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"there were echoes ... of a Gilded Age critique of plutocracy"
March 7, 2013 7:18 AM   Subscribe


 
Retiring with a 'competency' is nice when your life expectancy is like 45/50. What do you do when it's 75/80 and you have to put kids through college?
posted by spicynuts at 8:03 AM on March 7, 2013


That just means that the exact monetary amount or contents of a "competency" has changed, not the core concept.
posted by eviemath at 8:11 AM on March 7, 2013


or the likelihood of ever actually achieving it.
posted by spicynuts at 8:22 AM on March 7, 2013 [3 favorites]


Yup.

I have spent 15 years on Wall Street and the number of people I have met who are pursuing wealth in excess of their "competency" can be counted on the fingers of two hands.

The quantum of a competency for someone who supports an upper upper middle class lifestyle for his family in a high cost, high tax location is a lot ... real pre tax returns (to avoid losing principal) on a safe portfolio are around 2%, so you need 50x your annual pre-tax nut. If that's $400k a year (remember who/where we're talking about) than you need $20 million (all of which had to be accumulated after tax).

From what I see, when people get to that number they either quit, or keep working for the fun of it. For some that fun is keeping on in a high paid seat, but for others it's teaching or working for the government or something else comparatively non-lucrative.
posted by MattD at 8:59 AM on March 7, 2013 [1 favorite]


eviemath: That just means that the exact monetary amount or contents of a "competency" has changed, not the core concept.
Given the uncertainties of life, the longer one lives the greater the amount set aside per year must rise.

Doubly so for Americans, who must contend with rising medical costs, increased medical needs at higher ages (if you only live to 45, you likely won't need glaucoma surgery), and the aforementioned college bills (which are rising well above inflation).

So, that "exact monetary amount" is an ambiguous, and huge, number.
posted by IAmBroom at 9:07 AM on March 7, 2013


IAmBroom: So, that "exact monetary amount" is an ambiguous, and huge, number.
... which I see MattD pointed out with some real numbers, albeit from a different direction.
posted by IAmBroom at 9:15 AM on March 7, 2013


The quantum of a competency for someone who supports an upper upper middle class lifestyle for his family in a high cost, high tax location is a lot ... real pre tax returns (to avoid losing principal) on a safe portfolio are around 2%, so you need 50x your annual pre-tax nut. If that's $400k a year (remember who/where we're talking about) than you need $20 million (all of which had to be accumulated after tax).

I think one big difference here is that you aren't talking about an amount that will be spent over time to support someone and their family, you are talking about a fortune that will exist in perpetuity, outliving the person who accumulated it and distorting future generations. This is leaving aside utterly the question whether $400,000 a year is "necessary" for sustaining oneself and one's family (an idea I personally find absurd and think is at the root of a lot of our problems).
posted by Steely-eyed Missile Man at 9:18 AM on March 7, 2013 [5 favorites]


This is leaving aside utterly the question whether $400,000 a year is "necessary" for sustaining oneself and one's family (an idea I personally find absurd and think is at the root of a lot of our problems).

Fair enough, but people aspire to live at the level they currently live at, as a minimum, and to provide the opportunity for their children to achieve at least the same. Meaning that you could probably find a nice enough place to settle down and live out your days on $20,000 a year or less, but if that isn't the lifestyle you prefer, and isn't in a location where your children can have lucrative careers working towards the same goal*, it probably doesn't look very palatable. "I don't want to retire in a trailer on the beach, I want to live in [big city] in a house" may not make sense to someone who loves living/vacationing in a trailer on the beach, but makes perfect sense for someone who loves living/vacationing in a big city.

Having said that, if/when universal health care is available, that rolls a lot of the uncertainty out; provided you'd paid off a small house over (say) 30 years, you could retire with your principal expenses of food, transportation, utilities and property taxes and lose a lot of that "what about my health" stress. Just yet another reason why universal health care is a lovely thing.

*assuming you want your kids to be, as adults, near the place you live, and assuming the "same goal" is eventually creating a sustainable lifestyle.
posted by davejay at 9:47 AM on March 7, 2013 [1 favorite]


...you aren't talking about an amount that will be spent over time to support someone and their family, you are talking about a fortune that will exist in perpetuity, outliving the person who accumulated it and distorting future generations.

