Financed lifestyles

[Oakey]

Saturday Night Live, Millenial Millions, sums things up in a nutshell:

https://www.youtube.com/watch?v=ATTMB4gH3sU

[anonymous-user]

Oakey said:

Saturday Night Live, Millenial Millions, sums things up in a nutshell:

https://www.youtube.com/watch?v=ATTMB4gH3sU

I am sure the boomers would give it all up to be 25 again though. The inconvenient truth is they are going to get frail and eventually die and they cannot take it with them.

I know an accountant who has customers in their 80s with Parkinson's who have ten houses and millions in the bank who still moan about having to spend any money. Seriously, what good is it doing you anyway.

[DonkeyApple]

Croutons said:

DonkeyApple said:

... will all be dying off in the same short term window... The question we need to be asking ourselves is who below them has the wealth to purchase these assets at the current market values?

People die all day, every day. There isn't immediately some sort of "glut" of property on the market resulting. In many cases those houses are inherited. The kids can sell, live in, or rent them out as their circs and choices dictate. Immediate action is not always required. Can't sell? Rent it for a bit then and come back later. It might not be ideal but it happens a lot. It's a dump? Auction it. Plenty of demand, not reliant on the assumption buyers are 20 years old with 50k of student loans and can only borrow 3x a flaky grad wage. There is plenty of money available where property is concerned...

This also assume the expensive property has been retained, not otherwise sold and downsized already, or tax-managed to be retained. Old folk don't often like to talk about this as it reminds them they are finite. But the kids are when cash is at stake, and PoA's can put others in control come what may.

DonkeyApple said:

I do feel that the lottery of inheritance still needs to be treated as a Brucie Bonus rather than anyone factoring it in as a core part of their retirement plan.

Absolutely, but it would be daft to ignore that it will be beneficial to a considerable number of people who may have little or no other assets at a time when employment (or certainly income circs) can change.

People do die all day every day but that’s a too simplistic view as it actually flows in large bands. It’s these bands that the actuarial industry uses.

As the parents of the Boomers died off they were smaller in number, with less wealth and their assets were easily soaked up by the immense collective wealth of the Boomer generation.

The Boomers don’t have a generation behind them that is either greater in number or greater in wealth.

Look at it from the perspective of the EType. They are mostly all owned by the Boomers and currently have enormous valuations. Neither Gen X or the Millenials combined have the firepower to buy them at current values.

As for the elderly dying off progressively, this isn’t the case. Even non actuaries have physically seen this effect in actionnover the recent years with the glut of celebrity deaths. The reality is that people die off in quite consistent age zones. What we have seen over the last two decades is that the main zone has shifted out from say around 65-70 to maybe 80 but it hasn’t gone away. They will still all be dying off in the same zone just as they always do but this time the effect will be different on the economy as there are many more of them and for the first time the generations behind them are poorer than them.

Even the Boomers don’t have the money to buy the assets they own at current values so there is absolutely no way Smaller and poorer Gen X can or poorer Millenials.

There will be a ten year window when the bulk of Boomers die and their assets flood the open market at a supply rate that exceeds the demand rate at current values. That clearly suggests a rebasing of values?

Personally, I am coming round to the belief that it’s this looming and unstoppable asset supply and the total lack of wealth on the demand side that will hit us before rising rates do.

[GOATever]

hyphen said:

Got a letter from AMEX this morning, would have chucked in bin as on full DD but for the thread:

Notifying they are changing interest rates (from fixed to variable tracking BOE Rate) and also how they calculate minimum payments.

- min payment that can be made goes from £5 to £25
-previously min monthly was 2.5% of total balance, now Interest charges + 2% of balance

Their illustrative example says that if you have £4k outstanding @ 22.9%, your min monthly goes up from £100 to £150 (plus any repayment protection insurance).

So a bit more cash to find each month for these debtors.

Also noticed that their cash withdrawal rate is 27.9%! I imagine that is plus a fee to withdraw form ATM too.

Edited by hyphen on Friday 2nd August 09:17

The piper wants paying quicker.

[GOATever]

Interestingly ( for me anyway ) I really didn’t think it was worth the risk of spunking money up the wall, that I didn’t actually have, with an eye to clearing the st heap with any incoming inheritances. It seems I called it right. I’m about to cop for a very nice inheritance ( some time in the next year according to the silk in charge of the legal ste). Now if I’d have chanced my arm, and played it forward, on tick. I may have had the stuff I need earlier, but I’d be getting shafted for interest as well as original cost. I guess I lucked it in a way, but I’ll now get what I need ( another property, whether to live in or let out is yet to be decided ) and not accrue any debt. I still think it’s too risky to chance your arm, and take certain things / conditions as read, which really shouldn’t be.

