Young vs old wealth gap growing? Not so fast!

There's a new report out today from the Pew Research Center which is sure to get a lot of attention in the days leading up to the congressional supercommittee report deadline of Nov. 23. Here are the first two paragraphs of the story from the AP as posted at the Huffington Post:

"The typical U.S. household headed by a person age 65 or older has a net worth 47 times greater than a household headed by someone under 35, according to an analysis of census data released Monday."

"While people typically accumulate assets as they age, this wealth gap is now more than double what it was in 2005 and nearly five times the 10-to-1 disparity a quarter-century ago, after adjusting for inflation."

Here it is in graphical form from a story at CNN/Money:

According to the CNN/Money story: "Net worth includes the sum of a household's assets (like equity in a home, car and savings and retirement accounts) minus its debts (like mortgage, car and student loans and credit card debt)"

Why the big disparity? CNN says that: "Perhaps the biggest factor leading to the wealth gap between the ages though, is the housing market....Most of today's older homeowners got into the housing market long ago, at 'pre-bubble' prices," the report said. "Along with everyone else, they've been hurt by the housing market collapse of recent years, but over the long haul, most have seen their home equities rise."

Read the full stories to get a better picture of what's happening, but this certainly doesn't help those who are trying to defend Social Security, Medicare and Medicaid from cuts by the supercommittee. On the surface, it looks like the geezers are making out like bandits while the young are getting screwed.

Let's go under the surface a bit. Suppose your net worth is $170,494. Are you rolling in clover? Maybe, until you consider healthcare costs.

Wait a minute! Old folks get free medical care through Medicare! No way. Take a minute and refer to one of my previous posts: Hey Washington, we've already got plenty of skin in the game! You will see that it is reasonable to assume that a retired couple on Medicare--and fully insured with medigap and prescription drug insurance--will have out-of-pocket medical costs approaching $10,000/year.

Actually, according to the Money page at US News, the picture is worse: " In the past, I've written that retired couples will need between $205,932 (Boston College Center for Retirement Research estimate) and $225,000 (Fidelity Investments estimate) to coverhealthcare costs in retirement."

"A new analysis by the nonpartisan EBRI puts the number for a couple currently age 65 at a staggeringly high $635,000, and that doesn't include long-term-care costs. This ultraconservative calculation is higher than the other estimates because it is designed to give the retired couple a 90 percent chance of having enough money to cover all health bills beyond what Medicare covers."

"However, if you are willing to accept a fifty-fifty chance of being able to pay your out-of-pocket expenses, $212,000 would be sufficient for a couple (right smack in the middle of the other two estimates)."

"EBRI also calculated that a 65-year-old single man will need $331,000 and a single woman $390,000 to be almost completely certain of covering all out-of-pocket retiree health costs. If you're willing to accept a fifty-fifty chance, those numbers can be halved, EBRI says."

How's that $170,494 net worth looking now? And isn't it wonderful that we old folks in the USA don't have to put up with one of those French or German health care plans that cover everything--including longterm care--at about half the per capita cost of the American system. We Americans are just so bright and--what's the word?--exceptional.

Oh, I know they're paying higher taxes, but take a look at those numbers I just quoted and tell me who's getting the better deal.