The problem here may sit with the extended lifespan problem; if you knew you were going to be dead by 60, you could (at 40) say "okay, I need x money to live, and so I can spend down my nut" but if you know you might end up living until 90, at 40 you can't anticipate the amount to spend down the principal. So the rational response is to live on the interest and dividends, and assume that your principal will get spent down for your end-of-life medical/care costs.
posted by davejay at 9:50 AM on March 7, 2013 [1 favorite]


Don't forget to factor in the cost of the private army.
posted by srboisvert at 9:57 AM on March 7, 2013 [2 favorites]


The idea of a competency is about more than material comfort and security, though. On the one hand, the first Boston Review piece argues that material sufficiency was seen as a prerequisite for (the more important) political and cultural participation: 'Liberalism valued property because its possession bestowed more than access to things. Property, as R. Jeffrey Lustig put it in Corporate Liberalism (1986), allowed “a stake in productive wealth, a chance to exercise initiative, do valuable work and earn standing in a community.”' The second Boston Review piece, in quoting Wharton, points out that this is not a direct correlation, a theme that both Vonnegut's "Player Piano" and Friedan's "The Feminine Mystique" take up.

Reading the two Boston Review pieces - one not taking gender into account, one focusing on the female experience - is in many ways like reading Vonnegut's Player Piano together with Friedan's The Feminine Mystique. Both Player Piano and The Feminine Mystique address the anomie of a group that has material sufficiency, but lacks opportunities for cultural and political engagement - a sort of cultural and political poverty or lack of competency. In particular, Player Piano seems to posit a negative relation between material comfort and cultural and political engagement, in many respects, going beyond even the negative relation between wealth above and beyond material sufficiency and personal fulfillment that the second Boston Review piece describes from Wharton's The House of Mirth (and that the first Boston Review piece concurs was a common perception). Though it could perhaps be read as demonstrating that in a world of great inequality (there is a very small, and increasingly smaller, elite class in Player Piano, though the main characters don't generally get the opportunity to interact with any of the elite directly), material sufficiency is no longer enough to ensure access to cultural and political participation - what the ideology behind the ideal of competency as opposed to personal wealth accumulation warned against.

The lack of consideration for other gender or racial experiences with this issue in Vonnegut's Player Piano and consequent norming of the white male experience prevents Player Piano from any particularly nuanced analysis of the questions of human nature that it attempts to unpack(*), and this narrow focus also forces a somewhat dystopian conclusion in the absence of other ideas for solutions to the contradictions that Vonnegut sets up in his fictional society. In contrast, while the first Boston Review piece does suffer by ignoring the lack of options for attaining competency for women, non-whites, and indeed many poor white males in the post-Civil War 19th century United States, it is the second linked piece that seems to set up an unsolvable contradiction. Adding in these other perspectives (and intersectionality between class, race, sex and gender, and other issues) is important if we want to see a route to achieving an ethic of (overall) competency. Then we can see that there have been groups which have achieved material sufficiency, but which were in many ways emotionally and mentally stifling to some or many of their members; there are groups that maintained very vibrant and democratic communities even in the midst of constant economic uncertainty and deprivation; and there have been groups that accomplished both goals, and groups that accomplished neither. (* I don't mean to denigrate Vonnegut in general. He was an excellent writer, and many of his other novels are quite nuanced, complex, and piercing social critiques.)

Instead of trying to create a direct correlation in either direction between material sufficiency and political and cultural participation, I think it's more useful to view the material, cultural, and political as multiple facets of "The Good Life". Historically, this seems to be tied up with American Utopianism and those particular interpretations of the American Dream.

While utopian communities in the US spanned a broad range of ideologies, I think one feature that seems to unite many of them, and to still be relevant and important, is the idea that competency is not the survivalist's very individualistic notion of being able to provide for family no matter what. In setting up the goal of competency in opposition to the goal of accumulating personal wealth and as part of an ethic that viewed excessive accumulation of wealth as antisocial, implicitly what is considered "enough" is socially constructed, not individually constructed (that is, MattD's colleagues do not seem to be motivated by the idea of "competency" in it's full meaning). As well, a consideration for the good of society as a whole as being coupled with the good of the individual is implicit in the notion of competency. (It seems to me that there has always been a certain strain of anarchism in American thought as well as the rugged individualism that we're more stereotypically known for.)

