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Kevin O’Leary: Why Early Retirement Doesn’t Work

This whole idea of financial independence retire early doesn't work. Let me tell you why. It happened to me. On the sale of my
first company, I achieved great liquidity and I
thought to myself, "Hey. I'm 36. I can retire now." I retired for three years. I was bored out of my mind. Working is not
just about money. People don't understand this very
often until they stop working. Work defines who you are. It provides a place where
you're social with people. It gives you interaction with people
all day long in an interesting way. It even helps you live longer
and is very, very good for brain health. Staying stimulated is how people
live into their 90s. I'm not kidding. So when am I retiring? Never. Never. I don't know where I'm going
after I'm dead, but I'll be working when I get there too..

As found on YouTube

Retirement Planning Home

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Kevin O’Leary: Why Early Retirement Doesn’t Work

This whole idea of financial independence retire early doesn't work. Let me tell you why. It happened to me. On the sale of my
first company, I achieved great liquidity and I
thought to myself, "Hey. I'm 36. I can retire now." I retired for three years. I was bored out of my mind. Working is not
just about money. People don't understand this very
often until they stop working. Work defines who you are. It provides a place where
you're social with people. It gives you interaction with people
all day long in an interesting way. It even helps you live longer
and is very, very good for brain health. Staying stimulated is how people
live into their 90s. I'm not kidding. So when am I retiring? Never. Never. I don't know where I'm going
after I'm dead, but I'll be working when I get there too..

As found on YouTube

Retirement Planning Home

Read More

Kevin O’Leary: Why Early Retirement Doesn’t Work

This whole idea of financial independence retire early doesn't work. Let me tell you why. It happened to me. On the sale of my
first company, I achieved great liquidity and I
thought to myself, "Hey. I'm 36. I can retire now." I retired for three years. I was bored out of my mind. Working is not
just about money. People don't understand this very
often until they stop working.

Work defines who you are. It provides a place where
you're social with people. It gives you interaction with people
all day long in an interesting way. It even helps you live longer
and is very, very good for brain health. Staying stimulated is how people
live into their 90s. I'm not kidding. So when am I retiring? Never. Never. I don't know where I'm going
after I'm dead, but I'll be working when I get there too..

As found on YouTube

Retirement Planning Home

Read More

Inequality – how wealth becomes power (1/3) | DW Documentary

this is the airfield for private jets at düsseldorf Airport entrepreneur Christoph gröna is one of Germany's super-rich people who have a lot of say in this country but a rarely heard in public corner is worth millions and private assets and company shares all of it and self-made [Music] let's say you have 250 million you could throw it out the window and it'll come back in through the door you can't destroy it you can buy cars and they go up in value you buy houses and real estate is worth more you buy gold and the gold prices go up you can't destroy money by consuming we've been following coasts of Kona for six months through him and many others this film takes a look at inequality in Germany a first glance Germany is a rich and powerful country full of opportunities but if you look closely you'll see wealth is more unevenly distributed here than in just about any other industrialized country success often depends on your background [Music] why is that do the differences threaten social cohesion and democracy to find some answers we go around the world and speak to a Nobel Prize winner and other experts who have looked deeply into the issue of inequality the world is at a crossroads today people sense that the control of their nation is being stolen from inequality is the most pressing social problem facing us today welcome to the land of inequality [Music] it's almost 8:00 in the morning in Berlin good longer my house the driver is already waiting when the boss comes he has to get moving right away Christophe Colonna a teacher son has made his way to the top often working 20 hours a day he's what's called a high achiever I don't have a driver because I'm lazier I think I'm too good for that on the contrary I like driving I'm a passionate motorist but the question is what does my company pay me for for sitting behind the steering wheel or for working corner earns his money with real estate hardly any company in Germany builds as much as his cg group does and in the housing market the prices only go in one direction upwards his company has just bought a very special building the developer wants to turn their Stieglitz a Keisel office block into the tallest residential tower in the city custom governor is always up for a challenge he wants to run all the way to the top in less than five minutes a race against himself 30 floors 120 meters 600 steps an employee times him with a stopwatch it's half a minute faster than the last time angry well it was pretty perfect but I could still do it better I could still remember back when I was finishing high school I watched Boris Becker when in Wimbledon and I thought just you wait I'll be right up there with you you know today's an apartment here will cost between five and ten thousand euros a square metre from up here corner can look down on many of his construction projects you can actually follow the trail of the last 20 years here in Berlin nearly 4,000 apartments and another 3,000 are under construction we've played a big role in housing construction here one stop this is Coronas headquarters in Berlin every company like this is a realm with the boss at the top and the staff beneath him corners company now employs 500 people they all have good contracts he says the 2015 tax statement from your brother there's a lot to pay one of his most important employees is his personal assistant Angelique Lisa you still in Dusseldorf then he'll be going on to Zurich then tomorrow he'll be back in Berlin Friday and Leipzig and then he'll be away over the long weekend and what about sleep not a lot there are rumors of between four and six hours I also don't think it'll be much more depending on how busy he is or whether he's traveling you can tell from when his emails arrive I'm an assistant like her has at least the same level of stress I have the boss is only as good as his assistant you don't notice it with her she's only been in the job for a few months so she's still fresh but she also has the Constitution for it Mario Lauterbach guards the door downstairs he's had a permanent contract as a security guard for half a year benzine outside gets in yeah but I went to school for 14 years I speak two or three foreign languages so if I ever got the opportunity again and had the initiative I could imagine becoming a lawyer or a judge that's something that interests me a lot latter Bach earns about 2,000 euros a month gross that's enough for a modest life but not much more his boss on the other hand has been able to build up millions of euros and assets can the guard live on what he earns from me that's what counts if he can then I've done my job as an employer if I pay a guard so little that he can't live off a salary then I've done something wrong so you think comparing him with you is nonsense of course it's nonsense I've stayed home from work due to sickness three times in 30 years ask my guard how many times he's been out sick if I have a slipped disc I come to work if I have a 40 degree fever I come to work if my wife quarrels with me and keeps me up all night I still come to work ask my security guard comparing us isn't fair or correct justification is miscarriage dismissed fish dish will he ever be able to afford a house with a pool of course not but he does not want that I know my security guards I know my caretakers would you like to trade places with her groaner didn't say yes right away I guess if I had to answer spontaneously my first answer would be no and I believe if I thought about it for a long time it would still be no that's actually got a lot less to do with him as a person or what he does it's just a question of my own attitude I wouldn't want to have that much responsibility would you like to have a house with the pool yes but then maybe not here in Germany where in Greece so whereas the one can only dream of a house with a pool the other can afford several properties Kristoff corner has a villa in Berlin and a penthouse in Cologne with a view of the cathedral but little time off how much distance should there be between those in the middle and those at the top and how big is the gap in reality there's a lot of data about poverty in the poor but very little about the rich estate asset registry would help but there isn't one and so a team from the German Institute for Economic Research is trying to find out more if you try to represent the wealth distribution in Germany in a graphic way you can do it quite simply on an a4 sheet of paper and a few look you can imagine a coordinate system like at school with an x-axis and a y-axis and with the y-axis this here I show the amount of wealth you can easily display ninety-five percent of the population on this sheet here in the – area because a part of the population is in debt or even insolvent and then there's a relatively broad area where assets are virtually zero until it finally starts to increase exponentially at the outer edge instructors this describes 95 percent of the population but the question is of course how far away is the richest person from this manager magazine puts the Reimann family business at the top of its rich list for Germany the family's estimated worth thirty three billion euros so if 95 percent of Germans are graphed on an a4 sheet that aemon's would be a whopping six point six kilometers further away every era has its mother lode in the past car makers made big money earlier still the families who owned the big trading houses became hugely wealthy now real estate developers have joined them gustaf corners rice began here in leipzig 20 years ago he invested when prices below it was all ruins or scrap [Music] I love everything you see to the left and right has been redeveloped built and rented out by us his company says it now builds one in three new apartments in the city but coast of Cavanaugh's Korea has been unusual he was not born a boss he used to work on construction sites himself every other stone has been replaced here with expertise with a sense of proportion to create an entirety and it helps if you have worked on scaffolding like this yourself I can do masonry I can lay concrete I can lay steel I can plaster walls lay tiles put up the sods that was my career the company started out as christophe grew nabokov Steen's to building services then we took on specialized construction then contractor work and project development until we became the company that we are today Kona has also invested in this former industrial district this is the class family Thomas and Kirkland with their two children they live in a rented apartment around the corner they wouldn't mind having one more room well you have to say it's an oasis in a built-up environment each building has nine classic apartments and two penthouses one large and one small at the top I'd like to show you all the floor plans in the trailer so we're about where the woman is right no the house is next to that the houses themselves or at least 20 meters further back to the penthouse apartments there we have a four room 123 square metre apartment with a 60 square meter roof terrace I think we need to be realistic the penthouse isn't what we need or what we can afford I take a classic four-room apartment with a balcony or shared garden I think that's what we'd be looking for that would interest us then let's take a look at a floor plan parents would practically have a separate wing here a sandpit playground and recreation area so in general the target group is young families yes typical young families give me some idea of the scale I'd be interested in a four-room apartment first floor would come at three thousand four hundred fifty euros the foreign apartment would cost four hundred and fifty thousand euros to buy the classes are a typical middle-class family they both have good jobs buying property used to be the way to start building up assets was a Matthias tarbush at the spoke we were 30 before we could even start to think about our old age and accumulating wealth to date now I'm almost 40 and we still haven't managed to put away much in terms of reserves I even come up with the minimum amount of capital so that banks will be able to give us a loan a sticking point the screens not food the other fueled 94 percent of buyers here aren't from Saxony that means this is currently a market where normal Saxons can't participate even each Michi encode the class family isn't the only one with little chance of owning their own place in all the richest 5% of Germans own half the apartments and houses every second person owns no property at all most Germans rent and are having to pay more and more for living space the purchase price of an 80 square metre apartment has soared in the last 10 years leipzig is an extreme case only 10% of the people here own real estate 60% of all new buildings and 94% of refurbished all buildings have gone to bias from out of town [Music] don't you want to get your shoes dirty mister I can feel pretty fastidious while the Klaus family hesitates others are snapping up the houses on the market did he make a killing again he did did he get another bargain we keep getting repeat offenders here they buy one house after another this is the third right it's his second his second complete one and the apartments before we went for a meal and I said it won't cost less than 4.5 and he got it for 3 well I'm crazy right today the time is ripe for us to make money here with the standard and my company urgently needs it that's not a crime no I don't think it is such a bad thing the real estate market is symptomatic it enables those on top to make more profits while others can hardly afford to live in their own city anymore behind this is the more basic question does profit for the one mean loss for the others today's typical property buyers are rich people well-off retirees yes and investors the others like Thomas Klaus and his colleagues can only look on [Music] honestly when I look at what's being built in the sluicey district I need a practical apartment to live in and I don't think they're building them to be lived in they're building them as investments and I can't join in that game none of my colleagues can't either that probably also creates housing that doesn't meet the needs of the city and most of the population scary because many people are being left behind banks digna there are many parts of life see who are nowadays you find one place with high priced apartments and another where the people who just couldn't afford to live in them anymore had to move to it's a crappy situation when you say that for whatever reason you have to get out of your apartment but you'd like to stay in your neighborhood but that's not possible [Music] in a neighborhood in the eastern part of Berlin bigger schlosser has been the scene of an escalating conflict between residents who are afraid of losing out economically and the man they accused of making the deal of his life here Gustov kkona arrives and his security guard stays close by when he's here he usually gets police protection I'm going to be disturbing your lunch break today so let me at least say good morning Korea has been the focus of an angry backlash his opponents filmed the first encounter with residents and protesters let me ask you is this a dialogue it was nice whether they were meeting me for the first time we could call it the birth of the boogeyman they got to see an entrepreneur who has arguments on his side and won't back down and it's precisely this stupid thinking that prevails in society there's always a direct connection he makes money and he's become wealthy so we must have stolen it from someone it's all about politics he's charging 12 euros a square metre nobody can afford that well we have smaller apartments 35 40 50 square meters which any nurse can afford even at 14 euros a square metre as long as it's well made has great light she'd love to live there instead of in 60 square meters over there for 8 euros a square metre Clara knows that many of his workmen or the police officers who protect him had difficulties finding affordable housing but he says his millions of square meters are not the cause of the problem but part of the solution [Music] how do you strike the right balance between rewarding achievement and letting everyone share in it what consequences does inequality have for society the real general finding is that inequality being a way of making people feel more distance from one another stretches the social fabric it phrased the social fabric it pulls us apart from one another physically experientially and psychologically there's nothing necessarily wrong with inequality of course people have an unequal endowments of intelligence and beauty and they have different parents and where I start to worry as a sociologist is when people accumulate dynastic wealth and dynastic wealth means a lot of money that gets transferred down through generations because that starts to stabilize systems of inequality across society and that constricts the opportunities available to everybody else coast of Ghana may have worked his way to the top but even for him there's still a glass ceiling you can't buy your way into the world of dynastic wealth you can only be born into it Kirsti on fly – best all-time traces his family tree back to the year 1135 he's a descendant of the fogers one of the richest families of the Middle Ages you can always use a winch to pull in the deer and you've killed a stag which normally weighs well over 100 kilos then you need mechanical help to get it into the vehicle would look a bit odd when you drive around towing a dead deer in a trailer people sometimes find that a little strange the car he's is to transport dead stags as an old Austrian military vehicle when bechtolsheim uses it in the 300 hectares of forest he owns somewhere in central Germany we're not allowed to say exactly where back was his condition for letting us film him discretion is everything why had some visits in the morning a forest is a wonderful feeling because you have the run of it so to speak Keltie I think it was the publisher of deed site countess den Hoff who once said you always have to own everything you love I can comprehend the question philosophically but if I answer according to my natural instincts I'd say yes I like owning things that I find beautiful man rush to gardenia demonize Shirin imprinted by citizens not Eagles it had the great inequality that exists room on your folks is wanted for the economy and it's unavoidable obviously if you're an entrepreneur and you have inherited something and keep it running properly you will have more than someone who's just an employee do you think that things are by and large fair in Germany yes by and large I do I don't sense any real feeling of injustice and the part of most people on the street lights Lord after stars it can be not having during the week from best Hawthorne works with a view of the main river in Frankfurt he heads what he calls the family office this exclusive establishment is essentially what used to be known as a private bank perhaps you should add that this is one of the few old Frankfurt patrician houses that survived the Second World War intact this old terrazzo floor or this handle this banister you don't often find them in Frankfort today these display cases you can see the remnants of what once made patrician dining culture so special Oscar Moffitt you have to imagine a family office as just that an office that takes care of the interests and all the financial needs of a single family or an individual that ranges from let's say five or ten million to several hundred million not even the employees know all the names of the bank's clientele the wealthy come via personal recommendations they know that from battle time will offer them something that normal savers can't get from a bank these days interest and returns on their money we've done work together to create an asset structure one for the future let's say you want to invest so and so much in real estate and with real estate you also have apartments and commercial buildings and maybe even logistics stick stocks it's maybe thirty percent you might put 10% into pensions and 10% in cash the rest is invested in other things private equity forestry and so on we help families to maintain their fortunes for generations that is what we aspire to the legend surrounding germany's post-war economic recovery sometimes and evokes the notion of a kind of monetary zero-hour when everyone supposedly had to start from scratch if you wanted to get rich you had to work your way up according to the myth what's photomask Noveck shortly before the first world war a former interior ministry official published an almanac of millionaires in buda Shanda in these books you still find numerous names that look very familiar today if you look at the lists of the wealthy you get the impression that old money plays a huge role among the big fortunes today I'm hiding guns awesome for moving our biases line the ups transition dean dean the gap between those who only have work do you and those who belong to the upper class has increased enormously if i took for clue such i think if people understood how how deeply unfair economic competition was in the modern global economy they really would be up in arms [Music] it's the end of Thomas class's shift after visiting the construction site he and his wife considered the real estate agents offer at the moment the family lives essentially from his income his wife has reduced her workers to take care of the children [Music] the children are eager to tell their father about the events of the day they visited their grandmother once the children go to bed the parents talk about buying the apartment in the middle of the city when this dish walked on join us mommy first you are all enthusiastic and a bit dazzled by the idea and the beautiful project and by the question about whom the project is aimed at well at young families like you on the one hand that's flattering but on the other hand when you then hear the price and think about it again these are dimensions where I say that a family like us are out of it we aren't expecting an inheritance or any other sources of outside money we have to earn it on a monthly basis four hundred fifty thousand euros I don't even know how many annual incomes that would be as I income in the severan so at some point you start to worry that the step downwards into the lower middle class is much closer than the step up into the upper middle class I think everyone has the same feeling I'm lucky I have a big employer I feel like I have won the jackpot in Leipzig but that doesn't mean that we can keep up with the developments in the real estate market being mauled the classes are not poor but they belong to a group that has come under pressure in recent years the middle class the people who have no fortunes but have to work for prosperity in recent months thousands have sent in comments online for this film project under the hashtag on Graceland for example they've reported their salaries an industrial clerk in the car industry 1600 euros net a social worker in a rehab clinic 1648 net a civil engineer nearly 2000 net a medical specialist work 12 years of training 2768 net a net income of 3500 euros puts a single person in Germany's top 10% of earners accumulated wealth is particularly unequal half the population has less than 17 thousand euros in reserve that would let them buy a base-model VW Golf all shoes and clothing for 1.6 children from birth to the age of 18 or just 3.3 square meters of a newly built apartment in Frankfurt the vast majority of the gains and income have gone to people at the very top of the income distribution in the top 1% of the income distribution and incomes for people in the middle class and below the middle class have essentially not increased or have even fallen at the bottom very large middle class is necessary for peaceful and democratic societies and if you now have polarization in rich countries and if you have shrinkage of the middle classes then you really have a problem or you are really moving to a new territory that is just unexplored yet in u.s.

