There are quite a few unusual things up here in Alaska. For instance, it is common to be chased by a moose while running at Kincaid Park. You can scoop salmon out of the Kenai river without a rod. And for five months out of the year, the sun barely peeks above the horizon.
The Permanent Fund Dividend
Another unusual thing about Alaska is that we receive a check from the state every year, called the PFD, or permanent fund dividend. The Alaska permanent fund was established in 1976. It was designed to serve as an investment where a certain percentage of oil revenue would be put into a dedicated fund for future generations who would no longer have oil as a revenue source.
The recent decline in oil prices has strained the solvency of the fund, but at this time, every resident of Alaska receives a yearly dividend (payout) from the fund. The payout changes every year, but averages somewhere around $1000. This year, on Thursday, October 5th, every resident of Alaska (including children) received a direct deposit of $1100 into their bank account.
Save your PFD!
Most Alaskans use this boon as an excuse to buy a big screen TV, the newest iPhone, or take a trip to a Hawaii. The weekend after the PFD is issued is often as frantic as Black Friday. However, in the original spirit of the permanent fund, I recommend that every Alaskan save this money for their own future.
Think about it.
If you had saved your personal PFD from the time you were born to the time you were 65 years old, assuming a payout of $1000 per year and a 4% real (after inflation) rate of return, you would have $300,000 dollars.
Similarly, if a family of four saved their $4000 yearly dividend from age 25 to 65, they would have $380,000. Not too shabby!
Alternatively, a college bound student who had saved their yearly $1000 PFD from birth to 18 years old would have $28,000 available for college spending, which just might allow them to graduate from college debt free. Parents, think about this for your kids!
Don’t be Normal
The next time you see that dividend enter your account, don’t even think about heading to Best Buy. Immediately invest it in your Roth IRA or similar retirement account. Your future freedom is at stake and it’s much cooler than the newest iPhone.