -- is dead.
Posted by: Flannista | June 13, 2012 at 05:05 AM
In a June 9, 2012 editorial, the Wall Street Journal jumped all over Obama for saying in a news conference that "the private economy is doing fine". Shame on him for uttering that profanity, and shame on him for wanting more Federal government stimulus or whatever (I have no idea what I am talking about) because of cuts in local and state governments. The Wall Street Journal is pushing for pension reform because "governments are having to lay off workers to pay for their rising pension and health bills."
Well, shame on governments. Shame on workers who took jobs because of good benefits. Shame on all of us for not being able to see into the future. Shame on us for not being able to portend the evil of risky lending practices like mortgage-backed securities. Shame on me for hating Economics 101 so much when I was in college. If I had only paid more attention!
Look what I did to myself!! I'll never be able to retire!! Shame on me!!
Posted by: Flannista | June 13, 2012 at 05:18 AM
It is an ugly picture. Reality is, it won't get any better any time soon. Reality is, it could get worse.
I'll focus on student loans. I encourage every young person I know to try to figure out a way to get their college education without loans or to minimize loans. If it means living at home and going to a community college for 2 years, do so. I encourage folks my age not to co-sign for student loans. I'm hearing of more and more seniors who are being straddled by the unpaid loans of their children.
Imagine coming out of college with $25,000 or $50,000 in debt and not being able to find a job. Or, like my daughter-in-law, carrying $40,000 in college debt (currently) and making $35,000 a year.
It is just wrong.
Posted by: treesta | June 13, 2012 at 05:43 AM
It is wrong, treesta. $40,000 in debt and a $35,000/year job?
Should we be telling our children not to get expensive educations at good colleges and universities?
And you're right. It's not going to get any better any time soon. I'm so mad at myself for believing I would be able to retire in my 60's. Why was I so stupid to believe that? Why did I think I would not have to work until I was physically and/or mentally unable to do so?
Posted by: Flannista | June 13, 2012 at 06:15 AM
Don't knock yourself. You believed it because it was the norm for our enter lives growing up. We all believed it. It wasn't the norm in the 30's because of the Depression. It won't be the norm for the next... however many... years because of this 'Recession'. Folks with professional knowledge in economics are in the same boat we're in. You weren't 'stupid' for believing what was the norm, and don't call yourself that.
And we should be teaching our children about debt vs. the benefits of a given education, so that they can make educated decisions about where to go to college. For example - the nursing program at the local community college in Anne Arundel College is an excellent program. At community college costs. So should a local student of limited economic means take out huge loans to go to Penn State (and pay room & board besides), end up with $50,000 in loans to get a job making $60,000 per year? Or should we educate them about more reasonable alternatives that will allow them to come out of school debt-free or with minimal debt? We have to be realistic with our children.
I am so proud of my niece. She was prepared to go to college at night, taking a few courses each year, because her parents couldn't afford to help her. She did some research and qualified for a program in which she will start at a community college and then can transfer to any 4-year state university and still pay community college rates. She also applied for Pell Grants and got her first two years of tuition paid for. Then she scheduled all of her classes between 5 and 10 in the evenings, so she can still work during the day to save for her expenses the last two years of school. Hopefully, she'll get out of school debt free, so that even if she accepts a job of modest income, she can still live comfortably.
Posted by: treesta | June 13, 2012 at 08:52 AM
Treesta, good for you for advising against debt. It is evil. And now the policymakers are looking for ways to make student debt less onerous and more available. Mistake. We have seen this picture.
The Federal Reserve report is really quite comprehensive and is available on the Fed's website. It is the June Bulletin and is about 80 pages long. The media jumped on the parts they could sensationalize. Kind of like picking a single verse out of the bible.
The American Dream was never promised to anyone. And its not nearly as dead as people portend. Flann, your retirement picture is far more favorable than most a generation ago. You can find the stats on that as well. Though I am certain the mainstream media will not tell anyone that. We had a huge run in housing prices and the stock market. And a decade long of adjustment. It may not be convenient timing for everyone, but it is how these things work. And they will adjust again. Best thing politicians could do is to stop trying to fix what is a natural event.
Posted by: nowayasista | June 13, 2012 at 09:39 AM
treesta -- I'm proud of your niece, too, but do you see how we have adjusted our thinking? At one time in my life, we wanted to live well. Now, we want to "still live comfortably". And we've also adjusted what it means to be comfortable.
