Hacker News Reader

Comment by travisoneill1 | Hacker News Reader

The data doesn't support your conclusion. Almost nobody keeps all their assets in a savings account. What you should be looking at is net worth. https://dqydj.com/net-worth-by-age-calculator-united-states/

View on HN

I disagree. Net worth is an unstable data point and I always view it as a status symbol more than a realistic means of acquiring cash.

For example in a market where nobody is willing (or able) to buy your home, your net worth can be ... well, worthless. In a financial crisis it's even worse.

Your "on-demand" cash is what's in your checking or savings account. There's no guarantee you'll be able to tap into your home, car, 401K, etc. and even if you could, in the long term it may be more damaging to you. For instance in a city like Seattle if you sell your home, you could be looking at paying double or triple your previous mortgage in rent, so you're ultimately putting yourself in a worse position.

This is why you invest outside of retirement accounts. Your on-demand cash isn't getting much, if any, return. Your home equity and retirement funds are expensive to access.

Though retirement funds are usually exempted from lawsuits. If you are sued for medical debt, they can’t touch your retirement funds.

> For example in a market where nobody is willing (or able) to buy your home, your net worth can be ... well, worthless

No, because if it's true that nobody is willing to buy your home, your home isn't worth the $300,000 you're claiming it is.

There's no single metric that works for all situations, but net worth is the best way to compare financial health between people and across a population in a meaningful way.

It may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that.

Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is.

Cash will still be cash. (But also maybe worth less!)

> It may be worth $300,000 today, but after the next mortgage crisis, it may be worth a fraction of that. Similarly, for your investments, if the stock market takes a huge hit, your net worth will instantly become a fraction of what it currently is. Cash will still be cash. (But also maybe worth less!)

There is no asset (including cash) that is guaranteed to preserve its value across arbitrary amounts of time under all circumstances. Even TIPS could theoretically be worthless if the government collapses.

That doesn't mean that net worth isn't still an excellent normalized comparison between arbitrary people or parts of a population today, which is exactly what we're talking about.

You're correct in your criticisms of net worth, but that doesn't change that the use of savings accounts to estimate accessible savings is highly questionable, especially in the past few years when rates were hovering right above checking account rates and people got out of the habit of using them (anecdotal).

What exactly are they keeping their assets in? A house that they can't sell and make that worth liquid? A retirement account they cannot withdraw without huge costs and compromising old age? Where else?

Uh, you ever hear of taxable investment accounts? Online brokerages, mutual funds, etc?

The average HNer probably has, yes. The average American, quite possibly not.

The number of Americans who have any significant investments that aren't part of a retirement account is small.

People with < 6000$ on their savings account? Most of the population? Very very unlikely.

I'm pretty sure "most of the population" has at least seen advertisements for ETrade. Probably too complicated for them though. That's why they'll be working until 85 or eating cat food in retirement...

The amount of condescension/lack of empathy in your comment is astounding. Haven't logged in in 2 years, had to log in to say that. And before you worry that I downvoted you, I still don't have enough karma to do so.

Thanks, I appreciate it!

In case you are wondering why you're comment is being downvoted, the issue is not that investing is too complicated for most of the population, it's that most of the population lacks the money to invest in the first place. When you add up the cost of keeping yourself fed, clothed, and sheltered, along with the cost of kids, and maybe also a stay-at-home-spouse as a dependent, and deducting contributions to retirement accounts, health insurance, and other good ideas, there is not much left over for most working Americans. That is assuming you even get all the way down that list, which many cannot -- a scary number of people have far less in their retirement accounts than they would need to live on in their final years.

The fact is that it has never been easier or cheaper for individuals to invest in a reasonably diverse portfolio and grow their wealth. The problem is that the average American has no wealth to grow:

https://www.cnbc.com/2017/08/24/most-americans-live-paycheck...

Thanks, but I totally understand why it was being downvoted. I have seen and heard all of that before.

I am fairly convinced, based on the spending attitudes of many people I know, that even if they had extra money, they still would not invest. They would just spend it on a new 4K TV, new car, or a bigger house that they don't need. Most people seek immediate gratification.

Lack of financial education is another symptom of being poor.

1) Credit card availability

2) Home equity line

3) Retirement account

It's not painless. Losing money never is. But you said "wipe out" not "will pay fees and lose 10% of net worth."

Reply on news.ycombinator.com