The Financial Riddler 6-2-24

Ask your grandchildren for help. :)

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1. What share of American homeowners don’t have homeowners insurance?

   a. 20%

   b. 15%

   c. 12%

   d. 8%

   e. 4%

   f. 2%

And the answer is …

The answer is 12%. Living in fear of losing your home to a fire, mudslide, hurricane, flood, tornado, etc. is terrible. The federal government should provide catastrophic coverage at a reasonable price up to the cost of a basic home.

2. What fraction of employer 401(k) matches are spent on the top fifth of earners?

   a. 74 percent

   b. 54 percent

   c. 44 pecent

   d. 34 percent

   e. 24 percent

And the answer is …

The answer is 44 percent. The 401(k) system is a case study in failed policy. It has enriched Wall Street and provided massive lifetime tax cuts to the rich. And rather than raise our country’s saving rate, its tax breaks have done the opposite. They’ve encouraged spending. This is why our national saving rate, which averaged 14 percent in the 50’s and 60’s, is now running at 3 percent. Our domestic investment rate equals our national saving rate plus net foreign investment in the US. It averaged 13 percent in 50’s and 60’s. It’s now running at 5 percent. Thus, foreigners are investing almost as much in our country as we are investing. Running huge current account deficits is nothing new. Between 2000 and 2009, foreigners invested three dollars in our country for every dollar we invested. Hence, we’re heading toward a future in which much of America’s capital — its buildings, factories, and equipment — is owned by foreigners.

3. Do Food Stamps cover the costs of eating modest meals?

   a. Yes

   b. No

And the answer is …

The answer is no. This is based on a study by the Urban Institute. Our food policy is clear — “Let them eat cake.”

4. What share of American households have credit card debt?

   a. 10 percent

   b. 20 percent

   c. 30 percent

   d. 40 percent

   e. 50 percent

   f. 60 percent

And the answer is …

The answer is 50 percent. This is based on data from the Federal Reserve’s 2022 Survey of Consumer Finances. Here’s a fascinating Fed chart that Thorsten Slok, Appolo’s chief economist shared. It shows that the share of upper-income households (those in the 7th decile of the income distribution) with credit card debt is almost twice that of the poorest households (those in the first decile).

5. What share of workers are saving adequately for retirement?

   a. One fifth

   b. One quarter

   c. One third

   d. One half

   e. Two fifths

   f. Three fourths

And the answer is …

The answer is only one quarter. This is based on an extensive 2022 study by the Federal Reserve Bank of Chicago. It provides clear evidence that our employer-based, Wall Street-managed decades-long 401(k) system is an abject failure. Who in Congress enacted and sustained it? The answer includes members of the House Financial Services Committee. Taking bribes from Wall Street is a time-honored tradition.

6. What share of retirement account balances is reduced prior to retirement due to “leakages” — job separation, hardship withdrawals, pre-retirement, but post age-591/2 withdraws?

   a. One half

   b. One third

   c. One quarter

   d. On tenth

And the answer is …

The answer is one quarter.

7. Is there a difference in investing in a ladder of TIPS and in TIPS index funds?

   a. Yes

   b. No

And the answer is …

The answer is yes. Please watch this video by Rick Miller, who appeared on Economics Matters — the Podcast and is one of the nation’s top financial planners. His company uses my company’s financial planning software — MaxiFiPlanner.