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From Cradle to Retirement, Diapers to Depends - Re-defining “Long Term” Investing. Part 1 of 2

By Jack Towarnicky

Chris Carosa (DC Insights, Fall 2017) generously shared his thoughts on his book – From Cradle to Retirement – The Child IRA – How to start a newborn on the road to comfortable retirement while still in a cozy cradle.   

There are a myriad of definitions of what constitutes a long term investment that can be anything from 1 year to more than 10 years:

  • Investopedia: “A long-term investment is an account on the asset side of a company's balance sheet that represents the company's investments, including stocks, bonds, real estate and cash, that it intends to hold for more than a year.”
  • Investor Dictionary: “Long-Term Investments on a company's balance sheet are assets the firm intends to hold for more than one year. They consist of stocks and bonds, real estate, and cash hold for a longer period, e.g. for a specific purpose. In another aspect, an investment instrument is considered a long-term investment if it matures in more than 10 years.”
  • Business Dictionary: “In general, an investment instrument that matures in more than 10 years.”

Ben Franklin, however, had a different view. 

I have long been fascinated by our Founding Fathers – particularly Ben Franklin and Thomas Jefferson. My brother-in-law Ron and sister Carol, residents of Philadelphia, PA, know of my interest and shared the following story of Ben Franklin’s will and legacy. In 1785, French mathematician Charles-Joseph Mathon de la Cour wrote a parody of Franklin’s Poor Richard’s Almanack suggesting a person could leave a small amount of money in his will to collect interest over 1 – 5 centuries with the resulting astronomical sums to be spent on impossibly elaborate utopian projects. Franklin, who was 79 years old at the time, wrote back to thank him for a great idea and to tell him he had left just such a bequest to both his native Boston and his adopted Philadelphia - £1,000 each (1,000 pounds sterling) in 1790 to be invested in a specific manner for 200 years!  Chris Carosa estimates that £1,000 in 1790 would be the equivalent of $1,000,000 in 1990 (even more today). The money was to be invested in loans to start-up businesses and tradesmen, ultimately achieving a value of $4,061,000,000 ($4+ Billion) in each city’s trust at the end of the 200 year period in 1990.  It didn’t quite work out that way (see Chris Carosa’s post at:

Anyway, for Ben to take such action, he had to believe in America’s future. If you are a parent, obviously, you too believe in a future – for America and for your son or daughter. Some of you may even believe your child will achieve one version of the “American dream” where a child is better off than her parents.  

What do Ben Franklin and I share?  Long ago, way before I heard of Ben Franklin’s will and legacy, I became enamored with the power of doubling.  As a pre-teen, I would silently recite, to myself, 2, 4, 8, 16, 32, 64, 128, 256, 512, 1,024, 2,048 4,096, etc.  That’s as far as I could get without having to think. Then, 15 years later in the 1970’s, I learned about the Rule of 72 in more than one course during my business economics degree program. Divide the interest rate into 72 and you get the number of years it will take money to double.  

So, when my children, Andy and Dayle, were born in the 1980’s, I recognized that I would have 18 or so years to save for their college educational expenses. Giving it more thought, I decided to also make a long-term investment in their future.  So, my wife Debbie and I set aside $1,000 for each child through the Uniform Gift to Minor’s Act, placing the money in tax deferred variable annuities.  We invested the money in large cap equity funds. Historical annual returns for the S&P 500 index in the years after WWII through the mid-1980’s were about 12%.  

Rule of 72, at 12%, money doubles every 6 years.  $1,000 at birth becomes $2,000 at age 6, $4,000 at 12 …  $512,000 at 54, $1,024,000 at age 60!  

Sure, a 12% return is not likely achievable on a consistent basis over 60 years, and recent stock market average returns have been significantly lower. Sequence of returns risk or a different rate of return for this unique 60 year rolling period of investment may defeat these projections.   And inflation may erode the value of $1,000,000 in the 2040’s so that it has minimal value. But, just in case history repeats itself, Andy and Dayle will be middle-class millionaires as a result of a modest investment made long ago. And, even if middle-class millionaire status is widespread among Americans, even if it more than doubles compared to today so one in every five Americans is a millionaire, I know which group I want them to be in.  

Next:   Your Newborn Child As A Middle Class Millionaire …  Someday.   


Before taking action, always discuss your investment and financial plans with whoever helps you with financial decisions and tax decisions.

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