There have recently been some excellent conversations in the Texas Freemasons group on Facebook. It’s a great group and I strongly recommend you ask to join if you’re a regular mason, especially if you’re also from Texas.
The topics of these discussions have been about dues and endowments. I’ve already written about dues before but I haven’t ever discussed endowed memberships, mainly because it is a Texas issue. Other states may have similar programs but I simply don’t know enough about them to have an opinion.
Disclaimer: I am not an endowed member of any lodge or appendant body for reasons I am about to explain.
How Endowments Work
Endowments are a one-time payment that a Master Mason can pay to his lodge which excludes him from paying dues so long as he is a member of that lodge. The cost of the endowment is at least $500 but the price can be increased by the lodge in increments of $100.
This money is paid to the Grand Lodge of Texas (GLOTX) and then invested. The interest off of these investments is then paid back to the lodge annually. The idea is that this investment will continue to provide the lodge with income long after the brother has passed away.
The returns off of these endowments are estimated to be between 3% and 5%. For the calculations in this article, I will be using 5% for simplicity’s sake.
Each lodge is still responsible for paying the GLOTX per capita for every member, which is currently set at $27.50.
The Short-Term Problem
If a lodge charges the minimum price for endowments ($500) then they will receive an annual return off of each endowed member of ~$25.
Let’s say we have a lodge that charges $100 a year for dues and $500 for an endowment.
This means that instead of receiving the usual amount that lodge receives for dues they have to operate off of the returns for that endowed member. It gets worse than that, however, let’s look at some math.
If a 20-year-old buys an endowment and passes away at 70 years old then his investment will cost the lodge ~$3,750.
As I said, the annual dues are $100 but also remember that the lodge has to pay per capita on all members. This means that out of the $100 the lodge actually receives $72.50 for each dues-paying member.
How much does a lodge actually receive for each endowed member if endowments cost $500?
Remember that at $500 a lodge receives ~$25 per year. After that member’s per capita is paid for the lodge loses ~$2.50 per endowed member. Overall this means that the lodge has lost ~$75.00 ($72.50 + $2.50). If a 20-year-old buys an endowment and passes away at 70 years old then his investment will cost the lodge ~$3,750.
This is fine though because the endowment is supposed to benefit the lodge in the long term, right?
The Long-Term Problem
You don’t have to pay per capita on deceased members anymore, so you’ll be getting ~$25 in returns on that member. At $25 per year, it will only take 150 years before you recoup that $3,750 and you’ll start seeing real returns on that investment!
By the way, $3,750 is a conservative estimate in this scenario because both dues and per capita should be expected to increase during this 50 year period as well. Returns also don’t always pay out for various reasons so this could contribute to increasing this amount.
At $25 per year, it will only take 150 years before you recoup that $3,750 and you’ll start seeing real returns on that investment!
There’s another bigger problem that we have to look at when considering long-term returns as well: inflation.
It’s impossible to predict what the value of a dollar will be 50 or 100 years from now but the thing about inflation is that it always increases which means that a dollar will have less buying power every year.
The best way to predict the future is to look at the past. For the following examples, I’ll be using this government inflation converter to do comparisons.
In this first scenario, the year is 1968. Texas didn’t have an endowment program at the time but this is a non-issue for this example. According to the calculator, $3.44 was the equivalent to $25.00 today. This means that an endowed membership costing ~$68.85 fifty years ago (which would be about $500.00 today) would be earning the lodge it belonged to ~$3.44 in returns.
In the second scenario, it is 1918. A hundred years ago an endowment of ~$29.17 would be earning its lodge about $1.46 per year now.
You see, $25.00 will have less value the more long-term you look at it. Neither $3.44 or $1.46 are very significant returns, even on a yearly basis.
I recognize that my examples are very specific and cannot apply to every lodge. Still, let’s look at the facts:
Endowments currently earn returns at around 5% or $5 for every $100.
Endowments don’t always earn returns if the investments don’t go well.
If you raise dues without raising your endowment then you’ll begin to end up with more endowed membership.
Low endowment prices hurt the lodge in the long term.
Inflation subtracts from the long-term value of your returns.
Endowments at a young age can cost the lodge significantly more than endowments at an older age.
If a lodge charges $100 a year for dues then $500 will only earn ~$25 a year in returns. $1000 endowments earn ~$50 per year. $2000 endowments will earn returns ~$100, which means that the lodge will, on average, earn what the member would have otherwise paid in dues through the returns.
My recommendation is that a lodge set its endowment price to be at least 20 times the annual cost of your dues.
I also want to reiterate the relationship dues have with endowments. If dues are $100 per year then that $500 endowment looks pretty good to many people. If you keep raising dues without increasing your endowment price then you’re going to be looking at a lodge trying to operate off of returns and fundraising.
My recommendation is that a lodge set its endowment price to be at least 20 times the annual cost of your dues. This will keep the returns closest to the cost of the dues at the time the endowment was purchased and help make them more resistant to inflation for a few decades.
I invite anyone to check my math and correct me if I’ve made a mistake. I’m humble enough to admit when I’m wrong!
Thanks for reading!