The question can really a successful democracy exist with very polarized of citizenship with lots of people who are rich but also lots of people who are below the middle-class level the world is at a crossroads today that if it doesn't try to write a new social contract those who have been hurt the many many people who have been hurt will repel [Applause] there are a few places where all social strata come together but even where they do exist it doesn't mean that the pool the rich and the middle classes actually meet how are they doing they're playing tactically Costa Fiona has paid for a place in a luxury suite in Leipzig main soccer stadium we in the luxury area of paying for their cheaper tickets through our high contributions everyone makes their own contribution maybe that guy pays 20 years for a ticket I'm actually paying 2,000 for mine there's a certain justice there now at the family office in Frankfort the bank's own Forester has come to call I brought all the figures let's start with Finland Christian fund bechtolsheim has been using his clients money to buy up forests in Finland New Zealand and Uruguay what's benefited us you can see it here in the timber prices in Finland the development last year spruce and pine have seen a huge increase since 2016 and that works to our advantage the Sweden solution copy mm-hmm authorities German forests are just insanely expensive there are very few areas available and when an area opens up people jump on it like crazy surprises a double tripled quadrupled over the past 10 or 15 years of course this is also due to the low interest rates that we currently have people are looking for everything they can find where can you invest money where can you safely invested or invested very profitably it's an intrinsic conflict can we briefly talked about Uruguay how does the return look relative to our plans we're doing quite well Uruguay is our most conservative projects this is a new global form of capitalism financial capitalism to find out how the system works sociology stat Brooke Harrington first trained as an asset manager it's a global profession and that's why I had to go to 18 different countries you know from the Cayman Islands and the BVI all the way out to the Cook Islands in the middle of the South Pacific to the Seychelles and Mauritius to New York and London and Switzerland all over one of the things you learn in wealth management school is to regard the world as kind of a legal financial shopping mall and you go to each different state in the world the way you would go to shops in a mall picking out the laws and the conditions that are most favorable for what you want to do or what your client wants to do with a particular asset so what you have to know is a wealth manager is where's the best place to get the laws that you need to do what you want to do with the art collection or the yacht or the family business the family office is the starting point of a global investment chain the wealthy entrust from best all time with their money among other things he invests with these fund managers they send it all around the world ensuring it earns much more interest than say a normal savings account I'm glad that you're here to say it at the outset we are really satisfied with the performance you have achieved so far currently we are at nine point three percent since the beginning of the year they say the secret of their fund is automated investment they have an algorithm that scans the global economic situation and converts it into traffic light signals green means the computer buys a lot of shares and when the signal jumps to yellow will read fewer yeah the curve is flat and you can see it because the signal isn't dark green we do the market timing we are the ones who ensure that a customer can re-enter the market because we operate without emotion we have no emotions our entire set up our entire algorithm is purely quantitative normal geopolitical upheavals such as those in Syria or Ukraine none of them has such a global economic dimension that it could really knock the world economy out of sync and that's our benchmark where we would intervene in the traffic light it has to be an event that knocks the world economy off-balance and at least in history no conventional war has done that many people would now say here are six well-to-do people sitting at the table and all they're doing is trying to increase their wealth for many you are kind of an economic bloat what would you say to them frankly nothing because no one ever asks net I think it's pretty tricky in Germany everyone thinks he can join Deutsche Bank as a trainee at 18 then become an authorised signatory and then eventually a department head and then retire at the age of 65 as a class-b director with a palm tree in the office and a chair with arm rests that world is definitely over that's for sure in the context of modern investor capitalism there's been this massive shift of power from labor to investment it's called financialization dissonance cloud these are very clear elements of an artificial world for which only an abstract amount of money counts a vanished but not the quality of life locally among the peoples in the markets in society now you can get rich from being a rentier capitalist that is not from your work not from the sweat of your brow as they say but from putting your money at the right place and at the right time the right things Tomasz class has been working as an engineer for siemens for nine years he sits on the works council and could imagine staying here until he retires with or without a palm tree we have employees who have been trained here they've worked here all their lives it's like a family it's not just work it's a bit of family and a bit of life the staff and I are very attached to what we do here together during the day good mind some – just recently Siemens posted six billion euros in annual profits but then worrying rumors began circulating investors were reportedly putting pressure on the company saying this plant wasn't fit for the future actually nothing is secure even everyday life living in a rented apartment is insecure we're currently secured by a single income and that is now on very very shaky legs you suddenly realize that when you get a situation like the one we're in now students really insist [Music] a few streets away from the Siemens plant cassava corner has invited all his staff to the company Christmas party he just bought this old post office railway station his wife Anna and his youngest daughter are the first to show up then the boss arrives a lot is riding on him his employees are also worried for much the same reasons as Thomas Klaus in recent weeks the financial Press reported that investors have taken over 50% of the company's shares [Applause] before though dear friends family it's amazing to be able to stand among you you are my motivation seasoned minam will to pursue is easy where my strength yeah I think you have been convinced by a letter from the management perhaps signed by me that we are still the same family no matter who owns the shares no matter who will have a say and so forth yes we do Capital Markets yes we have to refinance ourselves yes we have to reposition ourselves I will also be doing that no matter in what post I will be available to you in the future what we have achieved so far as to be a truly great and big family have a nice evening and thank you at some point every company reaches a certain size where its banking and financing structures are no longer sufficient I have to deal with the financial institutions and all that if I have that under control then I will remain in my post but if I don't then I'll be voted out faster than you can possibly imagine [Music] it looks like the whole world is being shaken up by big money it's a game that few can play and even fewer can win but when those at the top stopped a jump ship and those below have to worry about a crash what effect does that have on a country today and in the future [Applause] [Music] [Applause] [Music]

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Income and Wealth Inequality: Crash Course Economics #17

Jacob: Welcome to Crash Course Economics,
I'm Jacob Clifford… Adriene: …and I'm Adriene Hill. The world
is full of inequality. There's racial inequality, gender inequality, health, education, political
inequality, and of course, economic inequality. Some people are rich, and some people are
poor, and it can seem pretty impossible to fix. Jacob: Well, maybe not. [Theme Music] Jacob: So there are two main types of economic
inequality: wealth inequality and income inequality. Wealth is accumulated assets, minus liabilities
so it's the value of stuff like savings, pensions, real estate, and stocks. When we talk about
wealth inequality, we're basically talking about how assets are distributed. Income is
the new earnings that are constantly being added to that pile of wealth.

