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REMEMBER: Income affects social security benefits.
The more money you earn, the more you collect from social security.
Peter Diamond, an economist at the Massachusetts Institute of Technology:
Don't mess with success. "In Social Security, we have a basic structure that's been really terrific for this country."
see: Bush pushes for overhaul; others say go slow, if at all; by Jonathan Weisman; USA TODAY; Wednesday, September 5, 2001, page 1A
and 4A.
"...low wage earners don't live as long as wealthier retirees on average."
"...a lot of people don't have the dicipline to save, and others might lose their savings through risky investments."
Social Security is always there and the public seems to want to keep it that way.
Reference: Payroll tax relief isn't high on political agenda, USA Today, September 24, 1999, page 2A
FACT: Sixty six percent of retirees rely on Social Security for at least half of their retirement income.
Planners say that Social Security generally should provide no more than one-third of the average worker's retirement income. Of the remaining to-thirds, one-third should come from pensions and one-third from personal savings.
Reference: Benefit report aids retirement plan by Christine Dugas, USA TODAY, September 24, 1999, Page 3B.
Did you know that most Americans are not covered by a company pension/retirement plan?
According to the U. S. Department of Labor, one out of every two employees is covered by a pension plan.
A pension plan is a regular and dependable source of income from the time you retire until the day you die.
A 401K plan and an IRA are not company pension plans.
Most companies today are eliminating their employee pension plans (because of the high costs) and fooling employees into believing that a company sponsored 401K plan is a company pension plan.
A 401K plan and an IRA are not regular and dependable sources of income from the time you retire until the day you die. If you don't have a pension plan at work, you may not have money in your golden years.
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There are three parts or pillars to your pension plan:
1. Company pension plan - defined benefit plan
2. Your savings plan (see below)
3. Social Security
Of the three, in the vast majority of cases, Social Security is the only part of your retirement plan that has a built in Cost of Living Adjustment (COLA). Without a COLA, you could find yourself out of money within five years after retirement (depending on inflation).
Remember COLA - Cost of Living Adjustment
FIGHT TO RETAIN & MAINTAIN SOCIAL SECURITY!
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Americans pay two types of taxes:
INCOME TAXES - American taxpayers who pay this tax never receive a direct return on their investment.
PAYROLL TAXES - American taxpayers who pay this tax will receive a direct return on their investment in the form of social security benefits.
I think that I would rather pay a payroll tax and get some direct return on my investment than pay an income tax and get absolutely no direct return on my investment.
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To the Editor:
In 2003, I received from the Social Security Administration (SSA) a statement indicating that a little after my 66th birthday, I will begin collecting approximately $2,000 a month in SS benefits. Not counting the SS automatic Cost of Living Adjustments (COLA), I should collect approximately $24,000 per year, every year, until I die.
To date, my father has been collecting Social Security benefits for over 20 years. When he first retired from the LTV/Jones & Laughlin Steel Corporation of Aliquippa, Pa., his retirement plan included healthcare and a monthly pension paycheck twice that of his SS income.
Today, my father's healthcare is no longer paid for by the bankrupt LTV Corporation. In addition, as a result of the COLA, his monthly SS income is twice the monthly pension paycheck that he receives from the Pension Benefit Guarantee Corporation (PBGC). The PBGC is a U.S. government agency that took over the LTV Steel (Republic) pension fund.
This past week, Allan Greenspan dropped a bombshell with his statements concerning the financial condition of SS. Since then, there has been talk by prominent Republicans that Social Security should not be changed for anyone presently on or close to retirement (age of 55 or older).
I am under the age of 55. Like millions of other Americans, I have been paying into the SS System for over 25 years. Worse case scenario, if the Republicans eliminate SS, I will have lost my entire investment into SS. More specifically, like millions of other Americans who will lose their entire investment, I stand to lose over $500,000 in SS retirement income.
As a result of the negative effects of the global economy and free trade, Americans today are losing many of their benefits, and the standard of living for all Americans is declining. Today, about half of all Americans do not have a pension plan. That number is rising.
If SS can be preserved as former President Bill Clinton envisioned, and if I drop dead tomorrow never collecting a dime of the SS benefits, I will die having the satisfaction of knowing that my contributions will provide for (using the words in the Preamble of the Constitution) the prosperity and general welfare of those American that will need SS.
Last year about this time, I wrote the following letter to the editor of The Republican (also, see below): "Let's personalize this scenario. If you are in your 30s, 40s, or 50s, as a result of Bush's poor fiscal policies, the federal government will not have enough money to pay off the national debt and pay Social Security recipients."
When I go to the polling booth in Aliquippa on the first Tuesday in November, I will remember one thing: "Anybody but Bush."
Nikola (Nick) Drobac
Aliquippa, Pa.
The Rupublican News, 4 March 2004
http://www.therepublicannews.com/letters.html
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From the Cumberland Times-News
Monday, April 28, 2003, page 8A
Tax cut now means more taxes to pay in the future
To the Editor:
There have been 2 million jobs lost in the past two years. The Republicans once boldly stated that government cannot create jobs. They stated that only the private sector had the ability to create new jobs.
