The Arbor Outlook: The Challenge of Income Inequality

“Some folks are born into a good life; And other folks get it anyway, anyhow…”
—from “Darkness on the Edge of Town” as performed by Bruce Springsteen

If Warren Buffett and Jeff Bezos and Mark Zuckerberg knew their personal annual income was limited to $2 or $3 million, would they have studied and innovated and worked

Here in America, we are limited in how wealthy we can become only by our imagination, creativity, drive, persistence and ambition. Putting limits on CEO compensation or individual wealth isn’t the way to deal with income inequality. If we limit CEO pay to 50 times what the average employee in the company makes, say $50,000 a year, CEO compensation in that company would top out at $2.5 million annually. Now that's a very nice salary, but this type of "cap" violates what we know about incentives and motivation. Huey Long and others advanced this “limit the top earners” concept during the Great Depression. It failed then, and it should fail now.

After all, in today’s globally connected community, an extremely effective CEO can add billions of dollars in shareholder value. If “hiring” LeBron James, who is compensated lavishly, even by NBA standards, brings your team a championship, everyone benefits.

Consider a successful small business owner who invested their entire life savings to start a small business. After 15 years of 100-hour weeks and personal sacrifices, they finally turn a nice profit. Shouldn't he or she, as the business owner who took all the risk and invested their own money, be allowed to profit by as much as they reasonably can?

Instead, what we ought to do, through private and public initiatives, is lift the earning power of all people, not limit income for one segment to benefit another. Businesses should be encouraged to provide training and part-time employment opportunities for high school and college students, who receive academic credit and a salary for their labor. When they graduate, they’d have real life job experience and often would go to work full time at the company where they’d been interning. This serves the corporation and the work force.

Ultimately, we've got to remake our work force into a viable one that can compete successfully in global markets and deal effectively with challenges like automation and cheaper labor abroad. This requires training and investment. Income inequality is a complicated issue, but our country is capable of creating this kind of sea change in the labor force.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.

The Arbor Outlook: How Hunger, Income Inequality Hurt Us All

Author’s Note: This is a two-part series on income inequality in America.

“And I’ve gone to bed hungry many nights as a lad...”
—from “In The Good Old Days (When Times Were Bad),” as performed by Merle Haggard

One of the most famous photos in American history is that of a starving mother during the Great Depression. The woman is gaunt and thin, her countenance worried. Then, hunger was commensurate with soaring unemployment.

The face of hunger in America has changed, but the problem is growing more severe. Many families suffering from a lack of food today are headed by employed adults who still can’t afford life’s essentials. And this is not only bad for those suffering families, it’s bad for the wealthy, too, in ways in addition to obvious humanitarian concerns.

If one is invested in companies that produce food and household products, the more people with income to purchase those products, the better the share price and value of the company. As an investor in, say, pharmaceuticals, it is to your advantage if more people in need of medicine can afford to purchase it. More people buying products manufactured and distributed by the companies you’re invested in means more money in their coffers.

If you own a car dealership, the market for selling is far greater when more folks are in a position to buy. Henry Ford paid his workers a living wage for a variety of reasons; some workers indeed did buy his cars. But beyond that, he created a more stable, dependable labor force. Similarly, we need a strong middle class to purchase more products and services offered by businesses, which are often owned by and invested in by the wealthy.

Brazil has a significant income inequality issue, and the wealthy citizens there live behind electronic fences and even drive bulletproof cars. No American lives in a bubble, and we all benefit from residing in communities where it is safe to venture out.

Inflation has not risen dramatically, but costs have risen significantly on items we deem essential: housing, food and healthcare expenses, for example. A recent small uptick in wage growth was the first in many decades. The bottom line is that for the past 40 years, wage increases are falling far short of the increase in the cost of living.

As Tracie McMillan wrote in National Geographic, “In 1980 there were a few hundred emergency food programs across the country; today there are 50,000. Finding food has become a central worry for millions of Americans. One in six reports running out of food at least once a year. In many European countries, by contrast, the number is closer to one in 20.”

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.

The Arbor Outlook: Do We Have a Retirement Savings Crisis?

“Do I have enough saved?” is the overriding question that permeates every conversation regarding retirement planning.

Savers who avail themselves of basic tax sheltered and tax free plans usually enjoy a greater probability of reaching their financial goals. Granted, there are millionaire retirees who haven’t utilized tax-deferred vehicles, but the majority of Americans who have accumulated significant savings have done so partly through the use of these plans.

American workers will be allowed to contribute $19,000 in 2019 to a 401(k) or similar workplace plan. Those 55 and older can also make a $6,000 “catch-up” contribution, which of course means that next year many nearing retirement can save a total of $25,000. Those fortunate enough to qualify for company profit sharing, which often accompanies 401(k)’s, can add significantly to this amount.

Contribution limits on Health Savings Accounts will top out in 2019 at $3,500 with a $1,000 catch-up contribution allowance for workers 55 and older. As long as HSA dollars are spent on qualified medical expenses, the contributions and the growth are tax free, which makes it the most advantaged and possibly the most under-utilized of all qualified type investments. If you’ve only got $3,500 to save in 2019, this is not a bad place to start. I call HSA’s “Bonus IRA’s” to emphasize their benefits.

