Three Things 7-19
07/19/2021 Although MAS is a financial services company, not everything published herein will be about numbers or investing. But no matter the topic, we hope for three things: 1) That you find the time you spend engaged worthwhile. 2) That you’ll reach out to us for help in any of our areas of expertise if something we discuss creates an urging in you to do so. 3) That you’ll share this with somebody new each time you read it. Thing One Anybody Can Build Wealth But Only Half Of Us Are Even Trying Using the latest data available via the Federal Reserve, Forbes magazine recently reported some information on investing by household. They determined that only 14% of all American households are directly invested in equities via individual stocks while that number rises to 52% when 401k and IRA plans that are invested in various mutual funds are included in the total. Elsewhere, CBS News reported on a Bankrate survey that found that 28% of Americans who earned less than $30,000 per year play the lottery at least once per week, spending roughly $413 per year. In addition, that same cohort spent a significant amount of money on restaurants and prepared drinks like coffee and smoothies. When combined with the lottery tickets, spending was around $2,100, or about 13% of their annual income as a group. Foregoing the lottery and Starbucks and instead contributing a like amount to a retirement plan - whether it was invested in appropriate mutual funds or individual stocks - would go a long way towards helping someone who wasn’t wealthy to accumulate more than they probably ever dreamed possible. Roughly speaking, if someone with the income level described above had started investing the $2,100 routinely in the S&P 500 index 20 years ago rather than buying lottery tickets and expensive meals and drinks, they’d have around $100,000 today. And that’s before adding in any additional contributions that might have resulted from things like raises or the extra motivation to save that might come from seeing the power of compounding work for them. Three conclusions: Acquiring wealth doesn’t have to be viewed as a game of chance. It’s never too late to get started. It’s never wrong to seek professional guidance.
Thing Two Some Facts About Taxes In terms of income tax brackets, are you a top 1 percenter? A top 10% percenter? A 50 percenter? Something less? Do you know what percentage of total taxes are paid by you and the other taxpayers in your cohort? If you do, the chart below won’t be news to you. If you don’t, you might find it interesting, and perhaps a bit surprising, if you’re at all sensitive to the “wealthy-should-pay-their-fair-share” arguments often put forth by elected officials. As you can see, to qualify as a 1 percenter, your annual income (AGI actually) would need to be $515,000 or over. If you’re in that cohort, you’re part of a group of 1.4 million taxpayers that pays 10% of all income taxes collected. If you’re a 10 percenter, you make at least $145,000/year and you’re part of a group of 14.3 million taxpayers that pays 70.1% of all income taxes. If you’re a top 50 percenter, you make at least $42,000/year and you’re part of a group of 71.6 million taxpayers that pays 97% of all taxes. That leaves only 3% of all taxes paid to be paid by the bottom 50% of earners – that is anyone earning less than $42,000/year. In 2020, total personal income tax receipts were roughly $1.8 trillion, and here’s the breakdown by cohort: The top 1% (1.4 million people) paid $180 billion. The top 10% (14.3 million people) paid $1.26 trillion. The top 50% (71.6 million people) paid $1.74 trillion The bottom 50% (71.6 million people) paid $49 billion. Those are the facts. Draw your own conclusions about fairness and about the motivations of the politicians who advocate on that basis.
Thing Three Just A Thought “I’m not what happened to me, I’m what I choose to become.” – Carl Jung