I grew up poor, sharing bedrooms with younger sisters in Section 8 housing, joining the military to pay for college, poor. We weren't the worst off, we had a computer that spawned an unhealthy level of escapism through World of Warcraft, and a small library of Goodwill-acquired books that helped ensure that I would one day be capable of writing my own and pursuing a graduate certificate and a Master's Degree. All the same, I grew up as disadvantaged as a white heterosexual male in the 1980s could grow up; which honestly isn't that disadvantaged at all. As my career progressed through a level of work that, in my opinion, is unsustainable on a societal level, my perspective shifted; the grass was greener on the other side.
Moving from a "have not" to a "have" and watching things become exponentially easier as life and career progressed gave me the perspective that I should be making things easier for others even as the effort made life a little harder for me. Part of what kept me motivated through the 18-hour days downing energy drinks as fast as undergraduate calculus was the motivation to one day leave behind an heir who didn't have to work as hard; part of what keeps me from taking my hard-earned, but unfairly gained, advantage and living a life of excess is the motivation to one day leave behind a society that doesn't have to work as hard.
The problem is that I'm a 30 year old millennial; we have many existential crises and prioritization is a not insignificant task. Furthermore, it is my opinion that a lot of the charities of today are aimed at assisting the very generation that caused many of the crises plaguing us, sending good money after bad. Haphazardly donating funds, especially in the amount I feel I owe society is likely to make less of an impact that I would prefer and quite potentially further reward the hedonistic behavior that caused the issues America must fix in order to progress; a more methodical approach is required.
I am only calculating the amount I "owe" (I’m going to sidestep the problematic terminology here to keep this post from becoming too esoteric) based on my projected lifetime wages; this is likely an inadequate measure by most sociologists' standard. Factors like investment income (a derivative of a higher salary) certainly would skew the total benefits I've received over my lifetime and factoring in the extreme expense associated with simply being poor, and things get really squirrely really quickly. Adding in qualitative measures (racial profiling by law enforcement) and any number of other inequalities within a modern America and this whole thought exercise can fall apart rather quickly.
I get that.
I also know that "simply donating" will result in me setting aside whatever amount of money is comfortable (likely $100/mo until retirement and 10% or excess from required minimum distributions, at most) resulting in a total benefit to the tune of maybe $300,000 over the course of my lifetime and in the execution of my estate. This isn't an insignificant amount of money, but in order to come up with a figure less comfortable and more meaningful than "simply donating" the comparison of wage-earning potential provides me with a more methodical and meaningful approach. To rephrase a bit more simplistically: I want this to hurt a little; otherwise I’m not really doing anything beyond what’s simply convenient.
Estimated Lifetime Wages: $2,099,431
Increased ease in getting the job (28%)
Salary Discrepancy (38%)
Career Advancement (8.8%)
Amount of my career considered a highly compensated employee (10%)
Adjusted Wages: $862,211
Inflated Wage Amount: $1,237,220
The most minimalist math that exists suggests that I benefited from my place in society by about $1,237,220. While some factors (i.e. racial profiling) certainly work in my advantage, other factors considered above essentially "double dip" (i.e. ease in getting the job and salary discrepancy have some overlap); whenever possible I calculated the information in favor of a larger inflated wage amount. To combat this, and in order to make sure my assumptions at least had some basis in reality, I double checked that figure against a different methodology: Net-worth by ethnicity where I found that white families in 2016 held approximately 147% net worth over that of the average non-white family. Given the inflated wage amount shown above is 143% that of the adjusted wages, I figured that figure looked close enough for government work: $1,237,220 it is.
Factoring in my past socially beneficial endeavors, and anticipated future working-year contributions ranging from outright charitable contributions to adoption costs, I'll have a societal contribution of roughly $210,000 before my retirement age (55) leaving me with approximately $1,000,000 in charitable contributions "owed." This amount of money is extremely large; it's 3x the amount of retirement savings of individuals retiring in 2018, and essentially 80% of the amount I hope to have squirreled away for my own retirement in 25 years.
A Donation Plan
The only way to tackle a problem that large without endangering my retirement portfolio, changing my retirement date, or completely gutting my projected estate is to simultaneously split the problem in half and start leveraging the market to my advantage. Setting aside $500,000 of the amount to come from my estate gives me the flexibility to ensure that I do not outlive my estate and that my family is taken care of; self-interest always has to be accounted for first. This leaves $500,000 to donate throughout the course of my life.
This is more manageable, but still a significant amount of contributions. Fortunately, starting early works to my advantage. Setting aside a non-tax advantaged brokerage account at 30, contributing $100/mo until I'm 55 gives me approximately $136,000 toward the burden (6% return). Assuming the tax code remains unchanged in this area, withdrawing the $36,000 in principle to help fund early retirement (55-60) leaves me with $100,000 to grow for another 15 years to be donated into tax-advantaged Donor Advised Fund whenever my retirement taxes need adjusting.
These scheduled disbursements, if they do not start until 70 years of age, would be worth about $200,000 (6% return), would assist my tax burden during retirement (67+) and would help defray the $500,000 charitable burden significantly. This Donor Advised Fund would be named as a beneficiary of my estate worth about $200,000 to enable my heirs to become involved and take ownership of the charitable giving process, and potentially help start their own charitable giving.
The image above shows that even with this $36,000 donated over the 25 remaining years of my career, I would still essentially owe $300,000 over the course of my 35 year retirement (55-90) which comes out to just under $8,600/year or $715/mo. While not an insignificant amount of money, it's essentially my entire projected Social Security benefit, this is a much more manageable amount of money; it's something I can comprehend better than $1,200,000 and it's something I can budget and factor into my financial planning. The unanswered question will remain, for the next 25 years: Can I develop a retirement plan robust enough to accommodate a $715/mo charitable contribution? Even if I do, would I still have enough left to accommodate a $500,000 charitable pay-out from my estate?
I honestly don't know. Hopefully, I am able to pull it off, but even if I don’t having the goal will likely motivate me to push further than I normally would. My goal of obtaining my PhD before 30 transitioned into finishing my Master’s, and working for Google evolved into working in cyber security research; I have a long history of setting unrealistic goals that still compel me to out perform myself. It is entirely possible that this will be one of those cases where my luck could run out and I could incur significant medical debt, or my family could face a significant loss or layoff; 25 years is a long time.