So when we talk
about income inequality, we're talking about how that new stuff is getting distributed. Point is,
they're not the same. Let's go to the Thought Bubble. Adriene: Let's look at both types of inequality
at the global level. Global wealth today is estimated at about 260 trillion dollars, and
is not distributed equally. One study shows that North America and Europe, while they
have less than 20% of the world's population, have 67% of the world's wealth. China, which
has more people than North America and Europe combined, has only about 8% of the wealth.
India and Africa together make up almost 30% of the population, but only share about 2%
of the world's wealth.

We're teaching economics, so we can focus on income inequality. These
ten people represent everyone on the planet, and they're lined up according to income.
Poorest over here and richest over here. This group represents the poorest 20%, this is
the second poorest 20%, the middle 20%, and so on. If we distributed a hundred dollars
based on current income trends, this group would get about 83 of those dollars, the next
richest would get 10 dollars, the middle gets four, the second poorest group would get two dollars
and the poorest 20% of humans would get one dollar. Branko Milanovic, an economist that specializes
in inequality, explained all this by describing an "economic big bang" – "At first, countries'
incomes were all bunched together, but with the Industrial Revolution the differences
exploded. It pushed some countries forward onto the path to higher incomes while others
stayed where they had been for millennia." According to Milanovic, in 1820, the richest
countries in the world – Great Britain and the Netherlands – were only three times richer
than the poorest, like India and China. Today, the gap between the richest and poorest nations is like
100:1. The gaps are getting bigger and bigger.

Thanks, Thought Bubble. The Industrial Revolution
created a lot of inequality between countries but today globalization and international trade are accelerating it.
Most economists agree that globalization has helped the world's poorest people, but it's
also helped the rich a lot more. Harvard economist Richard Freeman noted, "The triumph of globalization
and market capitalism has improved living standards for billions while concentrating
billions among the few." So, it's kind of a mixed bag. The very poor are doing a little better, but
the very rich are now a lot richer than everybody else. There are other reasons inequality is growing.
Economists point to something called "skill-biased technological change." The jobs created in
modernized economies are more technology-based, generally requiring new skills. Workers that
have the education and skills to do those jobs thrive, while others are left behind.
So, in a way, technology's become a complement for skilled workers but a replacement for
many unskilled workers.

The end result is an ever widening gap between not just the
poor and the rich, but also the poor and the working class. As economies develop and as
manufacturing jobs move overseas, low skill low pay and high skill high pay work are the
only jobs left. People with few skills fall behind in terms of income. In the last thirty
years in the US, the number of college-educated people living in poverty has doubled from
3% to 6%, which is bad! And then consider that during the same period of time, the number
of people living in poverty with a high school degree has risen from 6% to a whopping 22%.
Over the last fifty years, the salary of college graduates has continued to grow while, after
adjusting for inflation, high school graduates' incomes have actually dropped. It's a good
reason to stay in school! There are other reasons the income gap is
widening.

The reduced influence of unions, tax policies that favor the wealthy, and the
fact that somehow it's okay for CEOs to make salaries many, many times greater than those
of their employees. Also, race and gender and other forms of inequality can exacerbate
income equality. Jacob: Let's dive into the data for the United
States. We'll start by mentioning Max Lorenz, who created a graph to show income inequality.
Along the bottom we have the percent of households from 0-100% and along the side we have the
percent share of income.

By the way, we're using households rather than just looking
at individuals because many households have two income earners. So this straight line
right here represents perfect income equality. So every household earns the same income.
And while perfect income equality might look nice on the surface, it's not really the goal.
When different jobs have different incomes, people have incentive to become a doctor or
an entrepreneur or a YouTube star – you know, the jobs society really values. So this graph, called
the Lorenz curve, helps visualize the depth of inequality. Now, for 2010, the US Census Bureau found
that the poorest 20% of Americans made 3.3% of the income. And the richest 20% made over
50% of the income. So that's pretty unequal but has it always been like this? Well, in
1970, the bottom group earned 4.1% of the income and the top earned 43.3%.

By 1990,
things were even less equal so the 2010 numbers are just a continuation of the trend. And
it isn't just the poorest group that's losing ground. Over those 40 years, each of the bottom
groups or 80% households earned smaller and smaller shares of the total income. Now, from the Lorenz curve we can calculate
the most commonly used measure of income equality – the GINI Index. Now without jumping into
too much of the math, it's basically the size of the gap between the equal distribution
of income and the actual distribution. Now, 0 represents complete equality and 100 represents
complete inequality. Now, you might be surprised to learn the US doesn't have the highest income
inequality, but it does have the highest among Western industrialized nations.

The UK has
the highest in the EU. Adriene: The debate over income equality isn't
about whether it exists. It obviously does. The fight is over whether it's a problem and
what should be done about it. Let's start with those who don't think it's a big deal.
They tell you that the data suggests that the rich are getting richer and the poor are
getting poorer, but that might not be the case. Instead, it could be that all the groups
are making more money but the rich's share is just growing faster. Like, let's say you
own an apple tree and we pick 10 apples. You keep 6 and give me 4. A week later we pick
20 apples, you take 15 and give me 5. So my share of the total went down from 40% to 25%
but each of us still got more apples.

So it's true that people in the lowest income bracket have
earned a little more money in the last 40 years, but in the last 20 years, that average income has been falling.
Meanwhile, the rich have continually gotten richer. So, what's the richest guy on earth have to
say about it? Bill Gates said, "Yes, some level of inequality is built in to capitalism.
It's inherent to the system. The question is, what level of inequality is acceptable?
And when does inequality start doing more harm than good?" There's a growing group of
economists who believe income inequality in the US today is doing more harm.

They argue
that greater income inequality is associated with a lot of problems. They point to studies
that show countries with more inequality have more violence, drug abuse and incarcerations.
Income inequality also dilutes political equality, since the rich have a disproportionate say
in what policies move forward, and the rich have an incentive to promote policies that
benefit the rich. So, how do we address this inequality? There's
not a lot of agreement on this. Some argue that education is the key to reducing the
gap. Basically, workers with more and better education tend to have the skills that earn
higher income. Some economists push for an increased minimum wage, which we're going
to talk about in another episode. There's even an argument that access to affordable,
high quality childcare would go a long way. And some think governments should do more
to provide a social safety net, focus on getting more people to work and adjust the tax code
to redistribute income.

Jacob: Some economists call for the government
to increase income taxes and capital gains taxes on the rich. Income taxes in the US
are already somewhat progressive, which means that there are tax brackets that require the
rich to pay a higher percent of income. Right now, it peaks at around 40% but some economists
call for increases up to 50 or 60%. One idea is to fix loopholes that the rich use to avoid
paying taxes. Other economists argue that taxing the rich won't be as effective as reducing regulation
and bureaucratic red tape. It's unclear which path we're going to take but extreme income inequality
at the national and global level needs to be addressed. Motivation to improve income inequality may come
from a genuine desire to help people and level the playing field, or the fear of Hunger Games-style social
upheaval. But either way, the issue can't be ignored. Adriene: Even Adam Smith, the most classical
of classical economists, said, "No society can surely be flourishing and happy of which
the far greater part of the members are poor and miserable." Thanks for watching, we'll
see you next week.

Jacob: Thanks for watching Crash Course Economics.
It was made with the help of all of these nice people. You can help keep Crash Course
free for everyone forever by supporting the show at Patreon. Patreon is a voluntary subscription
service where you can support the show with monthly contributions. We'd like to thank
our High Chancellor of Learning, Dr. Brett Henderson and our Headmaster of Learning,
Linnea Boyev, and Crash Course Vice Principal Cathy and Kim Philip. Thanks for watching,
DFTBA..

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Inequality – how wealth becomes power (1/3) | DW Documentary

