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, April 3, 2011

Boomers and divorce

You see the news.  Al Gore, Tony Danza,  and many many more high profile boomers going through divorces.  Is it just high profile people?   No it isn't.  While the overall divorce rate has decreased recently it has doubled for boomers in their 50s.  This means 300,000 divorces this year for those in their 50s.

Divorce at any age can be rough to handle emotionally.  But for younger people with few assets and no children it is simpler.  Those in their 50s often have accumulated assets and this makes it not only emotionally  tough, but handled poorly it can be financially disastrous.  If you are in your 50s you have little time to recover for a severe financial setback, so it is critical you compartmentalize the emotions, the anger and focus on the financial implications and make the best deal you can.  I am not talking about being unfair - but about making sure you consider all parts of any financial settlement. 

Say there is a $300k house paid for and there is $350k in 401k/IRA asset plus some cash savings ($100k in a CD).  I am keeping it simple for the sake of illustration (your situation is probably more complicated).  She wants the house and  half the cash savings  and $25k IRA that is in her name (total $375k).   You get your  retirement savings ($325k)  and half the other cash savings ($50k) or $375K of assets. 

Sounds fair - doesn't it?  Wait a minute - hold your horses.  Most of the assets you get don't yet have taxes paid on them.  So that $325k of retirement assets may be worth only $250k (or less) net of  taxes.   So as you can see it can get complicated and you may need professional help in achieving an equitable settlement. 

If there are under age children involved this adds considerably to the complications (in most states there are guidelines and forms similar to tax forms to figure out what each partner should contribute to support),  This at least provides a good negotiating starting point. 

If alimony is involved then Social Security benefits should not be ignored,  if you were married at least 10 years the spouse is able to collect on the other spouse's earning record if it results in a higher level of benefits.

I am sure I have only scratched the surface.  Having gone through this process in my late 40s I can assure you reaching an agreement may take time.  My advice to you is not let the emotional aspect override your common sense.  Don't do as many I have seen do (go on a spending spree with the credit card or start hanging out and keeping late hours at the local bar and letting your career suffer).  It will be a tough slog but you will handle it better if you compartmentalize, focus on your career and get through each day and each week without making any bad decisions.

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