My Faith-Based Retirement

[lektrode]

Re: My Faith-Based Retirement

True. It's kind of fun to compare the size of Social Security's Trust Fund (~$2.678T) versus its annual burn rate (~$736B). People who think their "savings" are tied up in those Trust Funds would be dismayed by how much has been "saved".

more like squandered.... since there is no more 'trust fund'?

Also, I found this interesting summary of a paper about the redistributive nature of Social Security. I guess the interesting thing is that although the formal rates of contribution and benefits are fairly progressive, they become less so when one takes into account the differential in life expectancy between the economic classes. The system is set up to subsidize the poor, but the poor don't live as long as the rich, so in aggregate they don't collect as much of a subsidy as implied by the rates.

precisely - generally those able to make it to 'old age' enjoyed a fairly high standard of living (and safer, less health-threatening) thru most of their careers - not likely they were construction or mining workers (auto assembly liners maybe ;)

and FICA is only 'progressive' up to 106k - and those of us who make less than that (particularly if self-employed) pay a much higher % of our incomes - it galls me no end to think that i get to pay a full 15-point-whatever on every dollar i make, while someone in the 7figure range pays a pittance (something that isnt even discussed on issues of 'fairness of the tax system')

[Milton Kuo]

Re: My Faith-Based Retirement

here's another issue/problem that the use of clever synonyms by the political class has created:

instead of referring to what FICA funds as 'retirement insurance' or 'old-age-survival insurance' its called 'social security' thus creating in the minds of some that they are entitled to it because 'its their money'

why would or SHOULD people think they are entitled to a guaranteed payout for paying into something called 'insurance' ?

Because if Social Security is merely insurance, it is beyond excessive for it to extract approximately $13,000 per year from someone who has never earned a large income but through a high personal savings rate (austerity) and reasonably good investments (tremendous amounts of time learning to manage money) is considered wealthy?

[dcarrigg]

Re: My Faith-Based Retirement

and i also think its hilarious the present discussions of raising the retirement age, when its those most likely to arrive at that age, while still able to work, that wont need it (the whitecollar/political class vs people who physically labor for a living and are lucky to be even able to still walk upright without pain meds)

and hey!
i'm still holding my own and worried about making it to 67 (and being able to work til 70)

To play off of a phrase from Hanns Johst:

When I hear the words "life expectancy," I reach for my revolver.

This goes double if it's a person in a suit in front of a powerpoint presentation who utters the words.

[jiimbergin]

Re: My Faith-Based Retirement

To play off of a phrase from Hanns Johst:

When I hear the words "life expectancy," I reach for my revolver.

This goes double if it's a person in a suit in front of a powerpoint presentation who utters the words.

Yes, life expectancy is a very dangerous concept, because it is never used correctly. First of all it is always life expectancy at birth that is quoted. Each year you live, your ulitmate life expectancy age increases. By the time you reach 65, life expectancy is in the 80s. Also it varies by so many factors that it is truly meaningless. I too cringe when I hear that term in any article, for I know for sure whatever is being discussed the conclusion will be incorrect.

[flintlock]

Re: My Faith-Based Retirement

The problem with means testing is that a lot of people (especially seniors) believe that they have paid in a lot of money and it is theirs at retirement. Had the benefits simply been funded out of taxes instead of something called Federal Insurance Contribution Act then people might not have believed that it was their money in the fund

Only it would not have been politically possible to "sell" this to the US public as a tax, of course. They had to sell it as an "investment". All Ponzi schemes start out that way. The weasel politicians always have to sell programs like this as win/win when in fact they are nothing more than redistribution of wealth. We are fast approaching the point where all these back door taxes, hidden taxes and fees, and their ilk will no longer fool the American people. Its a testament to our stupidity that they've gotten away with it this long.

Nothing changes the basic fact that the math simply will not work. A small minority cannot be expected to support the rest indefinitely. Its all well and good in theory to just raise taxes but rarely works well in practice. We have a 14+ trillion debt that is the Elephant in the room no one wants to really address. I'm afraid means testing will be a necessity for SS and Medicare, but how long the US can last after that is questionable. Even most of our so called "wealthy" may find a hard time making ends meet in retirement without Medicare and SS. ( We tend to confuse wealth with high income).We have a ridiculous standard of living that is completely unsustainable and was only possible through mortgaging our future. Now the future is arriving. History will show America had a lifestyle bubble. It certainly will not be the same country it was in its heyday. And its by no means just the USA. The entire world has been on a bender and will have to pay the price for it soon enough. I expect it won't be pretty.

[flintlock]

Re: My Faith-Based Retirement

Because if Social Security is merely insurance, it is beyond excessive for it to extract approximately $13,000 per year from someone who has never earned a large income but through a high personal savings rate (austerity) and reasonably good investments (tremendous amounts of time learning to manage money) is considered wealthy?

