Can I Get Rich on a Salary has an interesting post on the question of whether American society offers real opportunity to provide each of us a believable chance at improving our financial situations. He discusses a lot of research and commentary that is pretty enlightening and reaches the conclusion that we do have a reasonable shot at moving up the ladder economically, but that it happens not by chance but through intelligent saving strategies. He asks readers if we think we’ve moved up, compared to our parents.
It’s something I’ve thought about occasionally: am I really better off economically than my parents were?
Typically, back in the Cretaceous, the only wage-earner in a family was the husband, and my parents were typical. My father went to sea. As a deck officer in the merchant marine racking up many an hour of overtime simply by being awake and on the bridge, he earned a pretty good living. My guess is he made around $10,000 a year at a time when $12,000 a year was the equivalent of today’s six-figure income.
He hated, loathed, and detested working. He set as a goal to retire at the earliest possible moment, and he decided that moment would arrive when he had $100,000 in savings.
He chose that figure because it was the amount his grandfather had left to his mother at the start of the 20th century. During the 1800s, his grandfather had a freighting business hauling buffalo hides out of Oklahoma into Texas. He made a ton of money. In those days, $100,000 was the equivalent of well over a million dollars today. Well over it, indeed. It would have been the equivalent of around a million dollars in the 1950s, when my father conceived his retirement plan.
When the old man died, this fund of cash went to his daughter, my father’s mother. My father was a change-of-life baby who came along 20 years after his youngest brother. When my father was born, his father abandoned the wife and new baby and disappeared. As the two older brothers went on about the business of making their livings and raising their own families, their mother slid into the influence of various con artists: spiritualists, a church (yes, a mainstream church) that persuaded her to donate large amounts, and a building contractor who took her money by talking her in to making repeated additions to her home. She sold two business properties and a second home. My father was ten years old when the grown brothers discovered she was flat broke and her primary home was being forfeited to the State of Texas for tax delinquency. She lost her entire estate to predators of the sanctimonious, the otherworldly, and the commercial varieties.
So my father determined to earn back that whole amount-$100,000-and when he did, he would quit working.
Through hard work, relentless frugality (some would say “miserliness”), and constant saving and investment, he attained that goal in 1962. By then he had $130,000, enough (he figured) for him and my mother to buy a house, retire modestly, and send me to college. At the age of 53, he quit his job and moved himself and my mother to Sun City, stashing me at the University of Arizona.
They lived comfortably enough in a manner that suited their tastes. The house was no larger than the apartments they’d lived in, but it was a house, not an apartment. For the first time in her life, my mother had a dishwasher. The development was quiet and safe, the cost of living extremely low, and in those days there was plenty of hunting and fishing within driving distance. What more could a man ask for?
Well, a crystal ball, maybe.
He didn’t anticipate the inflation of the 1970s, and as a result the hundred grand did not suffice. He had to go back to work until his health failed.
I now have almost $600,000 in savings, which I think is about equivalent to my father’s $100,000 around 1965. After having seen his experience, my guess is that in real buying power my economic status is not a lot different from his. I live a little better—have a bigger house with a pool, and I live in town, not in a retirement community out in the sticks. But I’m still working. I support that “better” lifestyle with a salary.
Certainly, if I moved to Sun City, which no longer stands in the middle of onion and cotton fields but is now surrounded by a sea of houses, I could collect a little cash on the trade from my house to the cheaper housing out there. I would save hugely on the cost of living, since auto and home insurance are half of what they are in town, property tax is a third of what I’m paying, and utilities on a smaller house are much cheaper. (The green stuff on the ground in the photo is gravel. That notwithstanding, ’tis a far, far better house than you can buy in town for $250,000.)
The fly in that ointment: I don’t want to live in a ghetto for the elderly embedded in a zillion square miles of ‘burbs!
But for me to feel the amount I’ve saved has more capacity to support me for the rest of my life than did the amount my father saved for his retirement, I would have to live exactly the way my parents lived. In other words: no, I haven’t moved up, really.