The Retirement Rise*
On Income Inequality, Long-term Investing, and How to Achieve Financial Goals
This Week’s Good Financial News (1.8.2023)
Is income inequality improving?
The high inflation of 2022 was challenging for workers and retirees alike. However, under the surface, important dynamics were shifting.
According to the WSJ:
In the decades before the pandemic, the wages of lower-paid, less skilled hourly employees steadily lost ground to those of skilled workers, college graduates, managers and professionals. In the two years since, those trends have sharply reversed.
The article cites several corroborating data.
Hourly worker pay or non-supervisory pay has been climbing faster than managerial pay.
Since the late 90s, wages for college-educated adults have climbed faster than those with only high school diplomas. This has started to reverse since 2021.
Younger high school graduates are among the few groups beating inflation with wage gains.
Importantly, wage inequality is falling not because of declines at the top but because of increases in pay at the bottom of the worker pool. This dynamic, paired with an unemployment rate of only 3.5%, bode well for workers going forward. Hopefully, the strong labor market will result in continued declines in income inequality.
An Investment Note for Retirees
2022 was a rough year for stocks, but don’t lose the forest for the trees. Check out the chart below. See that downward blip in the upper-right corner? That’s 2022. Do you see those other little downward blips? Those are all the other bear markets since the 1960s.
Yet, despite the chaos in any given year, the S&P 500 has increased from 76.45 on January 1st, 1964, to 3824.14 on January 1st, 2023.
In other words, the chart moves from the bottom left corner to the upper right corner. This is the forest.
A Thought on Retire on Purpose
Let’s WOOP Your New Year’s Resolution
A new year means new goals, financial and otherwise. But how many of your goals do you achieve? Is it possible that you, like most of us, are just engaged in wishful thinking?
If not, and you regularly achieve your goals, amazing. Keep going! On the other hand, if you struggle to achieve your new year’s resolutions (like most of humankind), enter WOOP.
WOOP
Have you ever heard of WOOP? I hadn’t until recently when I watched a Brian Johnson video espousing its virtues. I’m now reading the original book, Rethinking Positive Thinking: Inside the New Science of Motivation, by Gabriele Oettingen.
WOOP is an acronym that stands for:
Wish
Outcome
Obstacle
Plan
It’s essentially a research-based framework for helping you achieve your goals. Cool!
In her research, Oettingen observed that wishful thinking, or overly-simplistic positive thinking, wasn’t enough to achieve our goals. Her research concluded that we must contrast our dreams with the obstacles that stand in our way (she calls this mental contrasting).
By contrasting the baseline of where we are with the goal or vision we want to receive and assessing obstacles that may sprout up along the way, we can create a plan that really helps us achieve our goal.
So, is there some big financial goal you want to achieve this year? Maybe you want to save for a downpayment on a vacation home. Or, maybe you want to figure out how close you are to retiring.
Either way, WOOP it. See what happens.