Present Value of Lifetime NRA Membership

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Creeping Incrementalism

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I was thinking about upgrading my year-by-year NRA membership to lifetime, and out of curiosity decided to calculate the present value of renewing yearly.

The result: I would save about $400 by renewing year by year.

Assuming: (1) I die at the same age as my maternal grandfather (paternal is still alive), and (2) an interest rate of 10%, and

using the formula for present value (PV) of an annuity, PV=((1-((1+r)^(-t)))/r)*p

where p is the yearly membership payment of $35, r is the interest rate of 10% (which I think is an orthodox approximation of long term return for the stock market), and t = 69 years (years until I die--I think I'm younger than a lot of people here and my ancestors tend to live a long time),

PV = $349.51, which is $400.49 less than the $750 lifetime membership fee.

Did I do my math right? Isn't the point of paying for a lifetime membership to end up paying less?
 
Doesn't that calculation assume that annual dues will hold constant at $35? That's probably not a valid assumption.
 
Interesting calculation. Of course, you're calculating the NPV from your perspective. I upgraded to life membership a couple of years ago, but not because I was trying to save money. Rather, I wanted both to support the NRA and avoid future year-by-year nagging to re-up. Figured that more of my membership would go to the cause and less of it to junk mail sent to me if I upped to Life Member.
 
nextjoe, if the yearly membership fee rose, so would the lifetime, I'm assuming, so it would equal out.

Legionnaire, yes I want to support the NRA, I just thought that lifetime memberships in general were supposed to save you money, but then again, I never thought of thinking about it in present value terms until just now.

Anyway, the main reason I want to support the NRA is political--so they can preserve the right to keep and bear arms, and according to this:
To understand the second way you can help, you need to understand how NRA works. You might not realize it, but not one cent of your membership dues can be used for political activities. That means that all the lobbying work the NRA Institute for Legislative Action (NRA-ILA) does in Washington, D.C., and your state capitol is funded by individual donations.
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from http://www.nraila.org/About/NRAILA.aspx , so if I want the NRA to use my money for politics, then I should renew year by year, and donate the $400 to the NRA-ILA, right?
 
You need to include the value of the free leather jacket in your calculation. "A $250 value."

And don't forget the hat.

John
NRA Endowment Member
 
They run "specials" on lifetime upgrades that totally flumux NPV Excel exercises.

Watch your mailbox spam. Sooner or later, you'll get a "Lifetime upgrade" including a 250.00 leather jacket as a premium. I didn't know it was going on when I called but I sure wasn't too proud to take it. :eek: Nice jacket, BTW.

Upgrading from "Life" to "Endowment" is occasionally "on sale", (I've heard).

Any upgrade in membership gives you credit for current membership. IOW, if you upgrade to "Endowment" you get credit for the 750.00 you already paid for life.

In my case, the nice lady at the local gunshows generally talked me into a "25.00 in lieu of 35.00" annual membership often enough, I was already paid 5 years ahead and this counted toward the basic "Life" membership at the full 35.00 annual membership rate, rather than the "gunshow special" 25.00.

I believe I have seen "Annual" increase without a concurrent "Life" increase.

Good luck with feeding all that to Statpac.

I tend to upgrade when Brady litigates against Bushmaster or Teddy is on CSpan. NRA-ILA is separate but you'll have lots of "opportunities" to chip in unless you find the "do not promote" option in member services. I haven't bothered to take the option for no junk mail yet. One does what one can.
 
Whatever it is now and how ever high it seems, in years from now that figure will look like a bargain.

40+ year life member and I don't remember what it cost in the 60's. :D
 
It just means you should've done it sooner! :)

I got offered Life for $500 right after I started on the installment plan to pay $750 at $25/quarter. I had made 2 payments so just sent a check for $450. Maybe see if you can get a deal like that.
 
Actually, the value of a lifetime membership isn't to save money - but to become a fully vested voting member of the NRA. With your lifetime membership you are eligible to run for the Board of Directors, vote for the Board of Directors, and generally carry significantly more weight in expressing your views.
 
Creeping, it's been a few years since I have done NPV calcs, but here is my take based on the number you supplied.

T=69
R=$35
T*R=$2,415 dollars invested assuming a constant of $35 per annum for 69 years.

vs.

$750 one time payment.

How are you saving money?? :confused:

I think you are working it backwards. Try looking at the future value, which would be the amount you have tied up at the end.
 
I'll do a life one day, even though they have basically written off my state, I understand why and they are still the best thing going if not perfect.

I kind of don't mind springing for the one year or thre year thing anyways as I don't mind giving the extra cash it works out to. I even used to send them a few bucks extra here and there especially to the PVF.

I had a friend who passed away recently, he had a life membership since the 1960's, he said NRA probably spent more in time and postage begging him for more $ in mailings that the cost of the original membership!
 
"Upgrading from "Life" to "Endowment" is occasionally "on sale", (I've heard)."

It's true. They mailed me an offer I couldn't refuse. :cool: I like the (yes I know it's not really) free serrated CRKT Crawford/Kasper Folder, too. And I actually got the knife weeks ahead of the packet with my new card, certificate, decals and stuff.

John
Member www.vcdl.org
NRA Endowment Member
 
I signed up for EPL the day after the AWB expired, set Bank of America to send them $25 every month and I should be paid off in two years instead of 8 as the $25/qtr normally takes.

Kharn
 
As an aside, if you have children, one great thing you could do for them is give them a life membership. If you buy a life membership for a child under 18, it's only $550 I believe.

They will thank you many times over the years.....

That's how I got mine. Now all my money goes straight to ILA.
 
