Dear Mr. Buffet
First and foremost, I would like to say I admire your business acumen that I have viewed my entire 2nd half of my adult life. I am posting this letter as an open letter, I hope you don’t mind.
I loved your idea with the Earned Income Credit being increased for the average income to be a living wage. Because of your concern for the masses of people, I am studying a problem that will affect hundreds of millions of people and the majority of people are not even being educated or aware. This is a problem that will affect people more than the 2008 economic collapse.
The first half of my life, I wasn't too aware of who you were. I had a brief NFL career and was part of the statistics of being part of the 78% of athletes that will be broke in their first 2 years of retirement. My financial IQ was very low and was governed by spontaneity.
I had a wake-up moment about 18 years ago when I analyzed my life and I was ashamed and embarrassed and I started to study money. Not from an Economics stand point, not from a stocks and bonds perspective but from a lens that I needed to understand out of the box solutions on why I became broke and why were so many of my teammates going broke.
I learned a very simple answer, an answer that I knew would not only affect athletes but most Middle Class Americans. The athletes were making a large chunk of money in a small period that is supposed to last them for the rest of their lives. Average career is less than 3 years since the NFL must give a player a pension after 3 seasons.
So, a ball player with a million dollar a year contract lives the life of a millionaire and factoring in life expectancy and the gap of time needed for money to perpetuate itself the math does not add up.
I studied the middle class and there is a catastrophic situation coming, and none of the financial gurus are speaking about it. Since the pension plans have only 7% of companies offering it, that was one of the only methods the masses could guarantee a lifelong income. Factor that in with many of those pension funds having a crisis because of either mismanagement, stock market volatility, and extended life expectancy I guesstimate that pensions will be null and void for the masses to depend on.
The 401k or any qualified plan cannot perpetuate and by differing your taxes compounds your liability back to the government but the gurus have made this the trend for everyone to go by for their financial future.
I came up with an equation that is using expected future inflation rates to properly devalue money, and using an increased life expectancy for a 40-year-old. If an individual save $1,000,000 by the time they are 70 years old, we must show a lifelong income assuming the person lives until they are 90 years old. We will assume that tax rates stay the same, which is probably unlikely but for the example we will use an individual making $70,000 a year and in the 25% tax bracket.
Most Financial Advisors are using the 4% rule of retirement income that will state that the retiree only takes out $40,000 in this example. The retiree will not have as many tax deductions in the future because their kids will be grown, so their tax obligation might be up to $10,000, however I will show no taxes so they are keeping entire $40,000.
Using Friedman’s inflation website using the inflation chart of $40,000 value in 1985 drops down to $17,827.91. I use 1985 since that was 30 years ago, since that is how it deflated from 1985 to 2015, I will make the same assumption in 2045. The 40-year-old would be 70 in this example and would start to withdraw the 4% or the $40,000.
When I go back to 1975 which would be 2055 when our 40-year-old turns 80, using the same inflation chart it would be $8446.82 PER YEAR
When the 40-year-old is in his last living years at 90 the income dropped all the way down to $5310.13 per year.
This doesn’t factor in management fees, and future taxes, and any market volatility. I figured most management fees are between 1% to 1.5% on a million, I also know whatever they are investing the money must be conservative so they should be aiming for no more than 2-3% to not risk principle.
I have a solution that I’d like to discuss with you, and have you vet the program. It is primarily using our software tool to pay off a 30-year mortgage in as little as 5-8 years, and harvesting the equity and its appreciation in a liquid side fund that compounds and can perpetuate itself.
I’m thinking about Shark Tank because I am currently in patent pending status, however you would be my choice because of your financial wizardry. Please give me a call at the phone number I provided. I would love to speak to you further and arrange to give you all my material for you to review, as well as being available to visit Nebraska and give a formal presentation. Former Heisman Trophy winner Mike Rozier from University of Nebraska is set to visit you next month and he will be delivering this letter to you in person.
I believe there’s an entire industry you can leverage this program and have a niche that the masses will participate.
Mario M Henry