this is the airfield for private jets at düsseldorf Airport entrepreneur Christoph gröna is one of Germany's super-rich people who have a lot of say in this country but a rarely heard in public corner is worth millions and private assets and company shares all of it and self-made [Music] let's say you have 250 million you could throw it out the window and it'll come back in through the door you can't destroy it you can buy cars and they go up in value you buy houses and real estate is worth more you buy gold and the gold prices go up you can't destroy money by consuming we've been following coasts of Kona for six months through him and many others this film takes a look at inequality in Germany a first glance Germany is a rich and powerful country full of opportunities but if you look closely you'll see wealth is more unevenly distributed here than in just about any other industrialized country success often depends on your background [Music] why is that do the differences threaten social cohesion and democracy to find some answers we go around the world and speak to a Nobel Prize winner and other experts who have looked deeply into the issue of inequality the world is at a crossroads today people sense that the control of their nation is being stolen from inequality is the most pressing social problem facing us today welcome to the land of inequality [Music] it's almost 8:00 in the morning in Berlin good longer my house the driver is already waiting when the boss comes he has to get moving right away Christophe Colonna a teacher son has made his way to the top often working 20 hours a day he's what's called a high achiever I don't have a driver because I'm lazier I think I'm too good for that on the contrary I like driving I'm a passionate motorist but the question is what does my company pay me for for sitting behind the steering wheel or for working corner earns his money with real estate hardly any company in Germany builds as much as his cg group does and in the housing market the prices only go in one direction upwards his company has just bought a very special building the developer wants to turn their Stieglitz a Keisel office block into the tallest residential tower in the city custom governor is always up for a challenge he wants to run all the way to the top in less than five minutes a race against himself 30 floors 120 meters 600 steps an employee times him with a stopwatch it's half a minute faster than the last time angry well it was pretty perfect but I could still do it better I could still remember back when I was finishing high school I watched Boris Becker when in Wimbledon and I thought just you wait I'll be right up there with you you know today's an apartment here will cost between five and ten thousand euros a square metre from up here corner can look down on many of his construction projects you can actually follow the trail of the last 20 years here in Berlin nearly 4,000 apartments and another 3,000 are under construction we've played a big role in housing construction here one stop this is Coronas headquarters in Berlin every company like this is a realm with the boss at the top and the staff beneath him corners company now employs 500 people they all have good contracts he says the 2015 tax statement from your brother there's a lot to pay one of his most important employees is his personal assistant Angelique Lisa you still in Dusseldorf then he'll be going on to Zurich then tomorrow he'll be back in Berlin Friday and Leipzig and then he'll be away over the long weekend and what about sleep not a lot there are rumors of between four and six hours I also don't think it'll be much more depending on how busy he is or whether he's traveling you can tell from when his emails arrive I'm an assistant like her has at least the same level of stress I have the boss is only as good as his assistant you don't notice it with her she's only been in the job for a few months so she's still fresh but she also has the Constitution for it Mario Lauterbach guards the door downstairs he's had a permanent contract as a security guard for half a year benzine outside gets in yeah but I went to school for 14 years I speak two or three foreign languages so if I ever got the opportunity again and had the initiative I could imagine becoming a lawyer or a judge that's something that interests me a lot latter Bach earns about 2,000 euros a month gross that's enough for a modest life but not much more his boss on the other hand has been able to build up millions of euros and assets can the guard live on what he earns from me that's what counts if he can then I've done my job as an employer if I pay a guard so little that he can't live off a salary then I've done something wrong so you think comparing him with you is nonsense of course it's nonsense I've stayed home from work due to sickness three times in 30 years ask my guard how many times he's been out sick if I have a slipped disc I come to work if I have a 40 degree fever I come to work if my wife quarrels with me and keeps me up all night I still come to work ask my security guard comparing us isn't fair or correct justification is miscarriage dismissed fish dish will he ever be able to afford a house with a pool of course not but he does not want that I know my security guards I know my caretakers would you like to trade places with her groaner didn't say yes right away I guess if I had to answer spontaneously my first answer would be no and I believe if I thought about it for a long time it would still be no that's actually got a lot less to do with him as a person or what he does it's just a question of my own attitude I wouldn't want to have that much responsibility would you like to have a house with the pool yes but then maybe not here in Germany where in Greece so whereas the one can only dream of a house with a pool the other can afford several properties Kristoff corner has a villa in Berlin and a penthouse in Cologne with a view of the cathedral but little time off how much distance should there be between those in the middle and those at the top and how big is the gap in reality there's a lot of data about poverty in the poor but very little about the rich estate asset registry would help but there isn't one and so a team from the German Institute for Economic Research is trying to find out more if you try to represent the wealth distribution in Germany in a graphic way you can do it quite simply on an a4 sheet of paper and a few look you can imagine a coordinate system like at school with an x-axis and a y-axis and with the y-axis this here I show the amount of wealth you can easily display ninety-five percent of the population on this sheet here in the – area because a part of the population is in debt or even insolvent and then there's a relatively broad area where assets are virtually zero until it finally starts to increase exponentially at the outer edge instructors this describes 95 percent of the population but the question is of course how far away is the richest person from this manager magazine puts the Reimann family business at the top of its rich list for Germany the family's estimated worth thirty three billion euros so if 95 percent of Germans are graphed on an a4 sheet that aemon's would be a whopping six point six kilometers further away every era has its mother lode in the past car makers made big money earlier still the families who owned the big trading houses became hugely wealthy now real estate developers have joined them gustaf corners rice began here in leipzig 20 years ago he invested when prices below it was all ruins or scrap [Music] I love everything you see to the left and right has been redeveloped built and rented out by us his company says it now builds one in three new apartments in the city but coast of Cavanaugh's Korea has been unusual he was not born a boss he used to work on construction sites himself every other stone has been replaced here with expertise with a sense of proportion to create an entirety and it helps if you have worked on scaffolding like this yourself I can do masonry I can lay concrete I can lay steel I can plaster walls lay tiles put up the sods that was my career the company started out as christophe grew nabokov Steen's to building services then we took on specialized construction then contractor work and project development until we became the company that we are today Kona has also invested in this former industrial district this is the class family Thomas and Kirkland with their two children they live in a rented apartment around the corner they wouldn't mind having one more room well you have to say it's an oasis in a built-up environment each building has nine classic apartments and two penthouses one large and one small at the top I'd like to show you all the floor plans in the trailer so we're about where the woman is right no the house is next to that the houses themselves or at least 20 meters further back to the penthouse apartments there we have a four room 123 square metre apartment with a 60 square meter roof terrace I think we need to be realistic the penthouse isn't what we need or what we can afford I take a classic four-room apartment with a balcony or shared garden I think that's what we'd be looking for that would interest us then let's take a look at a floor plan parents would practically have a separate wing here a sandpit playground and recreation area so in general the target group is young families yes typical young families give me some idea of the scale I'd be interested in a four-room apartment first floor would come at three thousand four hundred fifty euros the foreign apartment would cost four hundred and fifty thousand euros to buy the classes are a typical middle-class family they both have good jobs buying property used to be the way to start building up assets was a Matthias tarbush at the spoke we were 30 before we could even start to think about our old age and accumulating wealth to date now I'm almost 40 and we still haven't managed to put away much in terms of reserves I even come up with the minimum amount of capital so that banks will be able to give us a loan a sticking point the screens not food the other fueled 94 percent of buyers here aren't from Saxony that means this is currently a market where normal Saxons can't participate even each Michi encode the class family isn't the only one with little chance of owning their own place in all the richest 5% of Germans own half the apartments and houses every second person owns no property at all most Germans rent and are having to pay more and more for living space the purchase price of an 80 square metre apartment has soared in the last 10 years leipzig is an extreme case only 10% of the people here own real estate 60% of all new buildings and 94% of refurbished all buildings have gone to bias from out of town [Music] don't you want to get your shoes dirty mister I can feel pretty fastidious while the Klaus family hesitates others are snapping up the houses on the market did he make a killing again he did did he get another bargain we keep getting repeat offenders here they buy one house after another this is the third right it's his second his second complete one and the apartments before we went for a meal and I said it won't cost less than 4.5 and he got it for 3 well I'm crazy right today the time is ripe for us to make money here with the standard and my company urgently needs it that's not a crime no I don't think it is such a bad thing the real estate market is symptomatic it enables those on top to make more profits while others can hardly afford to live in their own city anymore behind this is the more basic question does profit for the one mean loss for the others today's typical property buyers are rich people well-off retirees yes and investors the others like Thomas Klaus and his colleagues can only look on [Music] honestly when I look at what's being built in the sluicey district I need a practical apartment to live in and I don't think they're building them to be lived in they're building them as investments and I can't join in that game none of my colleagues can't either that probably also creates housing that doesn't meet the needs of the city and most of the population scary because many people are being left behind banks digna there are many parts of life see who are nowadays you find one place with high priced apartments and another where the people who just couldn't afford to live in them anymore had to move to it's a crappy situation when you say that for whatever reason you have to get out of your apartment but you'd like to stay in your neighborhood but that's not possible [Music] in a neighborhood in the eastern part of Berlin bigger schlosser has been the scene of an escalating conflict between residents who are afraid of losing out economically and the man they accused of making the deal of his life here Gustov kkona arrives and his security guard stays close by when he's here he usually gets police protection I'm going to be disturbing your lunch break today so let me at least say good morning Korea has been the focus of an angry backlash his opponents filmed the first encounter with residents and protesters let me ask you is this a dialogue it was nice whether they were meeting me for the first time we could call it the birth of the boogeyman they got to see an entrepreneur who has arguments on his side and won't back down and it's precisely this stupid thinking that prevails in society there's always a direct connection he makes money and he's become wealthy so we must have stolen it from someone it's all about politics he's charging 12 euros a square metre nobody can afford that well we have smaller apartments 35 40 50 square meters which any nurse can afford even at 14 euros a square metre as long as it's well made has great light she'd love to live there instead of in 60 square meters over there for 8 euros a square metre Clara knows that many of his workmen or the police officers who protect him had difficulties finding affordable housing but he says his millions of square meters are not the cause of the problem but part of the solution [Music] how do you strike the right balance between rewarding achievement and letting everyone share in it what consequences does inequality have for society the real general finding is that inequality being a way of making people feel more distance from one another stretches the social fabric it phrased the social fabric it pulls us apart from one another physically experientially and psychologically there's nothing necessarily wrong with inequality of course people have an unequal endowments of intelligence and beauty and they have different parents and where I start to worry as a sociologist is when people accumulate dynastic wealth and dynastic wealth means a lot of money that gets transferred down through generations because that starts to stabilize systems of inequality across society and that constricts the opportunities available to everybody else coast of Ghana may have worked his way to the top but even for him there's still a glass ceiling you can't buy your way into the world of dynastic wealth you can only be born into it Kirsti on fly – best all-time traces his family tree back to the year 1135 he's a descendant of the fogers one of the richest families of the Middle Ages you can always use a winch to pull in the deer and you've killed a stag which normally weighs well over 100 kilos then you need mechanical help to get it into the vehicle would look a bit odd when you drive around towing a dead deer in a trailer people sometimes find that a little strange the car he's is to transport dead stags as an old Austrian military vehicle when bechtolsheim uses it in the 300 hectares of forest he owns somewhere in central Germany we're not allowed to say exactly where back was his condition for letting us film him discretion is everything why had some visits in the morning a forest is a wonderful feeling because you have the run of it so to speak Keltie I think it was the publisher of deed site countess den Hoff who once said you always have to own everything you love I can comprehend the question philosophically but if I answer according to my natural instincts I'd say yes I like owning things that I find beautiful man rush to gardenia demonize Shirin imprinted by citizens not Eagles it had the great inequality that exists room on your folks is wanted for the economy and it's unavoidable obviously if you're an entrepreneur and you have inherited something and keep it running properly you will have more than someone who's just an employee do you think that things are by and large fair in Germany yes by and large I do I don't sense any real feeling of injustice and the part of most people on the street lights Lord after stars it can be not having during the week from best Hawthorne works with a view of the main river in Frankfurt he heads what he calls the family office this exclusive establishment is essentially what used to be known as a private bank perhaps you should add that this is one of the few old Frankfurt patrician houses that survived the Second World War intact this old terrazzo floor or this handle this banister you don't often find them in Frankfort today these display cases you can see the remnants of what once made patrician dining culture so special Oscar Moffitt you have to imagine a family office as just that an office that takes care of the interests and all the financial needs of a single family or an individual that ranges from let's say five or ten million to several hundred million not even the employees know all the names of the bank's clientele the wealthy come via personal recommendations they know that from battle time will offer them something that normal savers can't get from a bank these days interest and returns on their money we've done work together to create an asset structure one for the future let's say you want to invest so and so much in real estate and with real estate you also have apartments and commercial buildings and maybe even logistics stick stocks it's maybe thirty percent you might put 10% into pensions and 10% in cash the rest is invested in other things private equity forestry and so on we help families to maintain their fortunes for generations that is what we aspire to the legend surrounding germany's post-war economic recovery sometimes and evokes the notion of a kind of monetary zero-hour when everyone supposedly had to start from scratch if you wanted to get rich you had to work your way up according to the myth what's photomask Noveck shortly before the first world war a former interior ministry official published an almanac of millionaires in buda Shanda in these books you still find numerous names that look very familiar today if you look at the lists of the wealthy you get the impression that old money plays a huge role among the big fortunes today I'm hiding guns awesome for moving our biases line the ups transition dean dean the gap between those who only have work do you and those who belong to the upper class has increased enormously if i took for clue such i think if people understood how how deeply unfair economic competition was in the modern global economy they really would be up in arms [Music] it's the end of Thomas class's shift after visiting the construction site he and his wife considered the real estate agents offer at the moment the family lives essentially from his income his wife has reduced her workers to take care of the children [Music] the children are eager to tell their father about the events of the day they visited their grandmother once the children go to bed the parents talk about buying the apartment in the middle of the city when this dish walked on join us mommy first you are all enthusiastic and a bit dazzled by the idea and the beautiful project and by the question about whom the project is aimed at well at young families like you on the one hand that's flattering but on the other hand when you then hear the price and think about it again these are dimensions where I say that a family like us are out of it we aren't expecting an inheritance or any other sources of outside money we have to earn it on a monthly basis four hundred fifty thousand euros I don't even know how many annual incomes that would be as I income in the severan so at some point you start to worry that the step downwards into the lower middle class is much closer than the step up into the upper middle class I think everyone has the same feeling I'm lucky I have a big employer I feel like I have won the jackpot in Leipzig but that doesn't mean that we can keep up with the developments in the real estate market being mauled the classes are not poor but they belong to a group that has come under pressure in recent years the middle class the people who have no fortunes but have to work for prosperity in recent months thousands have sent in comments online for this film project under the hashtag on Graceland for example they've reported their salaries an industrial clerk in the car industry 1600 euros net a social worker in a rehab clinic 1648 net a civil engineer nearly 2000 net a medical specialist work 12 years of training 2768 net a net income of 3500 euros puts a single person in Germany's top 10% of earners accumulated wealth is particularly unequal half the population has less than 17 thousand euros in reserve that would let them buy a base-model VW Golf all shoes and clothing for 1.6 children from birth to the age of 18 or just 3.3 square meters of a newly built apartment in Frankfurt the vast majority of the gains and income have gone to people at the very top of the income distribution in the top 1% of the income distribution and incomes for people in the middle class and below the middle class have essentially not increased or have even fallen at the bottom very large middle class is necessary for peaceful and democratic societies and if you now have polarization in rich countries and if you have shrinkage of the middle classes then you really have a problem or you are really moving to a new territory that is just unexplored yet in u.s.

