by Mish Shedlock, Mish Talk:
Bank of America has an interesting report on who’s living paycheck to paycheck (PTP). It’s not just the poor. Blame the Fed.
What Does It Mean?
The term ‘living paycheck to paycheck’ is a fairly frequently heard expression but can be somewhat nebulous and is not always clearly defined. Broadly, one can imagine it refers to individuals or households that regularly spend nearly all of their income, leaving little to nothing left over for savings.
By that widely used definition, over 40 percent of respondents agreed or somewhat agreed to living PTP.
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BofA restricted that definition as shown in the lead chart.
BofA refines PTP as “households where necessity spending is more than 95% of their household income, leaving them relatively little left over for ‘nice to have’ discretionary spending or saving.”
Even by that definition, which I endorse, the percentage of PTP households is staggering.
More surprising is that the proportion of households appearing to live paycheck to paycheck falls only slowly as incomes rise. Around 20% of households with incomes above $150K also appear to be living paycheck to paycheck. How can this be? One reason is that higher-income households may have bought larger, more expensive, homes and consequently have bigger mortgages. And often along with bigger homes come bigger insurance costs, property taxes and utility bills. It is also possible that as household incomes rise, some households may have more varied sources of income that are hard to capture – such as cash from sales of equities paid into brokerage accounts.
Generational Paycheck to Paycheck
That chart struck me as odd. But perhaps not. Zoomers and Younger millennials are priced out of a home and forced to rent.
Then again, anyone with a mortgage should have been able to refinance at 3 percent or lower, putting extra money in their pockets every month.
How Old Are the Youngest Boomers?
AI Response: As of June 2024, the youngest baby boomers are 60–69 years old. The baby boomer generation is defined as people born between 1946 and 1964.
Some experts have given the youngest baby boomers, born between 1954 and 1964, a new name, “Generation Jones”, because they are so different from older boomers.
Has anyone heard the name “Generation Jones?”
Regardless, boomers are at retirement age. The kids are gone. So why are boomers living PTP?
One possible answer that BofA did not explore is Boomers have many assets and are prepared for the future. Besides, you can’t take it with you.
Other possible answers, such as being totally unprepared for retirement, are much more troubling.
Which is it? I suspect both reasons are in play, and that leads to the high PTP percentage shown.
