When it comes to stocks they're not a great way to measure American incomes I'll explain why.
Only about 54% of Americans are invested in them through their retirements plans (like the 401's), mutual funds, pensions and so forth. Meaning some 46% are foreign owned. So when the stock market does well nearly half of it's wealth benefits investors in other countries.
92% of stocks are owned by 20% of the wealthiest investors. This means 80% are left to divvy 8% of the remaining wealth between themselves throughout the world. Since only 54% are American investors it appears not as many as we're lead to believe are benefiting. Therefore I conclude the stock market does very little to benefit the average smuck unless they're in upper management receiving a profit sharing plan.
A Word About 401K Plans
In 2018 employees are allowed to contribute up to $18,500 a year. To my way of thinking workers are giving a good chunk back to the corporations. These companies can use this tax free money right now, On the other hand employees have only a piece of paper with numbers on it until they can start withdrawing their money at retirement. A lot can go wrong between now and then.
In my case I chose to keep my money, pay taxes on it now instead of later. Then using it to pay down ahead on my 30 year mortgage while setting some aside in FDIC insured savings accounts. The average return on of the S&P between 1973 and 2016 was 11.69%
. That's all fine and dandy but when you're 70 1/2 and are forced to start taking money out (paying taxes on it) better hope it isn't a year stocks take a tumble or if tax rates should go up over what they are now.
Here's how I benefited on the mortgage alone.
My original 30 year mortgage was around 10%. Compounded over 30 years it would have totaled 315.92%. Divided evenly over 30 years it would have averaged 10.53%. Even if the average S&P' returns were 11.69% it wouldn't have included the fees I'd end up paying. Plus I wouldn't be able to get at my money to do what I did.
After a few years I refinanced the remaining balance on my mortgage at 6%. Instead of keeping the extra $700 I saved monthly I put in on the new mortgage. Hence being able to pay it off 10 years before retirement rather then still be paying on it for 8 years into my I retirement. Since it was paid off 10 years before I retired I was able to then use a chunk of that former mortgage payment for savings. Besides, who wants to pay a mortgage or ever escalating rents when they're on a fixed income if they can buy a house early enough?
A bird in the hand is worth two in the bush.
Maybe someone is comfortable with a finance company holding their deed over them for 30 years while they gamble on the stock market. I wasn't. After I wised up I rolled over what ever little I had of my 401K into a no fee, no risk FDIC insured IRA savings account years ago. Good I did or it would have taken a shellacking in 2008. This along with some regular savings. This doesn't mean I'm well off by any means but it sure beats allowing others to manipulate what little assets I've accumulated. LOOKING FOR FEEDBACK
I'm temporarily adding this to all my posts throughout October.
I have a few questions and requests.
(01) Which of these interest you (maybe none of them)?
(02) How do you feel about what was said?
(03) Are there any you feel need correcting?
(04) What could I improve on?
(05) Would you subscribe or refer this blog to a friend?
(06) What are your impressions of the author (me)?
(07) What subjects matter to you that I haven't covered?
(08) How often do you visit?
(09) Are there topics I should avoid?
(10) Do you prefer posts without remarks?
(11) If you ever decided to blog what would you blog about?
ON A SIDE NOTEI call this blog "Lehigh Valley Clancularius Introspectives" for a reason. It is because you'll never know what I come up with next. This is because I have so many varied interests.
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