Tuesday, May 24, 2022

Opinion: The world's richest country has no concept of wealth

MARK GONGLOFF/BLOOMBERG OPINION

Stock market information on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, April 29, 2022. Technology stocks extended losses Friday as shares of what were once market darlings at the height of the pandemic headed for their worst monthly drop since the great financial crisis. 
Photographer: Michael Nagle/Bloomberg

How much money would it take to make you feel wealthy? What is wealth? What is money? These are just some of the mind-bending questions raised by the results of a new Charles Schwab Corp. survey taken way back in Ye Olden Times of February.

In a bit of a head-scratcher, the survey found that people think it takes $2.2 million in net worth to be "wealthy," down from $2.6 million in 2020, just before the onset of the COVID-19 pandemic. Survey respondents think it takes $774,000 to be "comfortable," which is down from $934,000.

Given that consumer price inflation has soared from about 2% year-over-year before the pandemic to roughly 8% now, you might think people would need more cash to feel "wealthy," "comfortable" or "able to buy milk." Then again, maybe the pandemic has made us lower our sights a bit. Perhaps all it takes to feel wealthy now is an RV, a pleasant Zoom background, maybe a home office on the French Riviera.

In fact, the Schwab survey also found many respondents highly value, uh, values when considering employment. More than half said they'd take a lower-paying job for a company that "better represents personal values or interests." Of course, my personal values and interests include a home office on the French Riviera, so your mileage may vary here.

Still, 89% of respondents said they wanted fulfilling work, 85% said they wanted the respect of their colleagues and 84% said values guided their career. Lest you think such numbers merely reflect the attitudes of so many woke millennials, consider that Gen X and baby boomers together made up 56% of survey respondents.

So maybe money really is slightly less important these days. And from a global perspective, you could say $2.2 million is still exorbitant, considering the median global income is roughly $12,000. Teen grocery clerks — or at least the ones not yet replaced by self-checkout machines — in America might be considered wealthy, or at least comfortable, by such standards.

On the other hand, again, have you seen prices lately? One rule of thumb for what a person might need to retire comfortably is 10 times their retirement-age income. The median household income of Schwab survey respondents was $68,000, meaning the median retiree would need $680,000. Make a little or a lot more than the median, and you can quickly see how even the $774,000 the Schwab survey considers "comfortable" can get uncomfortable in a hurry, particularly with inflation chewing through it.

The sad fact is that most Americans don't have enough to survive in retirement, much less live comfortably or extravagantly. A separate survey out this week from the investment firm Schroders — also taken in February, back when the S&P 500 Index was about 500 points higher — finds Americans think they'll need $1.1 million to retire comfortably. But less than a quarter actually expect to hit that mark.

Terrifyingly, more than half of the Schroders survey respondents in or nearing retirement say they have less than $250,000 saved. Again, everything is relative, and in most contexts $250,000 is a lot of money. But a lot of us are in for a rude awakening about how truly expensive it is to be "comfortable" in America in 2022.

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