Inequality has been a concern since the time of Caesar. However, Thomas Piketty’s book Capital in the Twenty First Century caused the debate to reach a fevered pitch. In Piketty’s book he discusses concerns about inequality, $200-barrel oil and other looming financial disasters. His concerns about inequality in my opinion are as pertinent as his discussion about $200-barrel oil. The main problem with Piketty is not that he assumes that wealth for a small cohort of society is growing faster than wages. The real problem is that he does not realize that the rest of us are losing our wealth before it can mature.  

The truth is that advances in the financial markets make wealth creation much more available than any time in the past. The best way to build wealth and tackle inequality is through a cost, tax efficient investment vehicle that earns a market rate return and follows a set plan.

My favorite low-cost investment vehicle is the one advocated by John Bogle, the inventor of the cost efficient Vanguard S&P 500 mutual fund. When the cost and yield efficiencies of the S&P 500 are combined with the tax-efficiencies of the Roth IRA, almost anyone can acquire vast amounts of wealth within their lifetime.

For example, setting up a Roth IRA for your 20-year-old child and making annual contributions of $5,000 ($100 a week) for 11 consecutive years in a fund such as Vanguards 500 ETF “VOO”, your child could have $5,159,930 at the time of her retirement.

Yes, so basically you invest over an eleven-year period and retire with over five million dollars. Oh, I almost forgot, the money in the Roth IRA can be spent free of taxes when you retire. There are some minor pesky rules that you may want to check on with your advisor, but this plan will work as advertised.

Robert A. Bonavito, NJ Forensic Accountant; his firm is based in Scotch Plains, New Jersey