Some rarely admitted unvarnished financial truths are covered in this segment. Worth a listen.
DoubleLine holds a high level financial discussion on where the economy is heading with CEO of Quill Intelligence, Danielle DiMartino Booth and CEO of DoubleLine, Jeffrey Gundlach at the Rockefeller Center’s Rainbow Room in New York. Here is a direct video link.
Yesterday’s Hedgeye cartoon goes nicely with the subject matter.
Here’s a sobering stat from the National Endowment for Financial Education: 70% of people who suddenly receive a large amount of money go through it all in just a few years. This is the reality, whether funds come from the sale of a business or real estate, stock picks, the lottery, an inheritance, or other windfalls.
Classic errors are over-estimating the amount of income that can be safely produced /withdrawn without depleting principal, too-high spending, wasteful purchases, giving too much to others, bad investment recommendations and aggressive risk-taking.
As I have explained many times, the best way to preserve savings is to see the capital as an annuity and design it for principal security and reinvested income. Anyone planning to withdraw more than 3% a year–30k from a million, 3k a year on $100,000–is being aggressive and most likely will deplete their principal too quickly in the process.
For more tips on using lump sums to gain lasting improvement to one’s financial health see Smart Ways to Handle an Inheritance.
As a result, Millennials are today in worse financial shape than every living generation that preceded them, and questions are mounting about how and whether they will be able to recover in time to form traditional households, raise children and fund the benefits and investment on which society is depending. See ‘Playing catch-up in the game of life. Millennials approach middle age in crisis:
Hobbled by the financial crisis and recession that struck as they began their working life, Americans born between 1981 and 1996 have failed to match every other generation of young adults born since the Great Depression. They have less wealth, less property, lower marriage rates and fewer children, according to new data that compare generations at similar ages.
Even with record levels of education, the troubles of millennials have delayed traditional adult milestones in ways expected to alter the nation’s demographic and economic contours through the end of the century.
Millennials helped drive the number of U.S. births to their lowest levels in 32 years. That means fewer workers in the future to support Social Security and other public programs for the ballooning population of retirees.
The mainstream is finally catching on that the financial weakness of Millennials–83 million in America compared with 75 million remaining Boomers–is one of the most pressing challenges for consumption-dependent economies and older generations counting on downsizing assets to younger buyers. See: Millennial home-buyers may never come knocking, as an example.
Policies to alleviate what’s binding here must eschew the obsession with debt-fueled consumption and asset bubbles that has dominated for the last 20 years, and instead focus on helping people of all ages reduce debt and increase net income while reducing their cost of living expenditures. This means lowering the cost of education, housing, healthy food, energy and transportation for the masses. Fortunately, technological innovation and fresh thinking can yield much help, but we do need to let status quo business, political and social models evolve in support of greater resource sharing, less waste and more efficiency.