The question can really a successful democracy exist with very polarized of citizenship with lots of people who are rich but also lots of people who are below the middle-class level the world is at a crossroads today that if it doesn't try to write a new social contract those who have been hurt the many many people who have been hurt will repel [Applause] there are a few places where all social strata come together but even where they do exist it doesn't mean that the pool the rich and the middle classes actually meet how are they doing they're playing tactically Costa Fiona has paid for a place in a luxury suite in Leipzig main soccer stadium we in the luxury area of paying for their cheaper tickets through our high contributions everyone makes their own contribution maybe that guy pays 20 years for a ticket I'm actually paying 2,000 for mine there's a certain justice there now at the family office in Frankfort the bank's own Forester has come to call I brought all the figures let's start with Finland Christian fund bechtolsheim has been using his clients money to buy up forests in Finland New Zealand and Uruguay what's benefited us you can see it here in the timber prices in Finland the development last year spruce and pine have seen a huge increase since 2016 and that works to our advantage the Sweden solution copy mm-hmm authorities German forests are just insanely expensive there are very few areas available and when an area opens up people jump on it like crazy surprises a double tripled quadrupled over the past 10 or 15 years of course this is also due to the low interest rates that we currently have people are looking for everything they can find where can you invest money where can you safely invested or invested very profitably it's an intrinsic conflict can we briefly talked about Uruguay how does the return look relative to our plans we're doing quite well Uruguay is our most conservative projects this is a new global form of capitalism financial capitalism to find out how the system works sociology stat Brooke Harrington first trained as an asset manager it's a global profession and that's why I had to go to 18 different countries you know from the Cayman Islands and the BVI all the way out to the Cook Islands in the middle of the South Pacific to the Seychelles and Mauritius to New York and London and Switzerland all over one of the things you learn in wealth management school is to regard the world as kind of a legal financial shopping mall and you go to each different state in the world the way you would go to shops in a mall picking out the laws and the conditions that are most favorable for what you want to do or what your client wants to do with a particular asset so what you have to know is a wealth manager is where's the best place to get the laws that you need to do what you want to do with the art collection or the yacht or the family business the family office is the starting point of a global investment chain the wealthy entrust from best all time with their money among other things he invests with these fund managers they send it all around the world ensuring it earns much more interest than say a normal savings account I'm glad that you're here to say it at the outset we are really satisfied with the performance you have achieved so far currently we are at nine point three percent since the beginning of the year they say the secret of their fund is automated investment they have an algorithm that scans the global economic situation and converts it into traffic light signals green means the computer buys a lot of shares and when the signal jumps to yellow will read fewer yeah the curve is flat and you can see it because the signal isn't dark green we do the market timing we are the ones who ensure that a customer can re-enter the market because we operate without emotion we have no emotions our entire set up our entire algorithm is purely quantitative normal geopolitical upheavals such as those in Syria or Ukraine none of them has such a global economic dimension that it could really knock the world economy out of sync and that's our benchmark where we would intervene in the traffic light it has to be an event that knocks the world economy off-balance and at least in history no conventional war has done that many people would now say here are six well-to-do people sitting at the table and all they're doing is trying to increase their wealth for many you are kind of an economic bloat what would you say to them frankly nothing because no one ever asks net I think it's pretty tricky in Germany everyone thinks he can join Deutsche Bank as a trainee at 18 then become an authorised signatory and then eventually a department head and then retire at the age of 65 as a class-b director with a palm tree in the office and a chair with arm rests that world is definitely over that's for sure in the context of modern investor capitalism there's been this massive shift of power from labor to investment it's called financialization dissonance cloud these are very clear elements of an artificial world for which only an abstract amount of money counts a vanished but not the quality of life locally among the peoples in the markets in society now you can get rich from being a rentier capitalist that is not from your work not from the sweat of your brow as they say but from putting your money at the right place and at the right time the right things Tomasz class has been working as an engineer for siemens for nine years he sits on the works council and could imagine staying here until he retires with or without a palm tree we have employees who have been trained here they've worked here all their lives it's like a family it's not just work it's a bit of family and a bit of life the staff and I are very attached to what we do here together during the day good mind some – just recently Siemens posted six billion euros in annual profits but then worrying rumors began circulating investors were reportedly putting pressure on the company saying this plant wasn't fit for the future actually nothing is secure even everyday life living in a rented apartment is insecure we're currently secured by a single income and that is now on very very shaky legs you suddenly realize that when you get a situation like the one we're in now students really insist [Music] a few streets away from the Siemens plant cassava corner has invited all his staff to the company Christmas party he just bought this old post office railway station his wife Anna and his youngest daughter are the first to show up then the boss arrives a lot is riding on him his employees are also worried for much the same reasons as Thomas Klaus in recent weeks the financial Press reported that investors have taken over 50% of the company's shares [Applause] before though dear friends family it's amazing to be able to stand among you you are my motivation seasoned minam will to pursue is easy where my strength yeah I think you have been convinced by a letter from the management perhaps signed by me that we are still the same family no matter who owns the shares no matter who will have a say and so forth yes we do Capital Markets yes we have to refinance ourselves yes we have to reposition ourselves I will also be doing that no matter in what post I will be available to you in the future what we have achieved so far as to be a truly great and big family have a nice evening and thank you at some point every company reaches a certain size where its banking and financing structures are no longer sufficient I have to deal with the financial institutions and all that if I have that under control then I will remain in my post but if I don't then I'll be voted out faster than you can possibly imagine [Music] it looks like the whole world is being shaken up by big money it's a game that few can play and even fewer can win but when those at the top stopped a jump ship and those below have to worry about a crash what effect does that have on a country today and in the future [Applause] [Music] [Applause] [Music]

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Income and Wealth Inequality: Crash Course Economics #17

Jacob: Welcome to Crash Course Economics,
I'm Jacob Clifford… Adriene: …and I'm Adriene Hill. The world
is full of inequality. There's racial inequality, gender inequality, health, education, political
inequality, and of course, economic inequality. Some people are rich, and some people are
poor, and it can seem pretty impossible to fix. Jacob: Well, maybe not. [Theme Music] Jacob: So there are two main types of economic
inequality: wealth inequality and income inequality.

Wealth is accumulated assets, minus liabilities
so it's the value of stuff like savings, pensions, real estate, and stocks. When we talk about
wealth inequality, we're basically talking about how assets are distributed. Income is
the new earnings that are constantly being added to that pile of wealth. So when we talk
about income inequality, we're talking about how that new stuff is getting distributed. Point is,
they're not the same. Let's go to the Thought Bubble. Adriene: Let's look at both types of inequality
at the global level. Global wealth today is estimated at about 260 trillion dollars, and
is not distributed equally. One study shows that North America and Europe, while they
have less than 20% of the world's population, have 67% of the world's wealth. China, which
has more people than North America and Europe combined, has only about 8% of the wealth.
India and Africa together make up almost 30% of the population, but only share about 2%
of the world's wealth.

We're teaching economics, so we can focus on income inequality. These
ten people represent everyone on the planet, and they're lined up according to income.
Poorest over here and richest over here. This group represents the poorest 20%, this is
the second poorest 20%, the middle 20%, and so on. If we distributed a hundred dollars
based on current income trends, this group would get about 83 of those dollars, the next
richest would get 10 dollars, the middle gets four, the second poorest group would get two dollars
and the poorest 20% of humans would get one dollar.

Branko Milanovic, an economist that specializes
in inequality, explained all this by describing an "economic big bang" – "At first, countries'
incomes were all bunched together, but with the Industrial Revolution the differences
exploded. It pushed some countries forward onto the path to higher incomes while others
stayed where they had been for millennia." According to Milanovic, in 1820, the richest
countries in the world – Great Britain and the Netherlands – were only three times richer
than the poorest, like India and China. Today, the gap between the richest and poorest nations is like
100:1. The gaps are getting bigger and bigger. Thanks, Thought Bubble. The Industrial Revolution
created a lot of inequality between countries but today globalization and international trade are accelerating it.
Most economists agree that globalization has helped the world's poorest people, but it's
also helped the rich a lot more.

Harvard economist Richard Freeman noted, "The triumph of globalization
and market capitalism has improved living standards for billions while concentrating
billions among the few." So, it's kind of a mixed bag. The very poor are doing a little better, but
the very rich are now a lot richer than everybody else. There are other reasons inequality is growing.
Economists point to something called "skill-biased technological change." The jobs created in
modernized economies are more technology-based, generally requiring new skills. Workers that
have the education and skills to do those jobs thrive, while others are left behind.
So, in a way, technology's become a complement for skilled workers but a replacement for
many unskilled workers. The end result is an ever widening gap between not just the
poor and the rich, but also the poor and the working class. As economies develop and as
manufacturing jobs move overseas, low skill low pay and high skill high pay work are the
only jobs left.

People with few skills fall behind in terms of income. In the last thirty
years in the US, the number of college-educated people living in poverty has doubled from
3% to 6%, which is bad! And then consider that during the same period of time, the number
of people living in poverty with a high school degree has risen from 6% to a whopping 22%.
Over the last fifty years, the salary of college graduates has continued to grow while, after
adjusting for inflation, high school graduates' incomes have actually dropped. It's a good
reason to stay in school! There are other reasons the income gap is
widening. The reduced influence of unions, tax policies that favor the wealthy, and the
fact that somehow it's okay for CEOs to make salaries many, many times greater than those
of their employees. Also, race and gender and other forms of inequality can exacerbate
income equality. Jacob: Let's dive into the data for the United
States. We'll start by mentioning Max Lorenz, who created a graph to show income inequality.
Along the bottom we have the percent of households from 0-100% and along the side we have the
percent share of income.

By the way, we're using households rather than just looking
at individuals because many households have two income earners. So this straight line
right here represents perfect income equality. So every household earns the same income.
And while perfect income equality might look nice on the surface, it's not really the goal.
When different jobs have different incomes, people have incentive to become a doctor or
an entrepreneur or a YouTube star – you know, the jobs society really values. So this graph, called
the Lorenz curve, helps visualize the depth of inequality. Now, for 2010, the US Census Bureau found
that the poorest 20% of Americans made 3.3% of the income.

And the richest 20% made over
50% of the income. So that's pretty unequal but has it always been like this? Well, in
1970, the bottom group earned 4.1% of the income and the top earned 43.3%. By 1990,
things were even less equal so the 2010 numbers are just a continuation of the trend. And
it isn't just the poorest group that's losing ground. Over those 40 years, each of the bottom
groups or 80% households earned smaller and smaller shares of the total income. Now, from the Lorenz curve we can calculate
the most commonly used measure of income equality – the GINI Index. Now without jumping into
too much of the math, it's basically the size of the gap between the equal distribution
of income and the actual distribution. Now, 0 represents complete equality and 100 represents
complete inequality. Now, you might be surprised to learn the US doesn't have the highest income
inequality, but it does have the highest among Western industrialized nations. The UK has
the highest in the EU. Adriene: The debate over income equality isn't
about whether it exists. It obviously does. The fight is over whether it's a problem and
what should be done about it.

Let's start with those who don't think it's a big deal.
They tell you that the data suggests that the rich are getting richer and the poor are
getting poorer, but that might not be the case. Instead, it could be that all the groups
are making more money but the rich's share is just growing faster. Like, let's say you
own an apple tree and we pick 10 apples. You keep 6 and give me 4. A week later we pick
20 apples, you take 15 and give me 5. So my share of the total went down from 40% to 25%
but each of us still got more apples. So it's true that people in the lowest income bracket have
earned a little more money in the last 40 years, but in the last 20 years, that average income has been falling.
Meanwhile, the rich have continually gotten richer. So, what's the richest guy on earth have to
say about it? Bill Gates said, "Yes, some level of inequality is built in to capitalism.
It's inherent to the system.