Now, President Bush has announced that his tax cut will create 1.4 million jobs. That would still leave 600,000 people without work.
Like his last tax cut in 2001 that failed to stimulate the economy and create new jobs, this tax cut proposed by Bush will increase the annual budget deficit thereby increasing the national debt.
In 1994 when the Republicans introduced their infamous contract with America, Newt Gingrich, Trent Lott, Rush Limbaugh, and other Republicans were pushing for a balanced budget amendment.
These and other Republicans demanded a balanced budget every year. The Republicans wanted a balanced budget even at times of war, recession, depression, etc. In short, “no matter what ... .”
Now around $6.4 trillion, this national debt must be paid. In addition, like your credit card bills, interest to be paid on the national debt will also increase as the national debt increases. Interest on the national debt cost American taxpayers $332.5 billion in 2002. This is not constructive; paying high interest rates on the national debt is like throwing money down the drain.
All of this means that future generations of Americans will have their taxes increased to pay for spending that will increase the national debt created by the Bush administration today. This will take more money out of the economy causing future economic slow downs. And to think that Bill Clinton had all of this under control.
Let’s personalize this scenario. If you are in your 30s, 40s, or 50s, as a result of Bush’s poor fiscal policies, the federal government will not have enough money to pay off the national debt and pay future social security recipients.
Knowing that more and more companies are eliminating or watering down their pension plans, and knowing that as many as 66 percent of all American will not have adequate funding in their pension plans, the result will be fewer and fewer people retiring.
This does not make me feel good about the new Bush tax cut plan.
Nikola (Nick) Drobac
Oakland, Maryland
http://www.times-news.com
References:
http://www.publicdebt.treas.gov/opd/opdint.htm
http://www.publicdebt.treas.gov/opd/opdpdodt.htm
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Feds may have to pay Enron's pension tab
Enron's pension plan is underfunded by at least $125 million, and the government might have to step in to pay guaranteed benefits, Steven Kandarian, executive director of the Pension Benefit Guaranty Corp. (PBGC), told a Senate Finance Committee hearing Wednesday.
In addition to a 401(k) plan, Enron also offers a TRADITIONAL PENSION, which is insured by the PBGC.
Enron's plan has about 20,000 participants and $220 million in assets.
The program hasn't stopped paying benefits, and Enron could offer restructuring plans in bankruptcy, so PBGC hasn't stepped in, Kandarian said.
REFERENCE: USA Today, Thursday, February 28, 2002, page 1B
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Social Security checks are distributed to:
1. more than 38 million retirees,their surviving spouses and children;
2. approximately 7 million disabled workers and their families.
Beginning sometime in 2016, the Social Security system will not collect enough in payroll taxes to cover all the benefits it has to pay out.
To cover the financing gap, the Social Security Administration must begin redeeming an expected $4.9 trillion worth of Treasury bonds that Social Security will have accumulated from surpluses it has been running since the mid-1980s.
As the bonds are redeemed, Congress will have to cover the costs by
raising taxes, cutting spending or borrowing money. By 2038, under
the trustees' best guess, the bonds will be exhausted. If nothing
were done, benefits would have to be cut 27% from promised levels to
keep the system afloat.
Reference: Bush pushes for overhaul; others say go slow, if at all; by Jonathan Weisman; USA TODAY; Wednesday, September 5, 2001, page 1A
and 4A.
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Companies are replacing their lifetime pension programs in favor of a more flexible plan called the cash-balance plan.
Companies want you to think that they are making the change because today's workforce is dominated by employees who job hop and see less value in traditional pensions. The real reason: companies save money. When IBM switched, they saved $200 million a year.
Cash-balance plans are controversial. Critics say they can hurt older workers by depriving them of retirement money they had expected under a traditional pension plan. And because the money can be paid out before age 65, workers may spend it rather than investing it for retirement. Or those who lack financial savvy may invest poorly.
Under a traditional defined-benefit pension, retirees typically get monthly payments until they die. The amount is based on the retirees' years at the company and highest pay in the five years before retirement. Employees have to stay with a company most of their careers for the pension to be worth much.
But under cash-balance plans, money accumulates steadily over time.
Employers generally contribute 4% to 7% of a worker's pay each year into an account with a guaranteed rate of return. In most cases, the return is tied to the 30-year Treasury bond, but some companies are giving employees a choice of linking it to the Standard & Poor's 500 index of large company stocks, says Gordon Gould, chief actuary at Towers Perrin.
And when employees change jobs, they generally take a lump-sum payment from the cash-balance plan with them.
Cash-balance plans are a boon to younger workers. A typical person who works for a company at least five years and quits at age 31 would have pension benefits worth 37% of her final pay in a cash balance plan, vs. 7% in a traditional pension, according to a study by the Society of Actuaries.
BY CONTRAST, a typical worker who left at age 61 would have pension benefits worth 147% of his final pay in a cash-balance plan, vs. 213% under a traditional pension, the study says.
The bottom line. The cash balance plan looks good when you're young. But, as you approach retirement years, you'll wish you had the traditional plan. Check back May 4, 2040. You might be surprised to see that a lot of retired workers don't have enough to live on under the cash balance plan.