[Croutons]

DonkeyApple said:

As the parents of the Boomers died off they were smaller in number, with less wealth and their assets were easily soaked up by the immense collective wealth of the Boomer generation.

The Boomers don’t have a generation behind them that is either greater in number or greater in wealth.

You continue to assume all assets from dead people immediately hit market, and there is no intergenerational transfer, ie gifts and/ or inheritance. This is simply not the case.

DonkeyApple said:

Look at it from the perspective of the EType. They are mostly all owned by the Boomers and currently have enormous valuations. Neither Gen X or the Millenials combined have the firepower to buy them at current values.

And if Dad gives it to son for buttons or zip when he gives up driving, the price is not something paid, the asset doesn't reach market, and even if it does son can hang on as long as he likes to get the price he wants, or it can just sit there like so many do. Naturally dad may croak before then and it is simply inherited, with the same end result.

DonkeyApple said:

As for the elderly dying off progressively, this isn’t the case. <SNIP> but this time the effect will be different on the economy as there are many more of them and for the first time the generations behind them are poorer than them.

Even the Boomers don’t have the money to buy the assets they own at current values so there is absolutely no way Smaller and poorer Gen X can or poorer Millenials.

And if they INHERIT the assets they won't need to care. Plenty will. No don't bank on it, but you seem to think there is a crystal clear point in time where a heap of folk die and suddenly all their possessions pop up for sale at prices no-one can afford. That's simply daft.

DonkeyApple said:

There will be a ten year window when the bulk of Boomers die and their assets flood the open market at a supply rate that exceeds the demand rate at current values. That clearly suggests a rebasing of values?

Oh, you do think that. So no-one will inherit anything then as everyone who dies will be childless and intestate will they?

I guess we'll see...

[otolith]

I think DA's point is that in most cases an E-type or a house which is inherited will be swiftly converted into cash - particularly if there are multiple benefactors or an IHT bill to settle.

[DonkeyApple]

Croutons said:

DonkeyApple said:

As the parents of the Boomers died off they were smaller in number, with less wealth and their assets were easily soaked up by the immense collective wealth of the Boomer generation.

The Boomers don’t have a generation behind them that is either greater in number or greater in wealth.

You continue to assume all assets from dead people immediately hit market, and there is no intergenerational transfer, ie gifts and/ or inheritance. This is simply not the case.

DonkeyApple said:

Look at it from the perspective of the EType. They are mostly all owned by the Boomers and currently have enormous valuations. Neither Gen X or the Millenials combined have the firepower to buy them at current values.

And if Dad gives it to son for buttons or zip when he gives up driving, the price is not something paid, the asset doesn't reach market, and even if it does son can hang on as long as he likes to get the price he wants, or it can just sit there like so many do. Naturally dad may croak before then and it is simply inherited, with the same end result.

DonkeyApple said:

As for the elderly dying off progressively, this isn’t the case. <SNIP> but this time the effect will be different on the economy as there are many more of them and for the first time the generations behind them are poorer than them.

Even the Boomers don’t have the money to buy the assets they own at current values so there is absolutely no way Smaller and poorer Gen X can or poorer Millenials.

And if they INHERIT the assets they won't need to care. Plenty will. No don't bank on it, but you seem to think there is a crystal clear point in time where a heap of folk die and suddenly all their possessions pop up for sale at prices no-one can afford. That's simply daft.

DonkeyApple said:

There will be a ten year window when the bulk of Boomers die and their assets flood the open market at a supply rate that exceeds the demand rate at current values. That clearly suggests a rebasing of values?

Oh, you do think that. So no-one will inherit anything then as everyone who dies will be childless and intestate will they?

I guess we'll see...

Slightly passive aggressive there!!

I’m not assuming that all the assets from probate instantly got the market. The point here is that most people’s primary wealth is their property and as we are all aware the value of property has massively outstripped the rise in IHt allowance. What that means is that the tax man comes into play now for very many people whose estates would never had had that concern.

Whatever someone gives away does not leave the estate for IGT purposes but retains a 7 year tapering liability.

There is a crystal clear point where people die off. There is an entire financial sector built around this.

