We really should get a kickback for putting this up on our blog. This video is a from a promotional interview with Loral Langemeier for a book of hers. Even though we’re tooting her horn a bit, we checked out the video and found some of the ideas thought provoking. Its brief, so you might want to have a look at it.
Best,
James
To wrap up our week of discussing wealth and race, I thought a global perspective might be fitting. When discussing issues of race and wealth, inequality creeps up pretty quickly. I found some great stats on international and domestic inequalities.
Domestic Inequalities
According to The Economist, between 2002 & 2005, American corporate profits rose by 60%, wage income by only 10%.
The top one percent of Americans now make more money than the bottom 40 percent. That’s roughly three million people out-earning 110 million.
Wealth differences along racial and ethnic lines are even more striking. A 6-to-1 gap between whites and African-Americans. 11-to-1 between whites and Latinos. It seems this analysis is shows a difference from our post the other day that showed Latinos consistently earning more than Blacks.
Global Inequalities
According to the UNDP Human Development Report (HDR) 2005 only 9 countries (4% of the world’s population) have reduced the wealth gap between rich and poor, whilst 80% of the world’s population have recorded an increase in wealth inequality. The report states that ‘the richest 50 individuals in the world have a combined income greater than that of the poorest 416 million. The 2.5 billion people living on less than $2 a day – 40% of the world’s population – receive only 5% of global income, while 54% of global income goes to the richest 10% of the world’s population.‘
‘The Inequality Predicament’, identifies non-economic aspects of global inequality (such as inequalities in health, education, employment, gender and opportunities for social and political participation), as causing and exacerbating poverty.
Food for thought!
Miel
Good Morning and Greetings to All!
Since we DINKS have holdings in Canadian energy trusts, I wanted to let you know that there has been some news since the last time we blogged about Canroys current tax predicament. It looks like the energy trust industry and the Canadian government will be meeting. As near as I can tell from the article, the energy industry is going to try and stall for time, approximately 10 years worth of time.
While I’m not an expert, this seems like a good strategy to me. In a few years, the current government may be gone or Canada’s macroeconomic situation may change such that the tax is no longer necessary.
Clicky here for the Globe and Mail Story.
Best,
James
Hi All,
As part of our mission to bring you the most interesting personal finance tidbits on the web, today’s cruising has yielded a gem worth blogging about. As you may have noticed, many members of our nation’s representative body, the U.S. congress, are execeptionally wealthy.
If you’re like us DINKS, you’ll likely wonder how they got that way. Well, it turns out the most popular stock held by congress is GE. Not only that, the most common asset class was real estate with finance & insurance being the most popular sector.
If you want more details, Opensecrets.org has the skinny on congressional wealth.
Enjoy your surfing!
Best,
James
A while ago, President Bush signed the Pension Protection Act of 2006. The Pension Protection Act (PPA) has made a number of changes to America’s pension laws. If you have an IRA or are making contributions to a 401k type account, you might want to briefly read up about these changes. There are five key points.
1) Direct rollovers from retirement plans to ROTH IRAs:
According to schwabs winter investing magazine, the PPA will allow you to roll your 401k directly into a ROTH IRA. Previously you had to move it into a traditional IRA, and take the tax hit.
2) Permanently Increased Contribution Limits:
This provision is really great. The PPA raises the contribution limits for IRAs to $4,000 and the limit for 401ks to $15,000. This is really terrific because investments held in ROTHs are tax free and 401k contributions lower your taxable income. In short, these changes are about as exciting as pension reform can get.
3) Catch Up Contributions:
If you’re over 50 you can now make a catch up contribution of $1,000 to your IRA or $5,000 to your 401k. In later years these figures will be indexed to inflation. Previously, these provisions were set to expire in 2010. This is good news if you are old and you haven’t saved much.
4) Automatic Enrollment into 401ks:
The PPA has made it easier for companies to automatically enroll their employees in 401k plans. Employees may opt out if they so desire. While I’m not sure about the economics of this one, automatic enrollment has been shown to increase 401k participation, so it probably makes sense that this provision has passed.
5) Permanent Tax-Exempt Status For 529 Plans
Under previous laws, withdrawals from 529 plans would have been subject to taxation. Now withdrawals from these plans are permanently tax exempt. It also frees up some other aspects of 529 plans such as allowing once yearly tax free rollovers.
Most of this information comes from Schwab.com. If you want more details, which might be a good idea, click here. The act also has implications for same sex couples. Queercents has good posting on this.
Happy Investing!
Best,
James
Today is Friday December 1st. As part of minorities and wealth week, I wanted to briefly discuss some of the reasons why African Americans don’t have as much wealth as other ethnic groups and illustrate the issue of trust.
The statistics are pretty clear: African Americans earn less and have lower net worth growth than other ethnic groups. Anyway you look at it, its clear that Blacks aren’t as well off economically. The key question is why?
The reasons why African Americans have less wealth are fairly well know. This includes differentials in education, inheritance, savings rates, family status, health and consumer consumption. A factor that’s largely ignored however, is trust.
Historically speaking, African Americans have been grossly disadvantaged by the US’s economic and social systems. For example, for the first hundred years of our national history, Afro Americans weren’t even considered people, rather property. Not only that, after the civil war, terrorist groups like the KKK were successful in disenfrancising African Americans. Recent history hasn’t been much better. For example welfare programs and rent control have helped create urban ghettos. Finally, the war on drugs has resulted in the incarceration of over a quarter of African American men.
The long and short of this, why should Afro Americans buy into traditional methods for building wealth? It implies buying into a system which hasn’t historically ensured a fair playing field. Trust in the system or belief in the equity of financial and government institutions has got to be a factor financial decision making.
Now, I’m not an expert in these kinds of things, and very likely I could be wrong on this issue, but I do think that lack of trust in financial systems is one factor in why African Americans lower levels of wealth.
Best,
James
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