This next example of a survival crutch, Chargeguard Protection, is interesting because such a tiny amount of money is paid to "rent" this crutch that it is hard to imagine how it could make a significant difference. Chargeguard protection means that you will not have to pay if an unauthorized person gets your credit card or debit card and uses it to withdraw cash or make purchases.
The last time I checked out the Discover Chargegard (spelled without a "u"), it cost just $39 a year to subscribe to this protection. When I looked at the 12 aggressive growth stock mutual funds that I mention in a previous article, the $39 a year invested for 45 years from age 25 to age 70 would, hypothetically, accumulate over $100,000 for the lowest producing fund and over $500,000 for the highest producing fund.
If you read the small print that appears on the backside of the form you sign for chargeguard protection, you will find that you are only liable for $50 when your card is stolen.
This is true by virtue of law without subscribing to any kind of chargeguard protection.
If you take Discover Chargegard Protection throughout your entire working life (age 25 to age 70), you are forfeiting from $100,000 to over $500,000 of future wealth to protect yourself from a $50 hit. $39 a year is definitely a "fragment." Your wealth is hidden in the fragments of your life.
Please note that the 12 aggressive growth stock mutual funds used in these examples were chosen at random in the file room of the financial planning/investment management firm where I worked. These were simply the first 12 funds that I came to that had at least a 15-year history. There may well be other aggressive growth stock mutual funds that performed more poorly than the lowest producing fund in the group of 12 funds that I looked at. It is also true that the growth over the 45 years would not necessarily be the same as it was during the track record of these funds.
Even allowing for that, imagine that the actual accumulated amount for the 45 years would only be 1/5 of the total in the example of the lowest producing fund. In this case, you would not forfeit over $100,000 of future wealth by taking Discover Chargegard Protection throughout your entire working life.
You would forfeit "only" $20,000 or more of future wealth to protect yourself from a $50 hit.
In the previous example of paying $34 a month extra for a lower deductible, you would not forfeit over $1,250,000 of future wealth.
You would forfeit "only" $250,000 or more of future wealth throughout your entire working life to make sure you had $250 when you needed it.
Even if your investments perform much more poorly than the examples given, it is still true that your wealth is hidden in the fragments of your life.
No comments:
Post a Comment