Been watching a great show recently called Genius which is about Albert Einstein’s life starting from what seems like his teenage years up until his attempt to get to the United States before/during the rise of the Nazi Party. The story is told in a nonlinear fashion so I am getting pieces all over a 30 year span. I am sure the show is only going to get better and more detailed. I am sure it is dramatized but there is one theme that keeps coming up over and over, how Einstein broke the status quo. Einstein is in class getting shot down, getting denied from jobs, etc., all because the scientists are living under certain assumptions about physics (which turn out to be false…well because it is freaking Einstein).
It got me to start thinking about what it takes to change the status quo. John Bogel, who Buffett called a national hero, spent most of his career touting passive investing and yet it seems to be only taking hold today, nearly 40 years later (I could probably take either side of the argument that it took hold years ago and it hasn’t taken hold “enough”).
Some Financial Based Status Quos I’d Like to See Gone
There are a few other financial items that are held as gospel which I would like to be taken down a notch or two.
Buy Term and Invest the Difference is Bullshit
Buy term and invest the difference has been held as the end all be all when it comes to insurance planning, and it is absolutely horseshit. Why? Because no one saves the difference. This is America! We have near retirees with absolutely no money, I bet almost all of them would have loved another asset to turn to if/when things get tough.
Everyone gets 7% in the Market
Most people do not have their money a low cost S&P 500 index fund, but even if they did it is unlikely that they are getting 7%…because as humans we are generally terrible investors:
Look at that, most people only got 2.3%. I have to assume some of that is because of fees, but I bet a lot more of the difference between the S&P500 of 7%+ and the 2.3% has to do with people freaking out when shit happens and trying to time the market. I have a colleague who got out at out of his investments when the Dow was up to 15,000 after hitting its bottom at 8K or so since he knew that the 50% gain had to have a correction soon. I know he has since gotten back into the market but how much of the gain did he miss it out on? I am afraid to ask.
The Estate Tax is the Worst Tax in Human Existence
I am a pretty-anti tax guy, and actively live in the estate planning world, but I always scratch my head when people start arguing against the estate tax. The arguments are pretty easy to make I guess:
- Why am I being taxed for dying?
- The family farm is going to be taken away
- I already paid tax to build the wealth – this is a double tax
So why do I scratch my head? Because the federal estate tax, as it is written and implemented affects maybe the top 1% of the country. That’s right 99% of the country will not pay a federal estate tax. Notwithstanding situations with a non-US Citizen spouse you need to have over $5,490,000 (indexed to inflation) to get hit with an estate tax due…oh and if you are married he or she also has $5,490,000 to work with.
Once I explain that to people the numbers behind it they either fall into one of two camps. The first is majority, they no longer care. What? It only hits the top 1%…f’em. The second, which I respect a lot more, hold on to those arguments above and still say it is unjust tax.
Do you have any financial status quo that should be challenged?