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.

Saturday, May 21, 2011

Stop wasting money - 5 big wasters

Lottery Tickets
Going to win the lottery? If you doin't play you can't win. That's the pitch. So let's say you spend just $5 a weeki on the Super Mega Power Ball because you want to be a multi-millionaire. Well, I got news for you - the states love lotteries because of all those winners. NOT!!! They raise millions every week based on all the losers. The chances of winning the lottery is right up there with "Rapture" happening at 6PM on Saturday May 21.

So save that $5 a week, $22.50 a month or $260 a year.

Informercial Impulse Buys
Those gadgets are soooo tempting. That sealant will seal anything. They should have used it on the levees in New Orleans during Katrina. Let's face it - most of the things depicted on Informercials are never used (or at most used once or twice). Older people seem especially suspect to Infomercials. Learn to say NO. Change the channel. That $10-20 a month could be a nice meal out every month.

Brand Name Groceries
Sure Kellogs corm flakes tase better than the generic brand (or do they?). Truthfully, I have never been able to tell the difference. Does Del Monte can cream corn tase better than the generic brand? Not that I can tell.

OK, maybe you are picky about your food - how about paper products, cleansers, etc - you don't eat them.

You can find many generic substitutes for products you use every day. Often they are 10-20% cheaper than the name brand. So where acceptable substitute generics for name brand products. and save.

Unused Gym Memberships
Have trouble finding time to getting to to the gym. The bill will still come in every month. Maybe it is time to cancel that membership, use the money to buy some weights, etc that are there in the rec room at home when you find 5-10 minutes to exercise. Just a thought - It could save you $300-400 a year.

Bundled Cable, Internet and Phone Services
 You know a good deal when you see it. That cable/internet/phone bundle at $100 is a steal. Or, is it. You rarely use the phone services because you have a great cell phone service. So maybe that phone service is a waste of money?

And all those cable channels - most of which you never watch - maybe you are overpaying for what you need. A basic service may cost less than the bundled price.

And that superfast internet service. Do you use the internet at home that often? Maybe a cheap dial up plan is more suitable based on you use habits.

So how good a deal is that bundled cable/internet/phone service?

Monday, May 16, 2011

The house is on fire - pour gasoline on it to put it out

That seems to be the thinking of politicians in Washington.  Here is the headline:  Social Security TF – “We lost $1.1 Trillion last year!”.  What this means is the Social Security trust fund is $1.1 trillion dollars more underfunded that it was 1 year ago.  They use something called NPV (Net Present Value - a finance term) to determine how many $s is needed today to meet future obligations.  And Social security is $1.1 trillion worst off that it was a year ago as boomers are retiring in larger numbers than anticipated (IMO - largely due to the economic situation).

So what do the DemoRats and RepukeCons do?  They give workers a holiday on the payroll (translated FICA/SS) taxes.  That is the gasoline they are using to put out the fire.  The number of idiots per thousand people in Washington must lead the nation.  I suppose it is a good thing that many of the members of congress got fired in November.  We will see - the new crop may be as big idiots as the old crop.

Sunday, May 8, 2011

Retirement tax planning

Tax season is over. No time like now (while the facts are fresh) to look at what you paid in taxes and the source of those tax hits. What should retirees (or soon to be retirees) consider? Time to plan and implement strategies for 2011 and the future.

Can you answer this question: Will you get a refund or not next year? I won't (but then I plan it that way - I won't owe a lot either). If you don't know the answer now is a good time to answer that question. You can owe up to $1,000 without penalties so you want to make sure that you meet that threshold (make quarterly payments if needed). Be proactive. Look at last year's return. Where did all your tax liability come from? Stop being a victim to taxes and take control of how you pay your taxes to Uncle Sam. Make sure next April is not a huge surprise.

If you feel incapable of analyzing your return maybe it is time to consult a financial planner to go over your most recent tax return and explain in detail where all the tax liability originates. You want to make your cash flow as tax efficient as possible.
We spend a lifetime planning and accumulating funds for retirement and little or no time in planning the distribution of those funds. Do you have a pension? Are you collecting or planning to collect Social Security? How much additional cash flow are you going to need to draw from your assets to maintain an acceptable lifestyle?

What assets are making you Social Security mare taxable? You need to look at sources that are taxable and assets that are non-taxable. For example you pension is probably taxable in part (or all). Withdrawals from regular 401Ks and regular IRAs are taxable. Withdrawals from Roth IRAs (Roth 401Ks) are not taxable. Money from savings (IE CDs) are not taxable (the interest is). So maybe you want to draw down savings generating taxable interest (not that that is a problem with current low interest rates - another reason you may want to reduce the assets in this bucket) . Maybe you have investments you can turn into cash with little or no taxes (sell losers to offset gainers?).

You may want to tap sources of cash flow that will limit the taxes on your Social Security benefits. See prior posts on tax planning and Social Security:


Other strategies may be to take advantage of tax credits by installing solar panels or a wind turbine to generate a tax credit (and reduce future utility costs). Or you need to replace a washer or dryer get one that qualifies for an energy savings tax credit?

Whether to file itemized (or standard deduction) may depend in large part on medical expenses. Planning those expenses into one year to maximize them is a strategy to maximize the benefit especially if a procedure is needed but optional.

This is not meant to be a complete tax guide, but a starting point. At age 70 1/2 you face RMD (Required Minimum Distributions) from IRAs and 401Ks. This RMD needs to be considered in your tax planning today - especially if that minimum is substantial. It might make sense to transfer a sum each year to a Roth and pay the taxes now?