Did I say no one will inherit anything? No. What I was saying was that factoring inheritance in as a core part of one’s retirement planning isn’t a brilliant plan.

[DonkeyApple]

otolith said:

I think DA's point is that in most cases an E-type or a house which is inherited will be swiftly converted into cash - particularly if there are multiple benefactors or an IHT bill to settle.

That’s the key and historically, the younger generations have been more affluent and with growing access to debt to allow them to bridge any such issue if they wished to retain assets from probate but it is different today. The sheer number of Boomers combine with the massive asset inflation and the fact that for the first time the following generations are not wealthier to create a scenario that suggests supply could outstrip demand at current values, meaning obviously that values must decline to find the balance.

The two interesting numbers are probably that the IHT threshold is £325k and the average house price in the South East is £325k!

Average UK higher income tax payer has £60k in savings. That’s not a lot of firepower to start trying to retain probate assets if a sibling or the tax man is involved.

The general theory at present is that peak death will be 2034. So realistically we are very close to entering the zone, 10 years either side, where the probate rate starts rising steeply (maybe 5 years away?) and supply starts rising.

[bloomen]

I've never had a gig that was salaried. If I did then I can imagine I probably would finance a few fun things as long as the important stuff was taken care of.

The small number of people I've known who did debt never seemed to think that way. It was balls to the wall until bust. I never really understood that. Finance can add to your quality of life without upending it.

I've never had any type of debt at all and the handful of times I've done credit type things like phones I've always been weirded out by having a seemingly good credit rating.

[Croutons]

DonkeyApple said:

Slightly passive aggressive there!!

Sorry, not meant to be.

DonkeyApple said:

I’m not assuming that all the assets from probate instantly got the market. The point here is that most people’s primary wealth is their property and as we are all aware the value of property has massively outstripped the rise in IHt allowance. What that means is that the tax man comes into play now for very many people whose estates would never had had that concern.

Indeed, in the SE. However given the average house price is still what, £230k, and for two people who own a single property they have 2x main residence bands at £150k each, it really is not an issue. In the SE tax planning and downsizing is rife, just as it was when house prices, and the IHT limit, were lower. I can only find OBR figures for 15/16, which say 4.2% of households paid IHT, 24,500 households. The first Office for tax simplification (lol!) report on it in Nov 2018 said still under 25k households paid (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/758367/Final_Inheritance_Tax_Report_-_web_copy.pdf)

There are a fk load more estates than that in the SE, and none of them are paying IHT.

DonkeyApple said:

Did I say no one will inherit anything? No. What I was saying was that factoring inheritance in as a core part of one’s retirement planning isn’t a brilliant plan.

No you didn’t, and I continue to agree. But I disagree with the notion all dead people’s stuff is suddenly coming to market in one big lump which will neuter prices.

[DonkeyApple]

Croutons said:

No you didn’t, and I continue to agree. But I disagree with the notion all dead people’s stuff is suddenly coming to market in one big lump which will neuter prices.

But this is how death works for a generation. It’s why the West has estimated peak death for the Boomers to be in ‘34 and why economists are discussing the impact of this pretty predictable increase in supply. The looming issue is that this will be the first time that the numbers for the generation in question are so high and the numbers for the following generations are lower. It’s quite a big thing. Generations do die off within a pretty defined window of time, their assets do hit the open the market and historically the next generation behind it is bigger and wealthier and absorbs this supply and also delivers an economic boost as they hit the shopping arcades but this time Gen X is smaller and poorer so not only is it not likely that they will hit the shops but the big concern is that they won’t even mop up the asset supply.

I think Fannie Mae did a papernon it earlier in the year and the Economist covered it also.

[2354519y]

Joey Deacon said:

Oakey said:

Saturday Night Live, Millenial Millions, sums things up in a nutshell:

https://www.youtube.com/watch?v=ATTMB4gH3sU

I am sure the boomers would give it all up to be 25 again though. The inconvenient truth is they are going to get frail and eventually die and they cannot take it with them.

I know an accountant who has customers in their 80s with Parkinson's who have ten houses and millions in the bank who still moan about having to spend any money. Seriously, what good is it doing you anyway.

My parents are like this. So is a guy in his 70s I do contract work for.

They literally think they are going to live forever.

[wisbech]

the WSJ also did an article on it in the US context - boomers trying to downsize, and finding that the next generation isn’t interested/ can’t afford their McMansion.

My parents would love for one of us to inherit their place in the Cotswolds. Very unlikely though as it would mean major upheaval for someone’s family, changing jobs etc. So most likely outcome is that we will sell on their demise.

