This word inequality is getting annoying. To me it implies there is some normal state of equality. When was that ever the case? Is that what we really seek; no reward for success, but rather high taxation on a few to play Robin Hood? Clearly in some minds that is exactly what is wanted, but it’s just a feel good no real solution.
Most wealthy people earned their wealth and once some wealth was accumulated it grows because of the “snowball” effect as explained below. While admittedly on a smaller scale, the same thing is possible for anyone.
What is wrong with putting your money to work and thereby increasing your wealth? There are no barriers stopping anyone from doing the same.
Look at this example not unreasonable for very average Americans, in fact I’d say it’s quite conservative.
Say for ten years you save $50 per month. The next ten years you save $75 per month and the following ten $100 each month. In the final five years you save $125 per month. Using the average inflation adjusted return of the S&P 500 (say you put the money in an Index Mutual Fund), you will have $120,017 of which $34,174 is earnings. You did exactly what the 1% does.
Given this very modest savings rate starting at about 1.15% of average household income, kick it up a bit and see what happens. Start at 4% of earnings and increase at the same rate as above. At the end of 35 years you have $415,476. If you kept a steady savings rate of 4% of your growing income over the years, you would have even more.
Let’s be more realistic. Instead of saving for 35 years, you start at age 20 and save 45 years to 65. Adding those ten years at your last savings rate gives you $909,739. You’re almost a millionaire‼️Only $349,022 is your money, the rest is interest. Do you feel unfair to your neighbors?
Here is one more example. Say starting at age 20 you invest $100 a month and never increase it for the next 45 years (despite your growing income). When you are age 65 you will have $379,259 but only $54,000 of that is the money you saved. The rest is what you earned. Bazinga, you know the secret of the rich. And remember the interest rate used is already inflation adjusted.
I have been retired for almost five years; my net worth is higher than it was five years ago. How is that possible with no increase, in fact a decrease, in income over those years? Well my life savings in 401k, IRAs and other investments keep growing due to the growth in the stock market and reinvestment of interest and dividends. This year because of age I was forced to take the required minimum distributions, but guess what, growth in the stock market has replenished what I withdrew.
Yes, it can be a bumpy road; there are ups and downs. Sometimes I look at my savings and become quite depressed and at other times I feel elated.
To grow your wealth and your standard of living you cannot count on a growth in wages alone.
Creating a wealth gap between you and others not so prudent is no sin. You are not taking from others, you are not preventing others from doing what you did and by the way, you will pay your fair share in taxes. 😎
Equality
Pronunciation: ɪˈkwαˈləˈti
1. the quality of being the same in quantity or measure or value or status;
2. equivalence, equation, par — a state of being essentially equal or equivalent; equally balanced; “on a par with the best”
According to a recent paper by the economists Emmanuel Saez of the University of California, Berkeley, and Gabriel Zucman of the London School of Economics, almost all of the increase in American inequality over the last 30 years is attributable to the “rise of the share of wealth owned by the 0.1 percent richest families.” And much of that rise is driven by the top 0.01 percent…
Dr. Saez and Dr. Zucman wrote that a “snowballing effect” was creating extravagant wealth at the very top. Outsize incomes — fueled in part by stock — are put into savings and investments, which generate more income, which creates even more wealth.
via Another Widening Gap: The Haves vs. the Have-Mores – NYTimes.com.
QUINNSCOMMENTARY 