This clarifies a solution to the seeming dilemma that IAmBroom (and spicynuts) bring up of "how much is enough (given the uncertainties and vagaries of life, multiplied by increasing lifespans)?" - material security is best obtained through having a strong community that you can rely on in times of need, and through distributing risk. This, of course, was the idea behind the creation of social safety net programs at federal and state levels, eg. as part of Roosevelt's New Deal and Johnson's Great Society initiatives. It also shows up somewhat in the urban homesteading movement, which seems to be in many ways the modern-day descendant of the good life/back to the land movement in a post-Grapes of Wrath era where land ownership for more traditional homesteading is much more difficult(**); and in the modern intentional communities movement, which is in some ways a descendant of (though having learned from the mistakes of) certain of the more progressive strains of American Utopianism. (** Tthough the rural homesteading/back to the land movement never died, and is also undergoing a small revitalization currently.)

Anyway, it's all very timely for the present economic context. Thanks, the man of twists and turns.
posted by eviemath at 10:10 AM on March 7, 2013 [12 favorites]


if you knew you were going to be dead by 60, you could (at 40) say "okay, I need x money to live, and so I can spend down my nut" but if you know you might end up living until 90, at 40 you can't anticipate the amount to spend down the principal

Perhaps, but this is no reason to leave immortal fortunes lying around. Perhaps estate taxes of 90-100% are in order. Of course, there is no tax anywhere that someone will not try to cheat, but that's no reason not to try.
posted by Steely-eyed Missile Man at 10:23 AM on March 7, 2013 [2 favorites]


The quantum of a competency for someone who supports an upper upper middle class lifestyle for his family in a high cost, high tax location is a lot ... real pre tax returns (to avoid losing principal) on a safe portfolio are around 2%, so you need 50x your annual pre-tax nut. If that's $400k a year (remember who/where we're talking about) than you need $20 million (all of which had to be accumulated after tax).

What kind of insane lifestyle is that? Every family member owning a car with private parking, every kid going to a private school followed by a private ivy league college? If you duplicate every advantage of living in the city with an expensive private option your expenses are going to be through the roof, but that doesn't mean that you need them.

There's not a soul on the earth who "needs" 20 million to retire. The median income for Manhattan itself is 65k, not 400k.
posted by tripping daisy at 1:40 PM on March 7, 2013 [1 favorite]


If that's $400k a year (remember who/where we're talking about) than you need $20 million (all of which had to be accumulated after tax).

Oh, so that's where that Wall Street Journal view of the world comes from.
posted by dhartung at 2:11 PM on March 7, 2013 [1 favorite]


There's not a soul on the earth who "needs" 20 million to retire. The median income for Manhattan itself is 65k, not 400k.

You understand you're preaching to the choir in here, right? Try taking that song and dance out to Greenwich, CT or Beverly Hills and see what the response is.
posted by spicynuts at 2:16 PM on March 7, 2013 [1 favorite]


From the same issue of Boston Review: an interview with Emmanuel Saez, Taxing Away Inequality.
posted by russilwvong at 8:55 PM on March 7, 2013


tripping daisy: There's not a soul on the earth who "needs" 20 million to retire. The median income for Manhattan itself is 65k, not 400k.
MattD's point is that, for most of us, our "normal" current income (assuming one is fully employed) is pretty much our own definition of adequate, comfortable income.

Your point is that you are qualified to judge others' lifestyles, and those who make much more than you don't need it. Curiously, you're using the same idea as MattD (except you're applying your own definition to others' lifestyles).

Regardless of whether or not $400k, or $40k, or $400M a year is "enough", people almost always seem to draw a line somewhere above themselves, and say "Those people make more than they need! They shouldn't be so selfish."
posted by IAmBroom at 6:40 AM on March 8, 2013


This is mostly true but of course not universal. I could easily get by on half what I have now (which isn't a ton by developed world standards; in many areas of the world I would of course be a king). I wouldn't be able to save anything, but if I am just living on what I have already saved, that's not an issue.
posted by Steely-eyed Missile Man at 8:05 AM on March 8, 2013


Your point is that you are qualified to judge others' lifestyles, and those who make much more than you don't need it. Curiously, you're using the same idea as MattD (except you're applying your own definition to others' lifestyles).

There's a actually a medical condition that describes the inability of an individual to put the needs of others above their own wants. It's called being a child.
posted by tripping daisy at 5:55 AM on March 9, 2013


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