Where the money is....

When Willie Sutton bank robber was asked why he robbed banks he said "Because that is where the money is". How things have changed.

The banker's Bank the Federal Reserve is now robbing savers with near zero interest rates. Why? Because that is where the money is. It is a hidden tax. No law was passed. Still you are having the your money stolen through near zero interest rates to restore bank's balance sheets. If you had $300,000 in an IRA (or 401k) earning 5% in 2007 ($18,000 a year with nearly no risk) you are lucky if you earn half that today. That is a $9,000 or more of hidden taxes.

I hope to expose these types of actions and others by the FED and government. Boomers need to be vigilant - because their savings is where the money is. I will also delve into other areas of finances of interest to Boomers.

Sunday, March 13, 2011

Tax Social Security like other Defined Benefit Pension Plans?

Sounds like a plan to me.  Forget you paid taxes once on that money when it was contributed to Social Security - Uncle Sam Wants Your Money!!!  Think this is crazy?

The Congressional Budget Office came out with a thick report titled:

In here were potential expenditure reductions and revenue enhancers.  This is the one you are going to love if you are receiving Social Security (or expect to in the near future):

Tax Social Security the Same Way That Distributions from Defined-Benefit Pensions Are Taxed = +438b

Be vigilant, raise hell with your congressional representatives.

Lies, damn lies, DC lies

Saw a poll that a large percent  of folks believe we can balance the budget by cutting out waste and unnecessary spending.  Now to listen to the talking heads on TV you would think this is crazy.  But is it?

There are lies - like when you child says they picked up their room.  There are damn lies.  Like when the wife says that outfit cost half of what it really cost, or he tells the wife they spent the evening at a sports bar watching "sports"  (that was no sports bar  sport and  lap dancing is not a sport).  Then there are DC lies.  The deficit is 1.5 TRILLION for this fiscal year and 42 cents of every dollar spent is borrowed and we are being told it is a Medicare or Social Security spending problem. 

So who is right - the common folks or the DCers?  In 2007 the deficit was under $200 billion.  We can do the math - that is $1.1 trillion less than this year's deficit.  There is no way that Medicare and Social Security account for that huge an increase in spending.   There is only on conclusion - spending is out of control in DC and needs to be reined in (back to 2007 levels).  There is a lot of money being spent irresponsibly as wells as waste and fraud. 

The RepukeCons want to cut $61 billions and the DemoRats less than $10 billion between now and Oct (end of the fiscal year).    DC - we are not that stupid - the deficit is $1.1 TRILLION more than 2007.  Now the "folks" may be wrong that the problem can be fixed solely by reducing spending and elimination of waste  but they are  80% right.  And who knows - we get the government off business's back maybe growth would bridge the other 20%. Once we fix that 80% we can talk about fixing the other 20% (Medicare, Social Security, taking troops out of Europe, Japan, South Korea and closing half of the 800 overseas bases).

Trust the common sense of the folks.  It beats the politician "intelligence" in DC every time.

Let your Senators and representatives know - GET WITH THE DAMN PROGRAM OR WE WILL FIRE YOU.   It doesn't matter which party you are affiliated with - we will FIRE you!!!!


The Endgame - We have seen the script

You want to see the likely future outcome and what lies ahead.  You have seen the script - it is Japan and the last 20 years. 

"I think a long-term chart of the Nikkei says it all. There was a massive bubble in stocks and real estate that began in 1982 and climaxed in 1989. While stocks quickly corrected to flush excesses out of the system, the government elected to take the "easy" way out of the debt bubble, lowering interest rates to insane levels in the hopes that inflation would cause the debt bubble to evaporate. Or to say it another way, they stole from savers in order to bail out gamblers who lost their bets."


To understand the future you need to understand history.   In Japan - by 1990 we had a situation very much like what we see today in the US.  The  monetary authorities here have lowered interest rates to insane levels  (just like they did in Japan).  Instead of flushing the crap out of the system they continue to extend and pretend.  Soon we will be in Phase II - pray and delay.

It is time to demand your elected officials do the right things not the easy things.  It won't be pretty, it won't be easy, but it is the right thing - let the economy flush.

Friday, March 4, 2011

I can't live on Social Security Benefits due at 62

How can I afford to retire now?

I will be 62 soon, but I am a minimum wage earner. Never earned much more than minimum wage. I take home about $1,100 after deductions for FICA/Medicare and health insurance. My Social Security will be only $815 if I retire at 62 and I barely pay my bills as it is. I have no retirement savings. I see no way I can retire at 62. Please advise. Won't I need to wait until I get the maximum benefit to retire?

There is good news and there is bad news. You probably cannot afford to retire at 62 if you need $1,100 a month to pay basic living expenses. So you keep working. Now for the good news - working does not bar you from drawing Social Security benefits starting at 62.

According to WWW.SSA.GOV here is how it works:

 "How earnings affect your benefits:

You can continue to work and still get Social Security retirement benefits. Your earnings in (and after) the month you reach your full retirement age will not affect your Social Security benefits. However, your benefits will be reduced if your earnings exceed certain limits for the months before you reach your full retirement age. (The full retirement age is 66 for people born in 1943-1954 and will gradually increase to 67 for people born in 1960 or later.)

If you are younger than full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit ($14,160 in 2010).

In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn over a different limit ($37,680 in 2010) until the month you reach full retirement age. Then you get your full Social Security benefit payments, no matter how much you earn.

If you are younger than full retirement age and some of your benefits are withheld because your earnings are more than $14,160, there is some good news. When you reach full retirement age, your benefits will be increased to take into account those months in which you received no benefit or reduced benefits.

Also, any wages you earn after signing up for Social Security may increase your overall average earnings, and your benefit probably will increase."

The Analysis:

So you can receive benefits and work. In general the minimum wage is $7.25 an hour. A work year is about 2080 hours - so your earnings are around $15,080 a year. You are allowed to earn $14,160 with no reduction in benefits. So you will exceed that by $960. This will result in a decrease in your benefits of $480 a year (or $40 a month on average). So you continue bringing home $1,100 a month from work and get around $775 in benefits each month.

Finally you may be able to save something to fund retirement for that day when you are no longer able to work if you manage your finances carefully. If you are married and your wife is of age she may also receive benefits (spousal benefits if she has no work history).

Taking benefits at 62 may reduce your benefits somewhat at full retirement age around 66 (maximum benefits at age 70), but since you continue to contribute to FICA by working the hit will not be as substantial as might seem since benefits will be adjusted upwards based on your continued contributions.

So to answer your question - should you wait until you can receive maximum benefits to start receiving Social Security benefits. Absolutely not. Apply for benefits as soon as possible and continue working. Handle the extra money carefully and save some for when you finally do quit work.
If you don't start and die before you could draw maximum benefits - the money evaporates (it is gone). If it is in your bank account at least your spouse or children can benefit from it. 

I can think of no reason for you to wait. The fact you have no retirement savings is a good reason to start receiving benefits as soon as possible. Of course for others earning more (say $10-12 an hour) the analysis may differ and you probably should talk to an advisor and run the numbers. . .