You're on the right track. NPV is the right way to look at it but:

1) 10% is way too high by today's standards. Earning 10% in the market today is very difficult to do. You might be able to earn 6 or 7 percent in the bond market but you need big bucks to work bonds. Otherwise you're stuck with bond funds which earn 2 to 4 percent these days for a medium risk fund.

I'd recommend using no more than 4% as the interest rate.

2) Like someone else pointed out assuming the annual rate will remain at $35 is not a good assumption.

Try setting up a cash flow analysis like this. Look at the FV of a stream of $35 Annual payments over how ever long you expect to pay it. Plug in a reasonable rate of return like 4%. Compare that value to a one time payment of $750 and it's FV for the same number of periods as used in the cash flow stream FV calc and compare.

At 4% the $35 dollar payments are worth $3,325.89 at the end of 40 years if invested. The one time payment of $750 would be worth $3600.77 at the end of $40 years. So paying at the $35 rate costs you $3.3K the $750 costs you $3.6K. At 4% it's better to pay the $35 every year - assuming of course interest rates don't change, you can earn 4% and that $35 stays $35.

Fiddle with the numbers and make them fit your view of a reasonable interest rate.

My guess - the NRA has done the analysis and knows the annual payment is a better deal for members but is savvy enough to know most members do not have the financial knowledge to figure that out. The $750 one time looks good superficially but from a strictlly financial view it isn't (but the difference really isn't enoug at the individual level to matter though it definitely is to the NRA if they get thousands or even hundreds of thousands of life members).
 
Both of my children(age 2.5yearsold and 9 months old) are easy pay life menbers. I (age 33 at the time) went for the one time $750 sting and got the very cool leather jacket.

Last November before the Election they were mailing out whats called the "the Legion of Honor" special. You could "up grade" your membership status from Life to Endowment for only $450. Instead of the normal $750 addition to your $750 life membership. Once you reached Emdowment status each additional status was another $250.

So from my original $750 Life membership I add another $900 to get the Benefactor level. So in all I paid about $1400 for Benafactor level (cheaper than the regular $4000!!!). It was an election year and I had the money. (I will never give money to politicians even new comers running) But I will givet to what I feel are good groups. www.aclj.org is another great group. Now I'm just poor. Please send your ckeck to.......
 
Guys,

This is just present value, not NPV. NPV has both cash inflows and outflows, and that is not what we have here.

The initial calculation is correct. PV, rather than FV, is the correct analysis. This isn't an investment that provides a future economic return. It is a current cost.

"So paying at the $35 rate costs you $3.3K the $750 costs you $3.6K."

This is correct, if we are looking at opportunity cost. But we're not. We are looking at what does it cost today. The answer, $349.51 if you you pay annually (and the assumptions are valid) versus $750.




Scott
 
Ha, I bet some of you guys could have made another $350 in the time it's taken to calculate, recalculate and post.

As my granny used to tell me when I got too wrapped up in dollars and cents, "Boy, you know the price of everything and the value of nothing."
We didn't have much money, so it was really more of a family joke than a criticism.

John
Member www.vcdl.org
NRA Endowment Member
 
TaxPHD, thanks for the confirmation! This is the same as a simple annuity, so I just used the annuity formula.

Joe45acp and Werewolf, it would take a 4.4% interest rate to make yearly = life, and that rate is way too low—we are talking LONG TERM interest rates here. Stocks have averaged something like 8% in the last century, including the Great Depression. If you start after the Great Depression, I think it’s 10-12%. So I think 10% is reasonable.

Valkman, paying only $500 after two payments on the $25/quarter for 70 quarters sounds good. Using today’s interests rates, which are like Werewolf says, let’s say 4%, then $25 per quarter for 70 quarters, at 0.9853% (the quarterly rate for 4%) has a present value of $646.58. You paid $25 + $24.76 + $490.29 (last two amounts are discounted) for a total of $540.05. So if I got the same deal, then $540.05 would be $190.53 more than $349.51 (the yearly-renewal present value). So I’d be paying $190.53 for the freebies, deals towards upgrading to endowment, and supporting the NRA in general. That sounds reasonable, I think I may go Lifetime via that method soon…
 
Creeping: You're also assuming, probably incorrectly, that you'll actually invest in stocks that average 10%, or invest in anything at all. Could be you'd just spend the "saved" money on milkshakes. :cool:
 
Stocks have averaged something like 8% in the last century, including the Great Depression. If you start after the Great Depression, I think it’s 10-12%. So I think 10% is reasonable.
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Those numbers are for the entire market and depend a lot on what the entry date is (for example the 10-12% return doesn't include the 70's crash - I believe the 8% does include the crash of 29). Folks who were in the market in the 70's didn't even break even until the early 90's.

You can kinda get market return over the long haul - >40 years by owning at least 20 different stocks - maybe - anyway 20 is the number I was taught as the minimum for a fully diversified portfolio (and that's a theoretical minimum - in real life it'd never fly). To really get the return of the entire market you'd have to buy into an indexed fund unless you're rich and can just buy 100 shares or so of at least 500 companies.

10% is way too high under current conditions and to be honest IMO opinion the boom markets we saw in the 80's and 90's are gone for a minimum of 50 or so years. Look for 5% to 6% market returns. You will be able to do better than that by going with various industries at appropriate times but you better be able to time the market and no one I know or know of has ever been able to do that very well.

Finance guys are generally pretty conservative (comes with playing with other people's money I guess) so I'm gonna stick with 4%. If you really do earn 10% over the next 30 or so years look me up (I'll still be around - very old though) and I'll buy us both a beer. You to savor and me to help with the words I'll be choking on.
 
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