The American Dream was promised to everyone, beginning with Eisenhower in my lifetime and rammed down my throat during the Reagan years when I was first starting out in my career.
Why am I paying the price of a huge run in housing prices and the stock market perpetuated by a greedy people who milked what they could and are now retired in Naples? I have never lived with debt. I have always paid off my credit cards. Took me 10 years to pay off my college loans. I have been a wise consumer and good American, paying my taxes, donating at least 10% of my income (pre-tax) to charity. There is no guarantee that this economy will adjust in my lifetime though greedy people f*cked it up in my lifetime.
"It may not be convenient timing". I don't even know how to respond to that.
This is not a natural event. This is a man-made event and millions of Americans are paying the price.
Posted by: Flannista | June 13, 2012 at 09:55 AM
In the category of "I can't make up this sh!t" . . . while half-walking, half-trotting today, I caught a gleam in the path and it was a penny. The date on it? 1992 -- the year when I was economically roughly on par to where I am today.
Twenty years. TWENTY YEARS. In the economic crapper.
Posted by: Flannista | June 13, 2012 at 09:58 AM
Talk to me about the difference between military and say, autoworker pensions.
A gentleman in my retirement storytelling class yesterday seemed really young to me. Most of the folks in the class were 80 years old or older. He told me that he was a military veteran who had done 368 parachute jumps between 1967-1969. I thanked him for his service to our country during Vietnam. His response:
"Oh, hell, I never went there. These were all jumps at the training center in Quantico. Worked in the military 30 years. Retired when I was 52. Six-figure retirement income -- how do you think I can afford to live in this swanky place? -- and full benefits. I'm having the time of my life."
He was only four years older than me.
The proud. The few. The Marines.
Posted by: Flannista | June 13, 2012 at 10:04 AM
Flann, I think we all share your frustration. There are some things we can control and some things we can't. The economy is one we can't, especially now that it's a global economy. We have to ride it out, we have no choice but to plan as best we can. We can control our own finances.
Believe me, I thought I'd be a lot better off at this point as well. It is hard to swallow when you are financially responsible to see those who have abused the system benefitting.
Posted by: Matissta | June 13, 2012 at 11:45 AM
Hey, Matiss, if we could afford tax lawyers like TRM can, we could find ways to write off our home utility bills!
God bless America!
Posted by: Flannista | June 13, 2012 at 11:51 AM
My guess is that some autoworker (or postal workers) pensions rival military ones. I'm surprised when people say that they have retired with a pension and/or health benefits.
BTW noway, I appreciate your steadiness and confidence. Right now for me, it helps to hear a voice that makes me think we'll survive and maybe even come out ahead.
Posted by: Matissta | June 13, 2012 at 11:53 AM
All we hear about, though, Matiss, are the greedy union folks and their sacred pensions. We never hear anyone complaining about military pensions. That would be like spitting in the eye of God.
I, too, appreciate noway's confidence, but perhaps some of that confidence rests on an income that has not diminished 40 percent over the last four years. I don't know, but it may be easier to be confident when you're in a stronger financial position that most folks around you. Of course I'm told that I am in a stronger financial position than most folks around me, so I don't know what accounts for what feels like fury to me that so many Americans have been hoodwinked or screwed by greedy people who have more money than God.
And their mentality just boggles the mind. Last week, the CEO of TRM's company just happened to pass by as I was sharing photos of the First Graders I volunteer taught over the past six months. His response: "Bet most of them just have one parent. That's what's wrong with America today."
You are SO right, Mr. CEO, who always asks for a black linen napkin in a restaurant so he doesn't get lint from the white linen napkin on his dark pants. Damn, the benefits of being raised by two parents!!!!
Posted by: Flannista | June 13, 2012 at 12:04 PM
Actually, most of the kids have loving parents. His offhanded, stereotypical comment really ticked me off.
Posted by: treesta | June 13, 2012 at 12:20 PM
It shows how far removed he is from reality. And I realize that's your point. But why give him any thought? People like you and treesta are making a difference with the kids.
This guy was probably always a jerk. Even before he became a CEO.
Posted by: Matissta | June 13, 2012 at 01:03 PM
I'll can tell you about the American Dream, perhaps Eisenhower's American Dream, but Reagan, of course, was always full of crap. The Dow Jones is already at like 90 percent of it's all time high, slow growth is more sustainable, ask any bodybuilder.
