1. Because birth rates are lower, being directly supported by one's children/grandchildren is no longer feasible.
2. No socialized retirement system. As a result, each individual must accumulate a small fortune in order to retire. Most retirement plans rely on living off of the investment income without touching the principal. Therefore, the amount required to retire is also sufficient for a person to live indefinitely. (Back of the envelope calculation, assuming 3% annual return on investment after inflation, $3M in retirement savings yields about $90k/year perpetually.)
3. Currently, the first $11.18M of an estate is entirely exempt from the estate tax, and the even the top marginal rate is only 40%. At no point would it prevent inheritance of a perpetuity by several descendants.
(1) is a long-term demographic change, and I think it's good overall, in terms of the care and attention children can receive. (2) forces the accumulation of wealth, out of fear of societal abandonment in old age. (3) allows those accumulations to persist across generations. I think that the appropriate spots to break this cycle are at (2), by instituting better social safety nets and retirement care, reducing the incentive to indefinitely accumulate, and at (3) by significantly increasing the estate tax.
Plus, not everyone wants to work to 67 (full retirement age for SS for most workers today). Then, not everyone wants to drop their spending down to that of a median income household.
Combine those factors and social retirement systems aren’t going to be the solution to stop people from saving and investing privately to supplement.
I can’t see social retirement ever being funded to the level of a middle-class retirement; I think it’s a useful safety net to ensure people who worked their whole lives but didn’t save privately don’t starve, but dramatically expanding it is mathematically difficult to fund.
Nope, the max is around $4200 (or, will be in a few weeks). And that's per person. A couple could receive as much as $8400/month.
We have a general problem that our economy doesn't support certain use cases of wealth.
EG, the ECB recently "loaned" EU member states quite a lot of euros. They do this every year, with the amount determined by public deficits. The amount is not determined by the amount of savings in ECB savings accounts. They can loan as much as they need, subject to EU law.
Public surpluses (deposits by EU member states into their national ECB savings account) are not common. The public doesn't make up the difference. There's no auction of ECB bonds before budget season to balance savings and loans.
Banks access funds in a similar way, though the EU chain is more complex that the UK or US'. There are often rules that dictate a balance between savings and access to central bank funds. Basically though, banks can loan as much as their regulators allow them to... for the same reason that states can.
We have a general problem in that people do not consume enough to grow our economy. Now, endlessly increasing consumption sounds bad, but it’s basically required for the economy to keep growing in real terms, since it’s the main component of GDP. Most wealthy people, not even billionaires but lots of run-of-the-mill hundred-thousandaires and petit millionaires, save a lot of their money including their ROI, or at the very least spend money less quickly than they make it.
If people spent money more or said “enough” earlier in their wealth accumulation journey, asset prices would be lower and the economy would be bigger. This is good in a lot of ways because capital goods like land really ought to be inexpensive to allow the economy to grow. Same with stocks. Assuming a constant risk-free rate of return (ie treasuries) it’s actually better for equities to have a lower P/E ratio - it’s cheaper to purchase cash flow.
I think this general lack of propensity to spend, or basically hoarding, is caused by our perpetually low interest rates and also general government policy that is leading to inflated asset prices. But there is also a cultural aspect to it though. There are a lot of “middle class millionaires” these days with $10m+ fortunes who basically don’t spend it. It’s their right to do so, but it’s stifling growth for the reasons I’ve outlined