The question is, what level of inequality is acceptable?
And when does inequality start doing more harm than good?" There's a growing group of
economists who believe income inequality in the US today is doing more harm. They argue
that greater income inequality is associated with a lot of problems. They point to studies
that show countries with more inequality have more violence, drug abuse and incarcerations.
Income inequality also dilutes political equality, since the rich have a disproportionate say
in what policies move forward, and the rich have an incentive to promote policies that
benefit the rich. So, how do we address this inequality? There's
not a lot of agreement on this. Some argue that education is the key to reducing the
gap. Basically, workers with more and better education tend to have the skills that earn
higher income. Some economists push for an increased minimum wage, which we're going
to talk about in another episode. There's even an argument that access to affordable,
high quality childcare would go a long way. And some think governments should do more
to provide a social safety net, focus on getting more people to work and adjust the tax code
to redistribute income.

Jacob: Some economists call for the government
to increase income taxes and capital gains taxes on the rich. Income taxes in the US
are already somewhat progressive, which means that there are tax brackets that require the
rich to pay a higher percent of income. Right now, it peaks at around 40% but some economists
call for increases up to 50 or 60%. One idea is to fix loopholes that the rich use to avoid
paying taxes. Other economists argue that taxing the rich won't be as effective as reducing regulation
and bureaucratic red tape. It's unclear which path we're going to take but extreme income inequality
at the national and global level needs to be addressed.

Motivation to improve income inequality may come
from a genuine desire to help people and level the playing field, or the fear of Hunger Games-style social
upheaval. But either way, the issue can't be ignored. Adriene: Even Adam Smith, the most classical
of classical economists, said, "No society can surely be flourishing and happy of which
the far greater part of the members are poor and miserable." Thanks for watching, we'll
see you next week. Jacob: Thanks for watching Crash Course Economics.
It was made with the help of all of these nice people.

You can help keep Crash Course
free for everyone forever by supporting the show at Patreon. Patreon is a voluntary subscription
service where you can support the show with monthly contributions. We'd like to thank
our High Chancellor of Learning, Dr. Brett Henderson and our Headmaster of Learning,
Linnea Boyev, and Crash Course Vice Principal Cathy and Kim Philip. Thanks for watching,
DFTBA..

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Retirement: I’m 60 Years Old with $900K in Savings. Can I Retire Now? What is My Risk Capacity?

so you're 60 years old with nine hundred thousand dollars saved and the question is can you retire in today's video we're going to look at a few different decisions that could be made the impact those decisions have on the plan with the overall goal of not running out of money hi I'm Troy sharp CEO of Oak Harvest Financial Group a certified financial planner professional host of the retirement income show and a certified tax specialist in today's case study we're going to look at a situation that's not too dissimilar from what we normally encounter in our day-to-day operations here at Oak Harvest Financial Group so we have James who's 60 years old he comes in and he says Troy I want to spend about seventy thousand dollars and I'm just tired of working I want to to this year to be my last year so I want to spend seventy thousand dollars I think I'm going to live to about 90 years old pretty good health and I want this fifty thousand dollars to increase with inflation over the course of my retirement but for the first 10 years and what I hear you talk about in this go go spending phase I want to spend an additional 20 000 per year bringing that first 10 years of spending up to 70 000 per year then that go go spending goes away and then we have the inflation adjusted 50 000 to plan for from age 70 to age 90.

Hey just a brief Interruption here to ask you to subscribe to the channel now what that does for you is that puts us Oak Harvest Financial Group and all the content we produce in your little TV Guide so you have a much easier way to come back and find it later share this video with a friend or family member and also comment down below I love to respond to the comments now if you have any questions about your particular situation or you'd like to consider becoming a client of Oak Harvest feel free to reach out to us there's a link in the description below but you can always reach out to us and give us a call and have a conversation to see if we might be a good fit for each other James tells us that since he wants to retire as soon as possible he he thinks it makes sense to take Social Security the first time available so claiming at 62 a little more than two thousand dollars a month at twenty five thousand dollars per year he also has that nine hundred thousand dollars broken out to four 401K money of 700 Grand then 200 000 in a taxable account or what we call non-qualified outside of the retirement account very important to point out here that the tax characteristic of these two accounts and the Investments inside them and the interest and dividends and the withdrawals from them are taxed differently so that's part of an overall tax plan now James also has a home that's completely paid for and worth six hundred thousand dollars but he's told me that I don't want to use this to fund any of my retirement goals I've lived in this home for a long time I want to stay in the home but we know from a planning perspective that we do have that in our back pocket if it's needed down the road so James's total net worth here is about 1.5 million looking at the paid off home of six hundred thousand the 700 Grand inside the 401K and the 200 000 of non-qualified or taxable account assets now as part of the process to understand where someone is and where they're trying to get to we have to understand how is the portfolio currently allocated so James tells us that Troy I know I've wanted to retire so I've been investing aggressively and trying to get ahead of the game but here we are in 2022 and the markets have pulled back some so that double-edged sword is starting to kind of rear its rear its head but we see James's 93 stock so one of the questions that we have from an internal planning perspective is if we keep this same level of risk while we retire and start taking income out of the portfolio what does that do for what we call the risk capacity or the portfolio's ability to take on risk while Distributing income in the retirement phase so we have to look at the guard rails and guard rails are essentially a statistical calculation of probabilities of the portfolio returning this much on the high side and a good year and this much on the downside in a bad year if these guard rails are too far apart and we're taking in income out if we run into a bad couple of years that bump up against that bottom guardrail but we significantly increase the risk of running out of money so part of the analysis of the planning is is this an appropriate guard rail for this type of portfolio given the desired income level so with everything we've looked at so far the question is if James continues doing what he's currently doing and retires with the desired spending level the assets that he's accumulated living until age 90 what is the probability that he has success well it comes in at about 61 so that's probably not a good retirement number it's something we want to see if we can work to improve so I'm going to pull up the what if analysis here and start to look at some of these different decisions that we could make and see if we can get this probability to increase okay so now we have the what if analysis where we have two different columns up here on the board right now they're identical we're going to keep this one the same as the base case everything that we just went through but now we're going to start to change some of these variables to see what the impact those decisions have on the overall retirement plan and this is much more of an art at this stage than it is a science because we want to start to explore different scenarios and then see what is most comfortable for you once you understand the impact of these different decisions you can take some time to kind of way think about them weigh the the pros and cons and now we're starting to work together to craft you a retirement plan that gives us increased probabilities of success but also something that you feel very very comfortable with so the first couple of options we have which are the most simple and usually have the biggest impact on the plan is that we can either work longer or spend less so James says no I don't want to spend less I have a specific plan I want to get my RV I want to travel the country I want to play some golf I've done my budget I need to spend that 70 000 for the first 10 years so the first thing we'll look at is the impact of working another couple of years so I've changed the age here to 63 as far as Retirement the only variable we're going to change at this time I don't want to change too many variables at once I want to see the impact of different decisions how they impact the overall plan okay so that gives us a bit of an increase but the next thing I want to look at here is social security so Social Security is a very valuable source of guaranteed lifetime income first it's an increasing stream of income it increases with inflation but two no matter what happens with the stock market that income is always going to be coming in so instead of taking the 62 and having a significant reduction in the lifetime income that we receive because I don't want to change spending we still have the 50 and 20 in here I want to change the Social Security from taking it a 62 to taking it at full retirement age okay so changing the Social Security election day gets us up to 76 we're definitely moving in the right direction here after a conversation with James and he realizing that you know what I do feel really secure with that increased social security income because if the market doesn't cooperate I know I'm still going to have that much higher income later in life so that would lead us down the road to say okay let's look at adding more guaranteed lifetime income if we can get your Baseline income to cover a majority of your spending needs then we don't need the market to perform necessarily as well later in life so now we want to look at the impact of adding more guaranteed income to the plan which has the effect of providing more security later in life because if the markets don't cooperate we know we have a certain level of income being deposited every single month no matter how long we live so if you go to our website here it's Oak harvestfinancialgroup.com com we have up top an income writer quote where this is constantly searching for the highest amounts of guaranteed lifetime income that are available in the marketplace simply input the variables here so in Texas age 60 Ira money income starts we're going to start looking at seven years here and I know the dollar amount I would want to put in 300 000.

The good news here is you can input any of these different variables we don't ask for your information so it's a calculator tool that you can play with on your own Single Life payout and we get quote okay so here's the output screen we have all of these different companies over here when you see the same company twice it's because that company offers multiple different products with the same income Rider so an income writer is just an addendum or an attachment to a contract that guarantees no matter what the stock market does a certain amount of Lifetime income based on the specifications you input so about thirty three thousand dollars here so that's about 11 percent of the initial deposit with that income starting in year seven this is why we call it a deferred income annuity because it gets a guaranteed growth to calculate a guaranteed lifetime income that you then would incorporate into your plan so in this what-if analysis we come down here we I've already inputted so three hundred thousand dollars and then we just calculate these scenarios okay now we're up to 87 percent here so now things are starting to look a little bit better let's make a couple of different adjustments here because remember when I talked about the guard rails that's too aggressive of a portfolio given the income need especially in the beginning years but now that we've added some deferred income into the plan the portfolio's capacity for risk increases later in life and all that means is because there's so much income coming in the portfolio can withstand a bit more volatility later once Social Security and the Deferred income annuity kick on because you're needing to take less from the portfolio so let's make a couple more adjustments here so after retirement we don't want to keep the the current investment strategy let's get a little bit more conservative here go from an aggressive plan to something a little bit more conservative and then you know what let's also say now that we're starting to move in the right direction instead of retiring at 63 what happens if we retire at 62.

Get your retired one year earlier than some of these other numbers okay now we're at 83 percent retiring at 62. I want to look at one more variable here because you may want to get a part-time job James may want to be a starter at a golf course maybe he wants to work in the church and he can get ten thousand or fifteen thousand dollars a year maybe just wants to work two three months out of the year so the next thing I want to look at is if we've done all this now what happens if during this first 10 years of retirement he decides he wants to work three months out of the year or maybe just a part-time job and work one or two days a week so instead of needing twenty thousand dollars per year we just need another ten thousand let's say from the portfolio so really that's only earning ten thousand dollars extra in retirement income you could do that driving Uber many different choices there you know what I'm just going to decrease this no I'll leave it there now with James deciding to maybe work part-time here to reduce that spending need in the first 10 years let's see if we can also get them retired at 61.