Exactly. Its fair to expect a return because that is what was promised. SS was not sold as an insurance policy, it was sold to Americans as forced savings. To claim anything else is revisionist at best. Everyone was promised a payout. It would not have passed otherwise.

Now one could claim the payout vs what was paid in, especially for people who got in early, is unrealistic and they should have known better. But the irony is it will probably be the people who paid in the most( current earners) who get the shaft, not some old timer who retired in 1974. Hopefully, someday, Americans will quit settling for this "whoops, we goofed" excuse given by their politicians. They knew full well what they were doing, if perhaps they didn't realize how far off the mark they would be.

All you can do today is to try your best. But very few in the US will have any certain degree of financial "security" in the future I'm afraid. If the government doesn't confiscate what you have, they'll ruin the value of what you do own. At the very least they are cooking up a Dystopian world of uncertainty and chaos.

But it could be worse. At least its not the 14th century Europe or something like that. Worst case we learn to make do with less.

[vinoveri]

Re: My Faith-Based Retirement

Not such a relevant concern now the SS is cash flow negative. Everything that goes in comes out the same year, so no pot of money for Wall Street to manage.

Ah, reason and common sense again.
Let's not let that interfere with financial innovation, to wit, SS expenditures funded by issuance of Treasury bond @ <1% p.a. interest, and let Wall Street use the payroll funds to generate a 4-6% return in equities et cet. Voila 3-5 % free money to strengthen the SS system. Wow, we can create money, increase the market valuation, rising tide all boats and all that .... good show!

[Polish_Silver]

An even bigger problem!

My Faith-Based Retirement

Nocera identifies several problems with 401k's,

1) people don't save enough
2) They don't manager thier savings well.

However, there is an even bigger problem, described by Thornton Parker In "What if Boomer's can't retire ?".

Parker explains that, even if all publicly traded securities were owned by retirement plans, and divided equally among all retirees, and all profits were used to pay dividends, there would not be enough money to provide adequate income. People would have to liquidate their holdings for income, which would create a long term bear market in prices. So neither capital appreciation nor current income would save the day.

Of course, a few investors could pick the right stocks and time the market, but everyone else would be poor.

Parkers solution is to increase investments in non-wall street type ventures, including local businesses.
He may be partly right, but when I inquire into buying a local business, I get scared. A lawyer told me they keep three sets of books, one for the tax man, one for the buyer, and one that's real.

My solution is straightforward savings, in cash or precious metals. For this to work, people will have to lower their standard of living to the point where they can save more. Responsible taxation would help too.

What makes it all worse are underlying macro factors: slow or negative population growth, high public and private sector debt, and depleting oil.

My parents hit the sweet spot of the bond bull, CA real estate bull, and the entitlements. Fixed income investments worked out OK for them.

Kotlikoff has a plan similiar to "G", but I can't find a good link. It is a "forced savings/investment" scheme. But since the investments are in indexes and global REIT's, it is not a wall street feedbag.

[cindykimlisa]

Re: My Faith-Based Retirement

Greetings all

Interesting topic, I would like to weigh in on as one with a faith based occupation (clergy).

I am 60 and retired first at 49 to leave the business world and go into the ministry.

I always had the same strategy from 1972 til about 2001. Save as much as you can tax deferred. Instead of "Value, growth, balanced, foreign, etc. " my strategy has always been capital preservation using bonds,cds, etc. I also established a comfortable lifestyle in 1976 and have lived at that lifestyle since then generally speaking. I still live in my first home I paid $31,500 for in 1976. Not keeping up with the Jones and understanding money is money and credit is not money has worked good for my wife and me.

All that being, said here is what I learned early on about the stock market. When I made my first purchase, the broker made a good commission. When I sold and lost money, the broker/ maybe brokers still made a good commission, even though their expert advice was terrible.

Pretty soon I became a real estate broker for nearly thirty years. Things worked good. By the way I am a Christian and have done what I can along the way to serve my fellow man and woman. God has been good and has blessed my faith in Him, not in brokers or government promises.

Right now I am living a comfortable 1972 lifestyle adjusted for inflation. I have recently chose to go back to work full time in ministry after being retired 11 years and working part time in ministry.

Another key component to my strategy is reading and understanding the tax code. Most people are clueless about taxes on Social Security. With a little long range planning a lot of taxes can be avoided on SS.

[astonas]

Re: My Faith-Based Retirement

Another key component to my strategy is reading and understanding the tax code. Most people are clueless about taxes on Social Security. With a little long range planning a lot of taxes can be avoided on SS.

Thanks for the information! What in particular did you do to avoid taxes on SS?

I'm still quite a long way from retirement, but if there's planning I can do now, I'm always open to learn more about that.