The 61% Syndrome

© Can Stock Photo / phildate

A few weeks ago we studied a report from a large institution. It stated that 61% of baby boomers preferred minimizing taxes to getting higher investment returns1. We wrote about this being a false choice: the rational object is to achieve the highest after-tax returns, thereby incorporating both goals sensibly.

But there is another problem with the 61% syndrome. There is a tendency for 100% of the attention to get focused on the 61%. It seems that the number is eventually forgotten. The formula is simplified to “The top priority of baby boomers is minimizing taxes.”

In other contexts, ugly words are used to describe the process of attributing perceived characteristics of a group to each individual in the group. Stereotyping and bigotry are costly to society to the extent that they hinder any of us from unlocking the highest fraction of our own potential, the secret sauce of American prosperity.

The forgotten 39% of baby boomers is 29 million people2. That is a lot of people to ignore.

We hear again and again that investors repeatedly do the wrong thing. But we don’t care whether most investors behave rationally; we just need you to do so. (In fact, when others behave foolishly that can create opportunities for us.)

It seems sort of insulting to start a relationship by attempting to prove to people that they will do stupid things and are incapable of learning. But when you attribute a perceived characteristic to every member of a group, you fail them in some way.

You may be familiar with Thoreau’s formulation: “If a man does not keep pace with his companions, perhaps it is because he hears a different drummer…” Many of you have seen the hand-lettered illuminated version of it hanging on my office wall. We are all about people as individuals, not stereotypes.

(Did you know my girlfriend lettered that saying and gave it to me when we were both seventeen? This has been fundamental for as long as I can remember. Extra credit question: what was the girl’s name?)

My unique story gives me respect for you and your unique story. It is how we aim to avoid the 61% syndrome and its related costs and lost opportunities. Clients, if you have questions about this or any other topic, please email us or call.

12016 U.S. Trust Insights on Wealth and Worth survey, U.S. Trust Bank of America Private Wealth Management

2Federal Reserve Economic Data, Federal Reserve Bank of St. Louis

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.