[NRS]

DonkeyApple said:

Croutons said:

No you didn’t, and I continue to agree. But I disagree with the notion all dead people’s stuff is suddenly coming to market in one big lump which will neuter prices.

But this is how death works for a generation. It’s why the West has estimated peak death for the Boomers to be in ‘34 and why economists are discussing the impact of this pretty predictable increase in supply. The looming issue is that this will be the first time that the numbers for the generation in question are so high and the numbers for the following generations are lower. It’s quite a big thing. Generations do die off within a pretty defined window of time, their assets do hit the open the market and historically the next generation behind it is bigger and wealthier and absorbs this supply and also delivers an economic boost as they hit the shopping arcades but this time Gen X is smaller and poorer so not only is it not likely that they will hit the shops but the big concern is that they won’t even mop up the asset supply.

I think Fannie Mae did a papernon it earlier in the year and the Economist covered it also.

Did China not relax the 1-child policy effectively based on this understanding, as they realised they were creating a ticking (and predictable) time bomb once the current lot die off (plus covering pensions etc)?

[DonkeyApple]

NRS said:

Did China not relax the 1-child policy effectively based on this understanding, as they realised they were creating a ticking (and predictable) time bomb once the current lot die off (plus covering pensions etc)?

It may also have been to alleviate the strain on the sewage system from all the infant girl corpses

[b0rk]

DonkeyApple said:

But this is how death works for a generation. It’s why the West has estimated peak death for the Boomers to be in ‘34 and why economists are discussing the impact of this pretty predictable increase in supply. The looming issue is that this will be the first time that the numbers for the generation in question are so high and the numbers for the following generations are lower. It’s quite a big thing. Generations do die off within a pretty defined window of time, their assets do hit the open the market and historically the next generation behind it is bigger and wealthier and absorbs this supply and also delivers an economic boost as they hit the shopping arcades but this time Gen X is smaller and poorer so not only is it not likely that they will hit the shops but the big concern is that they won’t even mop up the asset supply.

I think Fannie Mae did a papernon it earlier in the year and the Economist covered it also.

The generational dieoff is slightly more complex than Boomers, X's and millennials as whilst categorising into cohorts make things simpler for economists it doesn't fully reflect that actually the generations are in reality transitional bandings. As such so the oldest X'rs may well be as asset rich as a late boomer and indeed the youngest Xer as poor as a old millennial.

Indeed demographically peak boomer die off is likely to be boomers that sired millennials not X'rs, so it is not a question of can X's absorb the boomer assets but can millennials absorb the assets?
Moreover the generational shift in age at first born offspring primarily explains why X is a smaller generation than Boomers, it not that the children didn't get born rather they have been born later due to various societal changes in effect skipping a generation.

I suspect that in terms of assets such as a house rather than these being quickly disposed off post inheritance there with become a trend of holding onto them for revenue due to sales market being illiquid.

A more interesting question as raised by others is IMHO going to be what happens when younger X's and millennials start to reach notional retirement age post '32 or indeed as the labour market starts to spit them out in their 50's from '22 onwards and how they will pay the bills to live with potentially rented property and little cash to hand.

[wisbech]

https://www.wsj.com/articles/a-growing-problem-in-...

Boomers having issues selling big expensive houses

[NRS]

b0rk said:

Moreover the generational shift in age at first born offspring primarily explains why X is a smaller generation than Boomers, it not that the children didn't get born rather they have been born later due to various societal changes in effect skipping a generation.

I suspect that in terms of assets such as a house rather than these being quickly disposed off post inheritance there with become a trend of holding onto them for revenue due to sales market being illiquid

Given the birth rate there is some ‘people’ not being born to replace the boomers dying off - so it’s both delayed birth and less being born.

I would guess life will stop a lot of that. Government policy at the moment is pretty anti small private landlord. Not to mention yields and maintenance on big houses are much lower and higher respectively - so not the best for renting. Add in a bunch needing to be sold in divorce cases, to pay for the boomer’s health care etc and I’d suspect more will be sold due to forced circumstances.

[coffeebreath]

The larger houses belonging to boomers that no one can afford will simply be bought up by property developers and converted into multiple dwellings, i.e. flats, as is already happening all over the south. If anything, the demand will be pushed up as it's far nicer living in a converted detached dwelling with a proper garden and garage set-up, than some miserable block of communal apartments where everyone fights for visitor spaces.