So how are we doing? Are we saving enough? Statistics reveal mixed data. Household retirement savings represents a greater percentage of GDP than it did five or 10 years ago, as many retirement plan balances reflated following the Great Recession. That said, most evidence suggests that we will face a moderate-to-severe retirement crisis in coming years

After a brief uptick following the 2008 Great Financial Crisis and likely due to the wealth effect of rising portfolio and home values, savings rates have plateaued at a measly 6 percent. Consider that over half (52 percent) of households over 55 have no retirement savings. And 30 percent of American workers of all ages have no retirement savings and no pension options.

Starting our retirement savings contributions earlier, of course, allows us to enjoy the impact of compounding, and means that we actually need to contribute less to reach our goals. But it’s never too late to get started. As famous chess player Garry Kasparov once said, “It is better to have a bad plan than no plan.”

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin. This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.

The Arbor Outlook: Men Are From Mars but Women Travel There

“I’ve been everywhere, man; I’ve been everywhere; man; Crossed the deserts bare, man; I’ve breathed the mountain air, man; Travel, I’ve done my share, man; I’ve been everywhere.”
—from “I’ve Been Everywhere” as performed by Hank Snow

One of the fascinating dynamics of retirement is the difference in attitudes many men and women harbor about travel. Women like it. Men? Not so much.

Yes, this is a generalization, and it’s obviously not always true. But it’s been my experience that women simply seem to enjoy travel more than men during their retirement years.

If you could transport and replant the Louvre, Broadway theaters, the Caribbean and Hawaii, the Sistine Chapel, the south of France and a quaint Italian village into downtown Destin, my husband would gladly visit several times a week. Then he’d come home at day’s end. One of the reasons he espouses for not being a fan of travel is the hotel experience. “I’ve slept in enough bad hotel beds to last several lifetimes.” And, “I always get the room next to the ice machine.”

Some men don’t like big cities or hotels; they don’t like fighting traffic on strange streets; they don’t care for eating foreign food, hearing different languages or exchanging dollars for euros. In essence, they don’t like their routine disturbed. For many women, this immersion into foreign culture is part of the charm of the travel experience. Small inconveniences are far outweighed by the stimulation and excitement of a journey to a new locale.

Many couples do actually travel together and enjoy it. As we all know, there is an entire subculture of motor home enthusiasts, most of whom are retired couples. For those couples who do travel together, many evolve through the “Go Go,” the “Slow Go,” and the “No Go” phases of travel in retirement, hitting the road frequently in the early retirement years and less and less as they age.

For those solitary travelers, some women join travel clubs or take trips with friends, leaving their partner behind to take care of the homefront. For many years it was considered odd to travel without your partner. Now there’s no stigma attached for women traveling alone, which is healthy.

The bottom line is that it’s nice to have saved enough to enjoy recreational choices in retirement. Many under budget the cost of trips, but over budget the number of sojourns that will actually be taken.

Travel is supposed to be fun, and doing it with people who enjoy it probably makes it a more pleasurable experience for the happy wanderer. My passport is ready.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.

The Arbor Outlook: Auschwitz, Tragedy and the Dance of Life

“Some dance to remember... Some dance to forget...”
—from “Hotel California,” as performed by The Eagles

For an entire year after the war, she did not speak. And she hoarded food like an animal while recuperating in a Swedish hospital.

Now, at age 93, she performs the rumba, the foxtrot, the merengue and the tango.

All of us face significant life difficulties, including financial challenges and concerns. Many of us obsess over market movements, investments and our bank balance. Few of us, however, have experienced the cruelty and loss that has plagued the life of Manhattan resident Helena Weinrauch.

Corey Kilgannon of the New York Times recently chronicled her story. It began in Poland. Hitler invaded in 1939 and Helena and her loved ones, along with other Jewish families, were marked for death. Helena “passed” briefly as a gentile and danced with a Nazi officer at a social gathering. But her pose was discovered, and the officer, angry at being deceived, assigned her to concentration camps (including Auschwitz) rather than immediate execution, thinking this a punishment worse than death. Her parents and her sister and other relatives were murdered.

A march from Auschwitz in freezing conditions almost killed her. British soldiers rescued her from a pile of dead bodies when they took control of the camp at Bergen-Belsen near the war’s end. One soldier noticed that her body was warm and that she was still breathing. She weighed 60 pounds.

Later she moved to New York and married Joseph Weinrauch, a German native who had also escaped the Nazi’s reign of terror. Tragedy hounded Helena, though. Her only child, daughter Arlene, died of breast cancer in the 1990s. Her husband Joseph died in 2006. She was completely alone.

A flyer arrived in the mail a few years back, offering free dance lessons. On the designated evening, she walked to the studio from her apartment and found other dancers, mostly in their 20s and 30s. A friendly instructor encouraged her to try anyway, and showed her a few simple movements.

Soon she began hiring instructors to accompany and dance with her at venues outside the studio. She loved it. Now she dances several times a week.

“When I dance, I forget what happened to me and it makes me feel, for a few minutes or hours, that I am happy,” she said.

In the face of tragedy, Helena Weinrauch not only survives, but celebrates through dance. This story is worth repeating, as we express thanks for all the good in our lives and draw inspiration from those, like Helena, who have the ability to transcend unspeakable horrors.

Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 –, a “fee-only” registered investment advisory firm located near Sandestin.