My Dad was a well-paid senior manager in a private company of about 50 people turning over £20m pa. He got made a Director just before the end, turned 65 this year and promptly retired. He's setting up in business again now but he doesn't need to. His company and state pensions will keep him comfortable for life, he has no mortgage on the Exec home he bought for 40 grand in the 80s and his three kids went through college for free. He has a second property (rented to my brother!) and loads of shares from the privatisations of the past. In other words, he's sorted.
For me to achieve the same level of care-freedom by 65 I have, I have calculated, to become a millionaire. For a start, my pension is worth about 25 grand - four more than the 21k I have paid in since I was 24 year old. My mortgage is just over a quarter of a million- nothing unusual there I find when speaking to friends. And my two (maybe three) kids will need 30k min each off me to help them through college.
So let's assume I need a pension-pot of say half a million (on a 5% yield this gives me 25k pa), I pay about 400k in mortgage payments over the next 25 years - including the interest and I spend 100k on my kids education - and I need a million quid.
For my Dad's generation, it was possible to have a decent career to know you could do all of the above pretty comfortably. For ours, to get to 65 and have all of those boxes ticked means one has to be earning extremely well - or succeed in business.
Or, of course, in the case of pensions, be in the public sector.
While we are getting wealthier as a society, the truth is that the wealth is unevenly distributed across generations. My Dad's generation bought then sold the cheap houses, enjoyed the stock market boom and free education. My own didn't. The next generation - my son and daughter's - have it even harder, I believe, judging by the position most 20 year olds even today are in.
My main irritation with the CSR - in addition to the Housing Benefit mess - is its failure to tax the affluent over 65s. Their Winter Fuel Allowances, free travel cards and state pensions are not needed by many. They can't quite believe their luck, the few I have talked to. But they are numerous - and they vote.
3 comments:
its interestng that you've identified your father as the 'role model' in this scenario (and the inference that we all strive to be as successful as our parents) - up until a few years ago my father was pretty much on the same career track as yours (measures of success being in monetary terms), but then he's ending up aspiring to be more like me!
(poor fool...)
Good post Craig. I think things are shifting. A year or two ago you would have been dismissed as someone who was doing no more than generating inter-generational strife - when what we should be doing is celebrating that that many in that generation can enjoy a comfortable retirement.
But, as the various books on the topic point out, society is in a dangerous place when the contract between generations - to leave the world in a fairly decent position for the next generation to inherit - gets broken.
You know my story. I've spent the last 15 months trying to buy a family house off baby boomers, many of whom also had a second home and were downsizing to enjoy a wonderfully comfortable retirement. I needed to pay a ridiculous sum of money, profit for them which they "earned" from being in the right place at the right time.
As you suggest, the simple answer is to tax more heavily the gains people make through owning property. The unrest we've seen this week is only the start - young people have been let down big style by their elders, and they're right to be angry.
I dont subscribe to the argument that we have been let down by our elders. Everybody profits from a booming economy (interestingly the only people that dont enormously are those that choose to live off the state - recession and boom proof - altho i accept the argument that this government is going to make it harder to claim benefits - i applaud that). The economy is changing worldwide and when new processes are applied the ship will be steadied and growth will return. I am of a similar age to Craig and we have all benefited from rising house prices so its not just the previous generation that did. Its time to cut the cloth accordingly, take the pain and come out the other side. Whats done is done; the important bit is what comes next and i agree vehemently with Craigs arguments regarding the absolute mismanagement and financial debacle of the public sector over the last 25 years. We cant afford it now and we couldnt afford it before - unfortunately politics clouds the vision when trying to analyse that!
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