In the movie Back to the Future II, Marty McFly jumps into a DeLorean time machine and goes 30 years into the future. If the movie was reality, the teenage Marty would be shocked at the price of things in the United States. He left a time when the price of gas was only $1.09 a gallon, the cost of a postage stamp was 22 cents and $2.75 for a movie ticket.
Other interesting financial facts in 1985
- Dow Jones Industrial Average closed at 1546
- Yearly inflation rate 3.55%
- Fed’s interest rate 10.75%
- Average price of new house $89,330
- Average income per year $22,100
- Average monthly rent $375
- Average price of new car $9,005
Marty would suffer from sticker shock when he sees today’s prices especially the average cost of $31,200 for a year of college.
When it comes to investing, Marty would have been pleased to know that his future children would have access to the internet. More information with just a few clicks of the mouse or touches on screens of mobile devices. Plus on line tools to construct a well – balanced, diversified portfolio or to determine the optimal saving rate to ensure a secure retirement. He would be shocked to find that robots were available to manage his money and the existence of low cost mutual funds.
Marty’s teenage brain would be over-whelmed with the vast number of investments products available today. He probably wouldn’t feel confident enough to do it himself and would seek an advisor or pick a target date mutual fund.
Marty would have been happy to learn that there were more tax-advantage opportunities today. He might have known about the existence of IRAs but 401(K) plans were still in its infancy. Roth IRA’s were introduced in 1997 and Roth 401 (k)’s in 2006 which enable after-tax contributions, tax-deferred growth and tax free withdrawals. (TSFA was introduced in 2008 in Canada)
In addition, if Marty wanted to save for college for members of his family, he could open a 529 account, which is now the standard tax-advantaged option for education savings. (RESP was introduced in 1998 in Canada)
Although, I was not a teenager in 1985, I am happy with the major changes in the world of investing. By the way, Marty was played by Canadian born actor, Michal J Fox!