Make America Wealthy

I didn’t even think about wealth creation while growing up, but that all changed when I was invited to a financial planning seminar as a young Navy officer. The lure of attending the seminar was a free steak dinner. What I learned there changed my life and my perspective.
The presenter showed a graph of the S & P 500 financial index, which represents a compilation of 500 publicly traded American companies which have market value of at least $5 Billion. The index was established in 1926, during a period known as the Roaring 20s. The initial slide showed rapid growth in the index, followed by a collapse in value after the infamous stock market crash in October 1929, which led to the Great Depression. If that were all I saw, I would never have invested in the stock market.
What I saw next (and this was before the stock market boom of the mid-80s through the 90s) was how the markets performed after the Great Depression. People who kept their money in stocks were all rewarded over time. In fact, the S & P 500 index averaged an annual rate of return of nearly 10% from 1926 to 2015, even when factoring in the “crashes” of 1929, 1987, 2001 and 2008.
What the financial planners taught me was the concept of dollar cost averaging. It involves investing a fixed amount of money in stock funds each month and allowing the market to work its magic through good times and bad. I learned not to panic when the market dipped or get elated when it climbed. When my pay increased, so did my monthly investment.
The investments were divided between an Individual Retirement Account (IRA), which is not taxable until its withdrawn at age 59 ½ or older, and taxable mutual funds. During the market boom of the 1990s, I became acutely aware of the capital gains tax on mutual fund profits, which amounts to double taxation. I paid taxes on the income used to purchase the funds and then got taxed again when the funds appreciated in value, even though I didn’t sell them. This double-taxation led me to be a strong supporter of the FairTax plan, which only taxes consumption at the point of sale.
The capital gains bite motivated me to find a financial advisor who would help protect our assets from taxation and was blessed to cross paths with West Ashley financial planner Louis Tick at a seminar on the future of Social Security in 2000. He came up with a plan to transfer taxable funds into tax-free annuities and has served us well even since.
The stock market has performed very well since President Obama took office. The S & P 500 index had dipped to a level of around 800 when he entered the White House in 2009, reeling from the housing and financial market collapse of 2008. In late 2016, the index reached a record high of around 2250, meaning that it nearly tripled during his two terms.
On Nov. 9, when it appeared likely that Donald Trump would be our next President, the futures markets, in which investors speculate about how the next day’s market indexes will perform, were plummeting. What happened when the markets opened at 9:30 that morning was quite the opposite. Investors were optimistic and the markets rallied. The Trump Rally has continued in the weeks that followed.
Trump has toured the “battleground” states since his election and made the statement, “We have to be a rich nation – that’s a good thing!” President Kennedy coined the phrase “A rising tide lifts all boats.” If people are feeling optimistic, they are more like to buy a bigger house, buy a new car, or go out to eat. It has a ripple effect in the economy.
It is sad to see all the commercials for reverse home mortgages on TV, which are in demand because so many families at or near retirement have inadequate savings. I encourage anyone entering the job market or under 40 to visit a financial planner and come up with a wealth creation plan!
John Steinberger is the editor-in-chief of LowcountrySource.com. to contact him, email John@LowcountrySource.com.