Okay so now James has decided that working part-time and hey we're talking 10 grand here so this isn't a lot of money now I want to see what happens if we go back to the original goal that James had of retiring as soon as possible at age 61. so we're going to change this back to his original goal 61 calculate all scenarios and now this gets us up to 94 so we started at 61 if where James was originally at whenever he came in if he kept doing whatever he was already doing we got him up to 94 percent here okay I want to take a minute before we finish the final Concept in this video to discuss some of the adjustments we've made so far to get James from 61 to 94 so first and foremost we adjusted the Social Security election strategy secondly we added that deferred income annuity thirdly James has decided to work part-time to generate ten thousand dollars per year in those beginning years to help reduce the burden of taking out an additional twenty thousand dollars of retirement income and then finally we've brought the guardrails in on the Investment Portfolio which helps to eliminate very bad outcomes that could happen with his original 93 allocation to stocks we haven't totally went to bonds or cash we've just brought those guard rails in by reducing our Equity exposure in the beginning years of retirement we can always adjust that later now last thing I want to do is look at what we call the combined details all of these things together in a spreadsheet just so we can see how these different pieces are working together and then look at what we call different Monte Carlo analyzes so now I want to share with you some of the individual trial analysis that we run just like we would for a normal client to help identify not only where the weak spots are in the portfolio but how these different decisions that we're making impact the overall client balance and it's not just looking at what we call an average rate of return it's looking at a thousand different simulations we're going to look at a couple here and the Order of the return so check out the video if you want to understand more about this concept you can click the link up above and the title of the video is how eleven percent average returns could destroy your retirement and that'll really get home that concept of it's not about what you average but it's about the order in which you realize returns over the course of your retirement during the day distribution phase so here we have this individual trial and we're gonna it's the median scenario out of a thousand different scenarios so I just want to go through this fairly quickly with you and based on some of the adjustments to the portfolio we see the investment return column here so all of this I think averaged out to I think it was about four and a half percent gross returns I can go back and double check that in a second but you see it's it's never four four four four four four four four or six six six six this is what it looks like in the real world so James retires essentially the beginning of 2023 we have the Deferred income annuity clicking on here we've changed Social Security to click on here so if we add these two together come heck or high water there will be minimally 74 000 almost 75 000 deposited into his bank account every single year now if we look at the retirement need it's about sixty one thousand dollars plus the discretionary Go-Go spending is about twelve thousand two ninety nine so about seventy three thousand dollars but what this does is because we're getting so much from these two sources it really reduces the need for the portfolio to perform and if we kind of go out go on out through retirement you see Social Security isn't increasing income so later in life now we're up to about 89 almost 90 000 of income and our ninety thousand dollars inflation adjusted retirement income need is covered by the amount of guaranteed lifetime income that we have in the portfolio which then allows our portfolio balances to stabilize because we're not needing it to support our lifestyle later in life so this is just one example here but we see the ending portfolio value even though it spends down a little bit in the beginning years okay it starts to stabilize because the income provided from the decisions that we've made put us in a situation where we don't have to withdraw so much from the portfolio Okay so now I want to look at a different trial and just to confirm here the 500th scenario was an average of 4.6 but you saw the different order of those returns and how we actually got to 4.6 okay so if we slide this up here let's assume it's a pretty bad scenario this is going to let me change it here find a worse return okay so this brings the average down to 3.05 and we still see in bar graph form here that the portfolio value still is stabilized and it's primarily because that change in the Social Security decision and adding the Deferred income annuity it still puts us into that position to where if the market doesn't perform we have enough income from guaranteed sources that we're not dependent on the stock market to provide us income in retirement especially later in life when we typically are more conservative and most people that I've worked with don't have the same stomach at 80 or 82 to stay invested in Big Market pullbacks as they did when they were 52 or 62.

Now what I want to show you is the comparison to what we just looked at in the individual trial analysis to the original plan that came in at 61 percent with all the original inputs so if James just wanted to retire not go see anyone make any adjustments I want to show you what that looks like on the individual trial analysis so remember in this scenario we kept Social Security at 62 no job so the spending stayed at seventy thousand twenty thousand was that go go spending no change to the portfolio so we still have the aggressive portfolio which brings in the possibility of some pretty bad outcomes and no deferred income annuity here to help stabilize the income generation later in life as well as the volatility impact on the portfolio so when we when we look at this so here we go um had James has a 900 000.

You see we have none of the annuity income here Social Security starts out at about 26 000 for him a little more than two thousand a month now look at the investment returns here because it's a more aggressive portfolio the range the guard rails are increased here and then finally the spending we have the fifty thousand plus twenty thousand increasing for inflation with the Go-Go lasting 10 years so in the first 10 years of retirement we see things are going pretty well even at this spending level because we have some pretty good returns in here even though we have a couple bad years but what happens is the income because of inflation the income need increases later in life and we see it really just takes a couple of bad years here minus 21 minus 12 we go from a million to 755 and then it's pretty much all downhill from there in this particular scenario running out of income except for Social Security which is now only up to about forty four thousand dollars per year compared to the other plan with the Deferred Social Security so full retirement age and the Deferred income annuity we were at I wanted to say it was around 85 88 000 um of income not dependent on the stock market here we're only at 45 in the mid 80s so that means we have to take more out of the portfolio so it's more susceptible to bad returns later in retirement now the big takeaway here is this is what a good retirement planner does it's not necessarily about the investment returns it's about determining how much money you should have in the market when you should take Social Security we didn't even get into taxes here additional benefits could be provided through tax planning but what you should do with taxes and identifying those spending goals and those needs in order to get you retired and stay retired and then staying connected to this plan over time that's what a good retirement advisor does it's not about outperforming the market it's about finding a plan that gets you and keeps you retired just a brief reminder here to subscribe to the channel now what that does is that puts us in your TV Guide here on YouTube so it doesn't cost anything but if you subscribe to the channel you can come back to us much more easily down the road make sure to comment down below and also share this video with a friend or family member that you think could benefit from what we're talking about today [Music] foreign

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Retirement: I’m 60 Years Old with $900K in Savings. Can I Retire Now? What is My Risk Capacity?

so you're 60 years old with nine hundred thousand dollars saved and the question is can you retire in today's video we're going to look at a few different decisions that could be made the impact those decisions have on the plan with the overall goal of not running out of money hi I'm Troy sharp CEO of Oak Harvest Financial Group a certified financial planner professional host of the retirement income show and a certified tax specialist in today's case study we're going to look at a situation that's not too dissimilar from what we normally encounter in our day-to-day operations here at Oak Harvest Financial Group so we have James who's 60 years old he comes in and he says Troy I want to spend about seventy thousand dollars and I'm just tired of working I want to to this year to be my last year so I want to spend seventy thousand dollars I think I'm going to live to about 90 years old pretty good health and I want this fifty thousand dollars to increase with inflation over the course of my retirement but for the first 10 years and what I hear you talk about in this go go spending phase I want to spend an additional 20 000 per year bringing that first 10 years of spending up to 70 000 per year then that go go spending goes away and then we have the inflation adjusted 50 000 to plan for from age 70 to age 90.

Hey just a brief Interruption here to ask you to subscribe to the channel now what that does for you is that puts us Oak Harvest Financial Group and all the content we produce in your little TV Guide so you have a much easier way to come back and find it later share this video with a friend or family member and also comment down below I love to respond to the comments now if you have any questions about your particular situation or you'd like to consider becoming a client of Oak Harvest feel free to reach out to us there's a link in the description below but you can always reach out to us and give us a call and have a conversation to see if we might be a good fit for each other James tells us that since he wants to retire as soon as possible he he thinks it makes sense to take Social Security the first time available so claiming at 62 a little more than two thousand dollars a month at twenty five thousand dollars per year he also has that nine hundred thousand dollars broken out to four 401K money of 700 Grand then 200 000 in a taxable account or what we call non-qualified outside of the retirement account very important to point out here that the tax characteristic of these two accounts and the Investments inside them and the interest and dividends and the withdrawals from them are taxed differently so that's part of an overall tax plan now James also has a home that's completely paid for and worth six hundred thousand dollars but he's told me that I don't want to use this to fund any of my retirement goals I've lived in this home for a long time I want to stay in the home but we know from a planning perspective that we do have that in our back pocket if it's needed down the road so James's total net worth here is about 1.5 million looking at the paid off home of six hundred thousand the 700 Grand inside the 401K and the 200 000 of non-qualified or taxable account assets now as part of the process to understand where someone is and where they're trying to get to we have to understand how is the portfolio currently allocated so James tells us that Troy I know I've wanted to retire so I've been investing aggressively and trying to get ahead of the game but here we are in 2022 and the markets have pulled back some so that double-edged sword is starting to kind of rear its rear its head but we see James's 93 stock so one of the questions that we have from an internal planning perspective is if we keep this same level of risk while we retire and start taking income out of the portfolio what does that do for what we call the risk capacity or the portfolio's ability to take on risk while Distributing income in the retirement phase so we have to look at the guard rails and guard rails are essentially a statistical calculation of probabilities of the portfolio returning this much on the high side and a good year and this much on the downside in a bad year if these guard rails are too far apart and we're taking in income out if we run into a bad couple of years that bump up against that bottom guardrail but we significantly increase the risk of running out of money so part of the analysis of the planning is is this an appropriate guard rail for this type of portfolio given the desired income level so with everything we've looked at so far the question is if James continues doing what he's currently doing and retires with the desired spending level the assets that he's accumulated living until age 90 what is the probability that he has success well it comes in at about 61 so that's probably not a good retirement number it's something we want to see if we can work to improve so I'm going to pull up the what if analysis here and start to look at some of these different decisions that we could make and see if we can get this probability to increase okay so now we have the what if analysis where we have two different columns up here on the board right now they're identical we're going to keep this one the same as the base case everything that we just went through but now we're going to start to change some of these variables to see what the impact those decisions have on the overall retirement plan and this is much more of an art at this stage than it is a science because we want to start to explore different scenarios and then see what is most comfortable for you once you understand the impact of these different decisions you can take some time to kind of way think about them weigh the the pros and cons and now we're starting to work together to craft you a retirement plan that gives us increased probabilities of success but also something that you feel very very comfortable with so the first couple of options we have which are the most simple and usually have the biggest impact on the plan is that we can either work longer or spend less so James says no I don't want to spend less I have a specific plan I want to get my RV I want to travel the country I want to play some golf I've done my budget I need to spend that 70 000 for the first 10 years so the first thing we'll look at is the impact of working another couple of years so I've changed the age here to 63 as far as Retirement the only variable we're going to change at this time I don't want to change too many variables at once I want to see the impact of different decisions how they impact the overall plan okay so that gives us a bit of an increase but the next thing I want to look at here is social security so Social Security is a very valuable source of guaranteed lifetime income first it's an increasing stream of income it increases with inflation but two no matter what happens with the stock market that income is always going to be coming in so instead of taking the 62 and having a significant reduction in the lifetime income that we receive because I don't want to change spending we still have the 50 and 20 in here I want to change the Social Security from taking it a 62 to taking it at full retirement age okay so changing the Social Security election day gets us up to 76 we're definitely moving in the right direction here after a conversation with James and he realizing that you know what I do feel really secure with that increased social security income because if the market doesn't cooperate I know I'm still going to have that much higher income later in life so that would lead us down the road to say okay let's look at adding more guaranteed lifetime income if we can get your Baseline income to cover a majority of your spending needs then we don't need the market to perform necessarily as well later in life so now we want to look at the impact of adding more guaranteed income to the plan which has the effect of providing more security later in life because if the markets don't cooperate we know we have a certain level of income being deposited every single month no matter how long we live so if you go to our website here it's Oak harvestfinancialgroup.com com we have up top an income writer quote where this is constantly searching for the highest amounts of guaranteed lifetime income that are available in the marketplace simply input the variables here so in Texas age 60 Ira money income starts we're going to start looking at seven years here and I know the dollar amount I would want to put in 300 000.

The good news here is you can input any of these different variables we don't ask for your information so it's a calculator tool that you can play with on your own Single Life payout and we get quote okay so here's the output screen we have all of these different companies over here when you see the same company twice it's because that company offers multiple different products with the same income Rider so an income writer is just an addendum or an attachment to a contract that guarantees no matter what the stock market does a certain amount of Lifetime income based on the specifications you input so about thirty three thousand dollars here so that's about 11 percent of the initial deposit with that income starting in year seven this is why we call it a deferred income annuity because it gets a guaranteed growth to calculate a guaranteed lifetime income that you then would incorporate into your plan so in this what-if analysis we come down here we I've already inputted so three hundred thousand dollars and then we just calculate these scenarios okay now we're up to 87 percent here so now things are starting to look a little bit better let's make a couple of different adjustments here because remember when I talked about the guard rails that's too aggressive of a portfolio given the income need especially in the beginning years but now that we've added some deferred income into the plan the portfolio's capacity for risk increases later in life and all that means is because there's so much income coming in the portfolio can withstand a bit more volatility later once Social Security and the Deferred income annuity kick on because you're needing to take less from the portfolio so let's make a couple more adjustments here so after retirement we don't want to keep the the current investment strategy let's get a little bit more conservative here go from an aggressive plan to something a little bit more conservative and then you know what let's also say now that we're starting to move in the right direction instead of retiring at 63 what happens if we retire at 62.