My wife and I just went under contract for a 2800 square foot house being constructed east of town on 38 acres. How is this possible at all? I am 27 and she is 24...how would it be possible that we would buy a house anywhere? We even got the contractor to agree to build us a horse barn. We have three cars and a horse trailer, though only one TV, and it isn't even a flat screen...In a couple years, if I have a job lined up, maybe we'll even start working on two and a half kids.
Now, I'll admit, we have some significant help in this in order to get the house we really want, but even if we didn't, it would still be possible to buy a pretty nice house because the interest rate on a VA loan is something like 3.6 percent right now, which means you can get a 230,000 dollar mortgage for something like 1200 dollars a month, including taxes and insurance. I have the ability to get a VA loan,because, like many more people in the Eisenhower years who were buying houses in Levittown's on the GI Bill, I was in the Army.
Now, I've been told a lot of times "well, you earned it," but even if that were true, these days joining the military is an incredibly shrewd financial move. You don't make a lot of money while you're in, even when I was getting hazardous duty pay in Iraq, I pulled in like 19k that year. But you have health care and food, and a roof over your head. My brother gets more in Basic Allowance for Housing as a single Staff Sergeant than he pays in rent, and he lives a block from the beach.
Meanwhile, when I got out, I had my choice of GI Bills to return to college. The newest iteration of the GI Bill was designed to give students four years of tuition up to the most expensive public institution in their state, plus basic allowance for housing and sustenance equivalent to what a Sergeant gets in the Army,and adjusted based on your ZIP code, plus a 900 dollar stipend for books. It is a really, really good deal. Many states, like Wyoming, have additional benefits. Wyoming gives combat veterans 10 free semesters of college...including grad school or law school. This, of course, is another reason we are able to buy a house right now, because I am going to get out of law school with zero dollars in student loans, the nationwide average for law students is more than $90k (though the average starting salary is like 46k now), and often they marry other young professionals who are in a similar boat, doubling their trouble. There is only one other veteran in my law school class who is on the same deal, we frequently discuss our luck...he is already a homeowner.
My twin brother, on the beach in California, could retire and get a pension when he is 38 years old. It isn't enough to actually live well on, or provide for a family with, but it is enough to guarantee that regardless of what you do (as long as it is something) you will be able to have a pretty good life, a lot of retired military people chase their dreams in their early 40s. My brother can do whatever he wants when he gets out (if he stays in). There is another guy in my law school class who is on a different deal, he retired, gets a pension, gets disability (90%, for some damned reason), gets vocational rehabilitation (again, don't really know why)...he is in his early 40s, makes money going to school, and owns several rental properties.
The government has provided this path, but uppity parents still would prefer that their kids to borrow 80k to major in Classics at a small private liberal arts school.
A woman in my Law school class was an attorney in Germany and now lives in Laramie with her husband and child. She is applying for public housing because they have no income right now. Her husband (who is American) does not have a job...there are a lot of jobs in Wyoming.
Another guy was angry that he didn't get the full amount of his student loans, so he could not get a new flat screen TV.
A student was being interviewed on NPR, he had majored in English with an emphasis on creative writing, and could not find a job IN HIS FIELD. About to be called out on his student loans, he realized that he couldn't afford them, but could afford to take more of them to go to grad school....to study film.
The American dream isn't dead, it just got kind of perverted along the way. Think about it, how may people in the 50s and 60s were working their dream job? I realize most people these days aren't either, but the American dream of a little house, a car, and two and a half kids wasn't built in any convenient way. Now, people want all the Dream, but thanks to Reagan and generation x maybe, they also want to be pursuing their passion, you know, the "reach for the stars" and "if you can dream it, you can do it" stuff...which is true, but is an inherently harder row to hoe.
I do feel bad for the large portion of your generation who had their hopes of retirement delayed or worse...it makes me get even more bothered by people in my generation who act like they are getting screwed. There has never been a better time to be a young veteran (despite all the hype) and there has probably never been a better time to be young and ambitious. I have plenty of friends who are, and most of them are doing great...but they make much less noise than the ones who are not.
Posted by: Peter | June 13, 2012 at 01:25 PM
Sorry for the novel, it is just hard for me to believe that things are so bad if they are still marketing the Kohler Numi.
