by Brian Tomasik
First written: 2007; last update: 16 Nov. 2013
This page presents a calculator I built in 2007 with the aim of estimating the expected future value of donatable income from pursuing various careers. I now realize that these estimates are too optimistic and would not take them at face value.
In this paper, I present a formula for estimating the amount of donatable wealth, in current inflation-adjusted dollars, a person could earn by pursuing various careers; the numbers range from below $10 million to around $40 - $60 million. (Note that these are future-value estimates rather than the more conventional present-value estimates, which is why the totals are so high.) More detailed figures can be computed using the Java program below, which tends to give results about twice as big. Both of these estimates assume an expected return on wealth of 12% -- roughly the average stock-market rate over the last 80 years, but probably too high relative to the global stock-market average and projected future rates of return. I would now use something in the range 5-8%. Due to oversight on my part, capital-gains tax is not considered, but if you donate appreciated securities, there isn't capital-gains tax anyway. If you do sell your securities before donating (perhaps because you're donating to a foreign charity without US deductibility) and therefore do incur capital-gains tax, you could plug in an after-tax rate of return.
By the way, some corporate employers offer a matching-gifts program in which they will match, dollar for dollar up to an annual limit, donations made to a nonprofit organization. If this limit is, say, $10,000 per year, then an altruist can effectively earn an additional tax-free salary of $10,000 if her company offers this benefit.
Here's a Java program that allows the user to make a detailed calculation of donatable wealth under a broad range of possible parameter values. See the README for details. The code is available on GitHub or below.
Tar file of the package: