Compared to today’s career politicians and movie stars, the amount of money the Reagans left behind after a lifetime of government and glamour practically seems like an embarrassment. Let the leaders of tomorrow take note.
When Nancy Reagan died, estimates of her net worth topped out at around $25 million. That’s a respectable legacy for just about any 94-year-old widow, but it’s barely a typical S&P 500 top executive’s annual salary. And since the house in Bel-Air accounts for around $15 million of that wealth, the comparisons get even worse. Ronald worked hard for 70 years, led the free world for eight of them, won the Cold War and now his widow left behind what a doughnut chain CEO earns in a year or a top star brings down for one film. Maybe that’s the American political system at its finest, keeping the business of running the country separate from the big bucks that feed conflicts of interest. But I wouldn’t be surprised if the next Ronald Reagan stays in Hollywood, leaving the White House to people who already have more cash than they can ever spend. When the wealth gap widened Reagan entered the White House as a self-made member of the economic elite. He did all right as an actor and was paid fairly well to run California. In between rungs on the political ladder, he made money on the celebrity circuit, making speeches and public appearances that netted the 1980 equivalent of maybe $1.3 million a year. He was doing all right. When he won the presidential election, he had about $4 million on the books, about half of it tied up in the family home and the other half allocated between promissory notes and cash. On the Hollywood side, that was still a respectable chunk of cash. A top film might gross $20 million and a young Tom Cruise or other top star might demand $1 million per role. Meanwhile, Reagan was practically royalty in Washington. A decade previous, Nixon got elected president with barely $300,000 to his name, while Ford and Carter weren’t exactly Rockefellers. Even compared to old money, Reagan was set up well. George H.W. Bush might have had family resources to draw on, but his personal balance sheet topped out at maybe half of Reagan’s wealth. Now, of course, all these numbers look minuscule. Even adjusted for inflation, most of them are barely on the upper bound of “high-net-worth” households that a typical advisor works with every day. Nancy Reagan definitely didn’t die a billionaire or even a mega-millionaire. By all accounts she was living on survivor benefits from the state of California – governors’ widows can get full rights, first ladies are at best eligible for $20,000 a year – plus whatever income the investments provide. If not for the famous name and the right to make the federal government pick up her postage costs, on paper she’d look like just about any other entrepreneur’s surviving spouse: another rich old lady spending down the nest egg. As such, her estate planning concerns were a whole lot closer to the upper middle class than a lot of the celebrity billionaires, hedge fund moguls, titans of commerce and well-padded career politicians who dominate today’s headlines. Nancy had to waive her token $20,000 presidential pension because once Ron was gone and his monthly $14,670 checks from the federal government stopped coming, tapping his gubernatorial benefits was a better way to fill any holes in the household budget. Either way, the pension wasn’t a huge amount of income. As a lot of widows learn, replacing a monthly annuity when the primary beneficiary dies can be a huge struggle. Maybe it took the income on the $4 million the Reagans took into the White House and out again to make that happen under the conventional 4% rule. In that scenario, Nancy definitely didn’t get any richer over the last decade. Other people get rich Meanwhile, she got nothing from the foundations she represented and the professional positions she filled over the decades. The $270 million Reagan Foundation pays its staff $5 million a year. Payroll at the Screen Actors Guild, where Nancy was a regular fixture on the board throughout the 1950s, is closing in on $40 million. Not one dime went to her. Hollywood has changed. Julia Roberts is barely half as bankable as she was in the 1990s but still books more money per picture than the Reagans had at the end. Washington has changed too. The typical senator now has more money than George H.W. Bush was worth when the Reagans left the White House, and every administration since then has upped the wealth ante. As far as the front runners in the next election go, we could be watching Donald Trump take on a woman who’s only three times as rich as the Reagans were in 1980. Even on the small end of the estimates, Trump and Clinton over could buy and sell the Reagans a hundred times over. What’s changed is is that while the Reagans cashed in once they left the White House, it was on a scale that looks relatively small today and they didn’t have a whole lot of time to get back to work. Ron and Nancy weren’t rich anymore by the time they went back to California. The blind trust hadn’t even kept up with inflation – yes, an actual threat at the time -- so they reportedly only had another $1 million or so after they spent $3 million on the Bel-Air house. He hit the public speaking circuit at $50,000 per motivational appearance. She joined the board of Revlon in exchange for $100,000 a year and the stock options. With cash coming in from his pensions, they were extremely liquid again by 1990. Then, of course, Ron got sick and Nancy withdrew to take care of him. Unlike the Bushes and Clintons that followed in their footsteps, the Reagans stopped accumulating wealth. It’s natural. He was in his late 70s and she wasn’t a whole lot younger. Their peak earning years were behind them. From a planning point of view, all the presidency really did was delay their retirement. But back then, the Reagans took a lot of grief from the Washington establishment for going back to work at all. Former presidents and their wives were expected to withdraw into the shadows like Harry Truman, work on their memoirs and live on their pension if they didn’t have independent wealth already lined up. The Reagans, for better or worse, made the pursuit of wealth in and out of public service acceptable and ultimately even attractive. Three decades later, the world has not only learned the lesson but taken it to the next level. Now the real question is how a billionaire can even think about running the country without running into massive conflicts of interest – unless he wants to see his net worth drop.