Posted by: Peter | June 13, 2012 at 01:27 PM
Thank you, Peter, for your extraordinarily detailed comment. I needed to see this picture and am grateful that you provided it. It's very even-handed, which is not something I can say about any comment I posted today. I like your body-builder metaphor, and you know what? You and yours deserve a horse barn. Go for it.
And yes, they are still marketing the Kohler Numi, but I think it's for folks like the CEO who stereotypes black kids. Mighty nice place for him to sit while pondering the b.s. I wish the Numi was capable of flushing.
Posted by: Flannista | June 13, 2012 at 02:29 PM
It is all backwards for me. My mother came from a wealthy family, my dad from a poor one. My mom once told me she never had to worry about money because she knew, that in any crisis, her parents would take care of her. My parents made their own way in the world. My dad worked his ass off to raise and send six kids to private universities. My mother, the only surviving child in her family, eventually inherited her parents money and stuff. You may think this is a fairy tale life. It wasn't. My mother was a down and out alcoholic for more than 20 years. It is amazing that she is still alive, but her brain is destroyed. It is a blessing that her parents left money for the 24/7 caregivers needed to help her at this time, so that she can stay in her apartment, while her health continues failing.
In their time, my parents accumulated a ton of things. Some people say you own your things, other people say that your things own you. I think the latter is true. Money can provide all sorts of security, but it does not buy happiness. It never will. Security itself is not happiness either, but it may mean fewer worries, which may leave more room for happiness to thrive.
All I know is that I never bought in to the dream. I have always wanted less than my parents and had a simpler, happier life. In that regard, my life has been a big success. When my parents were my age, they were at the peak of accumulating more. I, on the other hand, am focused on getting rid of things and looking toward down-sizing. I want to be owned by less. I do not feel sad or deprived to have less than my parents. I feel free.
Posted by: PEACEsista | June 13, 2012 at 03:24 PM
Aaahh... PEACE, you always shine a whole different light on things. Thank you.
Posted by: treesta | June 13, 2012 at 03:34 PM
simpler, happier...I think that is a good mantra for most people.
Also, the Numi can flush anything, including bs and up to any acquired sense of shame, regardless of how large.
Posted by: Peter | June 13, 2012 at 03:58 PM
Thanks for your comment, PEACE, which, as treesta says, always shines light, period.
My parents both came from poor families. My mother's father worked in a coal mine. My father's father was a farmer . . . I think. My own father was a traveling salesman until he took over running a farm coop, then retired when he was 55, moved to Florida and had a second career as a bellhop at Disney World. He seemed happy in whatever he did. My mother never worked after getting married. Never seemed too happy about having kids, but really played up the "if you work hard enough, you too can be Miss America" fantasy to all of us. We didn't have a lot of stuff growing up, but, as they say, we lived comfortably. When my parents sold the house, they sold everything in it. All I have from that house is a popcorn pot and porcelain salt-and-pepper shakers in the shape of a pumpkin that I believed belonged to my mother's mother.
You are lucky not to have bought into the dream. We weren't allowed not to believe in the dream, the fantasy.
I know that I have accumulated a lot of art. A lot of CDs. A lot of books. Not much furniture or clothes. I began purging my life last year and must continue as it's apparent my house won't be getting any bigger.
Is it wrong that I always wanted a house where I could properly display my art collection? Something larger than 820 square feet? My house is paid for, but I don't feel "free". In fact, I feel rather imprisoned sometimes. What's the matter with me?
Posted by: Flannista | June 13, 2012 at 04:06 PM
I bought art that focused on the female form as a way to heal myself, by the way. Call me indulgent, but it was a critical part of healing from a childhood where I had no sense of my body whatsoever. I could have purchased a big house, I guess, but instead chose the art. I don't think it's going to pay for my retirement, but who knows?
Posted by: Flannista | June 13, 2012 at 04:09 PM
Your art is beautiful, Flann. If it was a played a part in healing, then all the better.
Posted by: treesta | June 13, 2012 at 04:23 PM
Why doesn't this latest headline surprise me?:
SENATE TREATS JP MORGAN CEO DIMON WITH KID GLOVES
Yep, that's right. He wasn't pressed to give an update on an estimated $3 billion in trading losses.
Probably wasn't a "convenient time".
Posted by: Flannista | June 13, 2012 at 04:46 PM