[Foundation-l] Thinking for the Future

[Anthony]

On Wed, Mar 26, 2008 at 7:48 PM, Thomas Dalton <thomas.dalton at gmail.com> wrote:
> On 26/03/2008, Geoffrey Plourde <geo.plrd at yahoo.com> wrote:
>  > The Foundation really should start thinking for the future. I noticed that a couple people were talking about an endowment. For the WMF, what would a endowment require?
>
>  That would depend how much of our budget we want to it cover. The
>  latest budget was $4.6m for the year, if we wanted that all to be
>  covered by an endowment and we assume a return of 5% after tax and
>  inflation (perhaps a little optimistic - can anyone offer more than a
>  guess at a return? I'm basing my guess mainly on it making the maths
>  easier...) then we would need an endowment of $92m. That's a very
>  rough estimate, but it gives you an order of magnitude, at least.
>
Real interest rates on safe investments in the US are currently
negative by many accounts.  Long-term, the 30-year inflation indexed
treasuries are yielding 1.87% over inflation, but that's before taxes.
 After taxes, the rate would be much lower, maybe even negative, and
if the foundation chose to rely on an endowment rather than public
contributions it would become a private foundation and be subject to
taxes on its investment income.