Get your retired one year earlier than some of these other numbers okay now we're at 83 percent retiring at 62. I want to look at one more variable here because you may want to get a part-time job James may want to be a starter at a golf course maybe he wants to work in the church and he can get ten thousand or fifteen thousand dollars a year maybe just wants to work two three months out of the year so the next thing I want to look at is if we've done all this now what happens if during this first 10 years of retirement he decides he wants to work three months out of the year or maybe just a part-time job and work one or two days a week so instead of needing twenty thousand dollars per year we just need another ten thousand let's say from the portfolio so really that's only earning ten thousand dollars extra in retirement income you could do that driving Uber many different choices there you know what I'm just going to decrease this no I'll leave it there now with James deciding to maybe work part-time here to reduce that spending need in the first 10 years let's see if we can also get them retired at 61.

Okay so now James has decided that working part-time and hey we're talking 10 grand here so this isn't a lot of money now I want to see what happens if we go back to the original goal that James had of retiring as soon as possible at age 61. so we're going to change this back to his original goal 61 calculate all scenarios and now this gets us up to 94 so we started at 61 if where James was originally at whenever he came in if he kept doing whatever he was already doing we got him up to 94 percent here okay I want to take a minute before we finish the final Concept in this video to discuss some of the adjustments we've made so far to get James from 61 to 94 so first and foremost we adjusted the Social Security election strategy secondly we added that deferred income annuity thirdly James has decided to work part-time to generate ten thousand dollars per year in those beginning years to help reduce the burden of taking out an additional twenty thousand dollars of retirement income and then finally we've brought the guardrails in on the Investment Portfolio which helps to eliminate very bad outcomes that could happen with his original 93 allocation to stocks we haven't totally went to bonds or cash we've just brought those guard rails in by reducing our Equity exposure in the beginning years of retirement we can always adjust that later now last thing I want to do is look at what we call the combined details all of these things together in a spreadsheet just so we can see how these different pieces are working together and then look at what we call different Monte Carlo analyzes so now I want to share with you some of the individual trial analysis that we run just like we would for a normal client to help identify not only where the weak spots are in the portfolio but how these different decisions that we're making impact the overall client balance and it's not just looking at what we call an average rate of return it's looking at a thousand different simulations we're going to look at a couple here and the Order of the return so check out the video if you want to understand more about this concept you can click the link up above and the title of the video is how eleven percent average returns could destroy your retirement and that'll really get home that concept of it's not about what you average but it's about the order in which you realize returns over the course of your retirement during the day distribution phase so here we have this individual trial and we're gonna it's the median scenario out of a thousand different scenarios so I just want to go through this fairly quickly with you and based on some of the adjustments to the portfolio we see the investment return column here so all of this I think averaged out to I think it was about four and a half percent gross returns I can go back and double check that in a second but you see it's it's never four four four four four four four four or six six six six this is what it looks like in the real world so James retires essentially the beginning of 2023 we have the Deferred income annuity clicking on here we've changed Social Security to click on here so if we add these two together come heck or high water there will be minimally 74 000 almost 75 000 deposited into his bank account every single year now if we look at the retirement need it's about sixty one thousand dollars plus the discretionary Go-Go spending is about twelve thousand two ninety nine so about seventy three thousand dollars but what this does is because we're getting so much from these two sources it really reduces the need for the portfolio to perform and if we kind of go out go on out through retirement you see Social Security isn't increasing income so later in life now we're up to about 89 almost 90 000 of income and our ninety thousand dollars inflation adjusted retirement income need is covered by the amount of guaranteed lifetime income that we have in the portfolio which then allows our portfolio balances to stabilize because we're not needing it to support our lifestyle later in life so this is just one example here but we see the ending portfolio value even though it spends down a little bit in the beginning years okay it starts to stabilize because the income provided from the decisions that we've made put us in a situation where we don't have to withdraw so much from the portfolio Okay so now I want to look at a different trial and just to confirm here the 500th scenario was an average of 4.6 but you saw the different order of those returns and how we actually got to 4.6 okay so if we slide this up here let's assume it's a pretty bad scenario this is going to let me change it here find a worse return okay so this brings the average down to 3.05 and we still see in bar graph form here that the portfolio value still is stabilized and it's primarily because that change in the Social Security decision and adding the Deferred income annuity it still puts us into that position to where if the market doesn't perform we have enough income from guaranteed sources that we're not dependent on the stock market to provide us income in retirement especially later in life when we typically are more conservative and most people that I've worked with don't have the same stomach at 80 or 82 to stay invested in Big Market pullbacks as they did when they were 52 or 62.

Now what I want to show you is the comparison to what we just looked at in the individual trial analysis to the original plan that came in at 61 percent with all the original inputs so if James just wanted to retire not go see anyone make any adjustments I want to show you what that looks like on the individual trial analysis so remember in this scenario we kept Social Security at 62 no job so the spending stayed at seventy thousand twenty thousand was that go go spending no change to the portfolio so we still have the aggressive portfolio which brings in the possibility of some pretty bad outcomes and no deferred income annuity here to help stabilize the income generation later in life as well as the volatility impact on the portfolio so when we when we look at this so here we go um had James has a 900 000.

You see we have none of the annuity income here Social Security starts out at about 26 000 for him a little more than two thousand a month now look at the investment returns here because it's a more aggressive portfolio the range the guard rails are increased here and then finally the spending we have the fifty thousand plus twenty thousand increasing for inflation with the Go-Go lasting 10 years so in the first 10 years of retirement we see things are going pretty well even at this spending level because we have some pretty good returns in here even though we have a couple bad years but what happens is the income because of inflation the income need increases later in life and we see it really just takes a couple of bad years here minus 21 minus 12 we go from a million to 755 and then it's pretty much all downhill from there in this particular scenario running out of income except for Social Security which is now only up to about forty four thousand dollars per year compared to the other plan with the Deferred Social Security so full retirement age and the Deferred income annuity we were at I wanted to say it was around 85 88 000 um of income not dependent on the stock market here we're only at 45 in the mid 80s so that means we have to take more out of the portfolio so it's more susceptible to bad returns later in retirement now the big takeaway here is this is what a good retirement planner does it's not necessarily about the investment returns it's about determining how much money you should have in the market when you should take Social Security we didn't even get into taxes here additional benefits could be provided through tax planning but what you should do with taxes and identifying those spending goals and those needs in order to get you retired and stay retired and then staying connected to this plan over time that's what a good retirement advisor does it's not about outperforming the market it's about finding a plan that gets you and keeps you retired just a brief reminder here to subscribe to the channel now what that does is that puts us in your TV Guide here on YouTube so it doesn't cost anything but if you subscribe to the channel you can come back to us much more easily down the road make sure to comment down below and also share this video with a friend or family member that you think could benefit from what we're talking about today [Music] foreign

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Growing Wealth Inequality In The World And America

Growing Wide Range Inequality worldwide and also
America Let’s beginning with some terrifying stats. Right here, wealth describes a cumulative total amount
of a family’s financial as well as genuine assets however doesn’t include financial debt. Statistics from the 2018 Global Wide Range Record
by Debt Suisse show that 1% of the globe’s richest very own 45% of the World’s wealth. Individuals in the 1% have estimated assets
of greater than $1 million. Grownups whose wealth is cumulative to less
than $10,000 hold just 2% of the globe’s wealth.These individuals

comprise 64% of the earth’s. populace.
Yes, an entire 64%. Individuals worth $30 million as well as above are.
described as the ultra-high internet well worth people, that makes feeling since $30 million is a.
great deal of cash. These people, incorporated, have a portion of.
the globe’s wealth, at 11.3%. In regards to population, however, they are.
sorely lacking in numbers, at only 0.003%. Jeff Bezos, Costs Gates, Warren Buffet, Amancio.
Ortega, Mark Zuckerberg, Bernard Arnault, Carlos Slim, Larry Ellison, and Larry Page.
are the nine richest guys on the planet. Their combined wide range, according to Forbes.
in January 2018 was 687.6 billion. This figure is equal to the overall wide range.
of; get this, 4 billion of the poorest people in the globe. This is to suggest, in regards to riches, if you.
place these 9 gents on one side of the scale (or see-saw if you prefer), you would certainly need.
an excellent 4 billion of the globe’s poorest beyond in order to stabilize it out.These figures represent the shocking wealth. inequality in between the abundant as well as the poor on the planet at huge, yet what is even more stressing.
is that these numbers keep expanding each year. Your House of Commons in the UK estimated that.
by 2030, 1% of the richest people in the world will certainly have two-thirds of the globe’s.
wide range. Is there a way to rein this in? These figures are in fact concerning, as well as.
eventually, they would certainly cause a poorer world. What are the factors for this inequality? What are the steps that can be taken to fix.
this problem? Closer Home.
America makes quite a substantial portion of the globes’ richest, as well as it is, therefore,.
not a surprise that the riches inequality here would be equally as disconcerting. In 1982, the richest man on the Forbes 400.
Wealthiest in America was worth a modest $2 billion. In 2018, to make it to the Forbes 400, you.
had to be worth at the very least $2.1 billion. The wealthiest male in America, who is the richest.
Now, allow us relocate to homes. In the very first quarter of 2017, the complete net.
worth of US houses together with charitable organizations was $94.7 trillion. The presumption would be that when separated.
among the complete number of houses, each would certainly get an equivalent share which equates.
to about $760,000. However, 50% of the total number of families.
throughout this quarter was worth just $11,000. 1% of this country’s richest.
hold 40% of the total riches. On the various other hand, 7% of the country’s wide range.
is held by almost 80% of the population. You can plainly recognize the fad in these.
figures. The rich are incredibly abundant as well as the bad extremely.
As well: and it is a vicious circle that maintains spinning.This widening gap might not have been as disturbing. if we had more people on the rich side. Instead, you will certainly determine that many individuals. hold much less than 10% of the globe ' s wealth.
The major factor behind riches inequality is income inequality. Earnings inequality comes as a result of the. This cost is typically determined with
a. comparison of the demand for the skill ability and and also number of people who are willing to.
for the work, its market price would certainly go down because one means or the other, the task placement.
is going to be filled. We live each time when most jobs have a low. market value, but some exclusive
ones have really couple of certified persons. The market cost difference of. both is the very first means with which riches inequality starts. Education is another primary factor for the expanding. wide range inequality in the world today, America most especially.The degree of education one obtains is normally. symmetrical to the ability
she or he is most likely to obtain. As stated over, the much more marketable the. skill, the greater the marketplace cost for it.
At the exact same time, even though education might. be totally free for all, the quality of education is
in some cases influenced by the environment and also. area the school lies in.
Schools discovered in areas with a better. socio-economic course tend to generate pupils with a much better chance of obtaining an extremely valuable. skill.Such colleges are additionally more than likely to promote.
intelligence, personal drive, and also self-control, all features required to make riches.
The resultant revenue inequality leads to a. significant gap in riches. The reverse holds true for poorer communities. As has actually been seen in recent times, the development. of modern technology has actually considerably motivated a boost in the wide range void in between the rich and the. bad. A great deal of people have actually been forced to.
leave the work market as their job is taken over by machines and other types of technology.
A phone driver benefiting a Telco business.
40 years, domestic workers will lose their job to artificial intelligence.Similarly, the growth in modern technology has actually produced. The wealthiest man in the world, Jeff Bezos made. Following him carefully is Costs Gates, yet one more.
These rich characters are increasingly. rich, as they use a solution most can not
find anywhere else. The richer they get, and as hands-on workers. lose their jobs to innovation, the broader the space in between the very abundant and also the very. poor obtains. One more variable that boosts this gap in between.
the rich and also bad is the tax obligation systems in place.The tax obligation code in the majority of nations worldwide.
In the UK, over 10 million words are used. Do you believe these words are to assist the bad. It’s certainly debatable.
The wide range gap between the inadequate and the abundant. is substantial. It is triggered by fairly a number
of elements,. some beyond our control, some not so much. The very best means to manage this inequality.
This means ensuring an equivalent as well as quality requirement.
As well as I will certainly see you all, in the next one. 5 Routines Keeping You Poor. Every month you seem to always have just enough … or have you ever been in an awkward scenario in which your credit scores card obtained declined.

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