Reference: IBM retools pensions, New plan sweeping Corporate America, Controversial going mainstream, By Stephanie Armour (Beth Belton and Christine Dugas contributed), USA TODAY, May 4, 1999, Page 1A.
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Social Security tax is regressive - in the menu to the left, find and click on "Taxes" for more information related to payroll taxes, progressive taxes, and regressive taxes.
1999 - the Social Security Tax is 12.4% (or .124) on wages up to $72,600.00.
1998 - the Social Security Tax is 12.4% (or .124) on wages up to $68,400.00.
The employee would pay 50% of the calculated taxable amount; and,
the employer would pay 50% of the calculated taxable amount.
Example:
An employee makes $35,000.00 per year x .124 = $4,340.00 (total Social Security Tax for this one individual).
$4,340.00 / 2 = $2,170.00
Under the present system,
the employees annual salary is reduced by $2,170.00; and,
the employer has a Social Security Tax expense of $2,170.00.
1. Employers don't like paying this amount to the Social Security Administration - it's an added expense of doing business IN THE UNITED STATES - companies would rather keep this amount an increase their bottom line - companies don't care about the workers/employees.
2. Financial planners would love to get their hands on the money that presently goes to the Social Security Administration. Financial planners want to invest your retirement dollars ($) in the stock market or in other investments. That's how they make their money.
Right now, the financial planners can't get to that money. If the government changes the rules, the financial planners and companies would profit at the expense of your retirement.
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Retirement SAVINGS choice - yearly maximum individual contribution:
401(k) - $10,000.00
Keogh - $30,000.00
IRA's:
Education IRA - $500.00 per dependent
Non-deductible IRA - $2,000.00
Roth IRA - $2,000.00
SEP IRA - $30,000.00
Simple IRA - $6,000.00
Spousal IRA - $2,000.00
Traditional IRA - $2,000.00
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Consider this:
You cannot touch your social security contributions.
One in five adults saving for retirement have spent some of their retirement money for the following reasons:
Unexpected expenses - 26%
Pay debt - 21%
Buy house - 20%
Pay for college - 9%
Changed jobs/cashed plan out - 8%
Buy car - 3%
This means less money available at retirement.
(Reference: USA Today, USA Snapshots, Dipping into retirement savings, December 14, 1998, page 1B)
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Feds crack down on 401(k) fees that aren't legit, 65 firms forced to reimburse retirement plans, by Christine Dugas, USA Today, December 5, 2000, page 1B
Pension regulators are taking aim at fees that can cost 401(k) plan participants tens of thousands of dollars over the course of their careers.
The Department of Labor is forcing more employers to refund fees that had been shifted to retirement plans. The effort affects both pensions and 401(k) plans and focuses on a variety of fees, including the cost to shut down a plan.
The enforcement push comes at a time when publicly traded companies, in particular, are under pressure to boost the bottom line.
''There is a tremendous push to cut expenses, and when it comes to the benefits department, there is pressure to put more expenses on retirement plans,'' says Fred Reish, a Los Angeles pension lawyer.
The trend to shift more administrative fees to 401(k) plan assets hurts workers even more now as they brace for major carnage as a result of the market downturn. And as companies siphon more fees from pension surpluses, there will be less available to provide cost of living increases for retirees.
The Labor Department's Kansas City, Mo., regional office began focusing on fees last year. Recently, offices in New York, Atlanta and San Francisco have followed suit. But it is not a national program, says Alan Lebowitz, deputy assistant Labor secretary. In general, federal law says that pension and retirement plan assets can be used only to pay benefits and legitimate expenses to administer the plan.
But industry groups say the agency has been vague about what qualifies as a legitimate expense. ''It's unreasonable to punish people in the absence of clear guidance,'' says Brian Graff, head of the American Society of Pension Actuaries.
Some industry groups complain that the government has changed the rules. ''It's creating havoc,'' says Edward Ferrigno of the Profit Sharing/401(k) Council of America.
Lebowitz says the effort merely reflects a change in focus. And he says the agency is looking into ways to provide more guidance.
Last year, the Kansas City office investigated 100 companies for fee-related infractions and found 65% to be in violation of the law, Lebowitz says. In contrast, 25% of all Labor Department investigations generally find violations.
The agency has not released names of the 65 companies because the cases were voluntarily settled out of court. The firms agreed to reimburse the plans for the expenses, plus interest. The amounts ranged from $20,000 to nearly $1 million, Lebowitz says.
Among the fees that the Labor Department says companies should pay: IRS penalties, the cost to conduct union negotiations and the cost to convert a pension to a cash balance plan, which favors younger workers because benefits build steadily each year.
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...Republicans are committed not just to creating the Social Security lockbox, but to crediting the amounts set aside to the accounts of individual workers.
From:
http://www.house.gov/republican-policy/documents/statements/1999/socsec.htm
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While in office, President Clinton asked Congress to place the interest savings from paying down the national debt into the Social Security Trust Fund. The White House estimated that action would add 54 years to the life of the Fund.
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 drobac@mailcity.com |
Information may be edited before posting.
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