The way to compare income and wealth is to measure what wealth is capable of safely generating, 4 or 5%.

I admit that any forced savings program would be a hindrence to any responsible individual who would prefer to wisely manage their own money. My experience as a financial advisor is that perhaps 20% of Americans have saved prudently enough to achive the retirement they envision.

The other 80% would have been better off had the goverment deprived them of a starbux/day for their 40 working years and allowed them a roast beef sandwich/day for their 22 year retirement.

While I’m pesimistic enought to think that any sensable solution is unlikely I don’t see why a national 401k style system could not mandate the savings as a % of earned income and deny all access to the money except for the most extreem circumstances and leave the money management up to the individual.

At scottrade there are restrictions to what I can invest my ROTH IRA in. I can’t use margin (probably a good thing.) I can’t buy options (probably a good thing.)

Most people would probably keep their money parked in whatever the default option was. Yet if you use a balanced fund as a default then the manager can swing at least some of your money between stocks and bonds if they feel a bubble brewing.

A well run national savings plan is probably wishful thinking but like getting HIV through unprotected sex, having a heart attack from being 100 pounds overweight, or getting lung cancer from smoking, the solution to the problem exists… just a matter of early education and willpower.

For starters, the Republican proposal (and any that is likely to pass) would restrict the investment options to mutual funds — likely low-cost index funds. While this is superior to high-cost index funds (which is essentially how most actively managed funds behave), index funds are a highly risky way to invest. They enforce whole-hearted participation in every bubble, while making it impossible to time holdings to match assets to obligations. If hedge funds were restricted to trading indexes and index futures, they would not make any money.

Second, there are three basic financial truths — college, your house, and retirement. (Because of the time frame involved, their PV isn’t as different as you might think.) There are times when it makes sense to be saving heavily for retirement, but other times when it makes sense to be aggressively saving enough for a 20% downpayment and another 10% as reserves. (Could easily be a full year’s earnings.) The more restrictions you place on the accounts, the harder it becomes to plan for the future.

Roth IRAs are the most flexible account structure I know. I would be interested in seeing statistics — are people as successful in accumulating money in Roth accounts as they are with other structures? (Obviously a strong demographic dependence that would need to be factored out.) If not, then perhaps your proposal is necessary.

Still, it would make yet ANOTHER bite out of the take-home pay. Even if it is money I would save anyways.

A lot people will locate whatever there is available to consume in the present, they will consume all of it. These people, and there are a lot of them, will never have any meaningful wealth.

Sadly that is the present attitude of the leaders of our State.

“Americans Prefer Sweden
For the first task, we created three unlabeled pie charts of wealth distributions, one of which depicted a perfectly equal distribution of wealth. Unbeknownst to respondents, a second distribution reflected the wealth distribution in the United States; in order to create a distribution with a level of inequality that clearly fell in between these two charts, we constructed a third pie chart from the income distribution of Sweden (Fig. 1).2″ [The "2" at the end is the reference to the footnote you quote.]

While I think that they should have used scare quotes around ‘Sweden’ to more clearly indicate what they had done, their reasons are well justified as a matter of research methodology (though there is a problem with the methodology of this task that Noah catches).

Gimein says: “The effect of this and other economic research isn’t to prompt debate. It’s to shock people with numbers, even if they’re made up.” But here he betrays his own failure to carefully read their paper. The results of the second task, shown in figures 2 and 3, are based on subjects responses as to ideal distribution, not on Sweden’s income distribution. There subjects preferred an even more equal distribution than the “Sweden” distribution from the first task. Those numbers are “made up” in the slightest, nor do they involve “mislead[ing] people about what’s possible”. What those results show is that the public is already deeply confused as to the realistic range of wealth distribution.

You’re also wrong in your characterization of Freeland’s reporting. When she says “Americans actually live in Russia, although they think they live in Sweden”, she’s clearly referring, not to the preferred distribution results from task 1, but to the actual vs estimated vs ideal results from task 2. As she, correctly, goes on to say, “they would like to live on a kibbutz”, i.e. their ideal is essentially utopian. When she says “they think they live in Sweden” she’s understating their estimation of US wealth inequality, as the estimation is actually more equal than the real Swedish distribution.

Noah does get it wrong, though he has a good criticism of Norton and Ariely’s task 1 methodology. But he misses entirely their ideal distribution results from task 2 that are even more equal than the “Sweden” preference from task 1.

If I’m 62 and I get 1500/month from SS and 1500/month from my union pension than I make $36000 a year with zero assets. That’s more income than a million dollars generates in the current rate enviroment.

We need a national savings program. Keep social security payouts just as they are… bust the earnings to pay the benefits. Next step increase payroll taxation to 12% and throw the new 5% into an UNTOUCHABLE retirement account in the name of every worker. Any approved financial company can manage the accounts. Some low cost provider with a strong reuptation like Vanguard can be the default option using active management for 50 basis points.

This way the next time we publish a study about income inequality not just the hard working responsible people will have all the money.

People believe they live in a society of broad equality because they look around themselves and realize that the majority of people are pretty well off. The difference between my own condition and that of Bill Gates is less material than the difference between a lord who had enough to eat all winter and the peasant who starved for 3-4 months of the year.

In any case, the take-away from the study is that:

(a) Americans think they already live in a society that is AMAZINGLY equal; more equal than the most equal modern societies on Earth;

and (b) they believe that this kind of equality would actually be desirable.

So the overall thrust of the journalistic commentaries — that the only reason Americans fail to support more progressive taxation and efforts to reverse the concentration of wealth, is that they don’t understand what kind of society they live in — is entirely accurate, even if the journalists are getting a key detail wrong.

That doesn’t mean they support the policies that would be necessary to achieve that wealth distribution.

Having wrestled with this question a bit myself, I’m still uncertain how to best measure “wealth distribution”. I believe the typical net worth calculation includes DC accounts but not the value of DB plans. It doesn’t count Social Security promises. Doesn’t make any attempt to estimate future earnings potential. The scion of a wealthy family may have nothing in his name during college (the trust fund that provides him with income is a separate entity) but is nonetheless stinking wealthy! And so on…

For many purposes, income is more meaningful than net worth, just as earnings and cash flow are more meaningful than asset prices. And income is more evenly distributed (especially post-tax income).