Here’s another stat to add to your knowledge. For roughly half of Americans, the stock market’s record highs don’t help at all, according to a recent Washington Post article. This chart shows that half of US household have no exposure to stocks, either directly or indirectly:
Direct vs. indirect. The academic paper by Dr. Wolff of NYU was a bit confusing with their terminology. From what I read, “direct” stock ownership means owning individual shares of stock. “Indirect” stock ownership includes “mutual funds, trusts, or various pension accounts”. Here, the term “pension accounts” include defined contribution accounts like IRAs, 401(k), and 403(b) plans. However, assets in defined benefit plans, which is the more traditional definition of the term “pensions”, are not included under “pension accounts”. Social Security is also excluded. Got that?
In theory, you don’t need to own stocks to have a comfortable retirement. You could have a mix of other resources like Social Security, private company pension plan, bank deposits, bonds, whole life insurance, commercial property, residential rental property, and so on. However, I’m willing to bet there is a healthy correlation between owning one and owning multiple forms of these productive assets.
Financial freedom means owning enough productive assets to get off the treadmill of work, spend, work, spend. I know there are probably good reasons why many people have trouble finding the money to invest in stocks. I don’t have an easy fix. However, one small tip for those on the margin is to get that spark and start viewing such assets with desire. The same desire as a nicer car or kitchen remodel. I get excited when I buy another chunk of VTI or VXUS. Others get excited when they acquire another rental property. Find a way to start your snowball.