The Power of Preserving Value is based upon two (2) basic but powerful financial concepts. The first is that your dollar today is worth more than your dollar tomorrow – time value of money. The second is that compounding growth from investments on a deferred payment will net a substantial benefit to you.
Time value of money. Today’s dollar is worth more than tomorrow’s because of inflation, even at a 3% inflation rate. Inflation pushes prices up over time which means that each dollar you own today will buy more in the present time than it will in the future. This is why deferring expenses, like taxes, is so important. The taxes will be paid in the future, but with ‘cheaper’ dollars as compared to today.
Compounding growth of invested dollars provides the opportunity to grow your deferred expenses or in this case, taxes. If you would have invested $100K in a Dow Jones Index fund 30 years ago, you would have over $330K today!
Combining the power of present value with compound growth provides a powerful avenue of growth for the farmer and farm land owner.
The following graph shows the potential of deferring a $100K tax bill for 30 years. The time value of money displays that at a 3% inflation rate the tax would be paid with today’s equivalent of $41K while the potential of investing over that same period would provide over $330K!
The Power of Preserving Value is in your hands!