Tag Archives: Social Security

Is Social Security a Massive Ponzi Scheme?

I received an interesting email. Here it is:

THE ONLY THING WRONG WITH THE GOVERNMENT’S CALCULATION OF AVAILABLE SOCIAL SECURITY IS THEY FORGOT TO FIGURE IN THE PEOPLE WHO DIED BEFORE THEY EVER COLLECTED A SOCIAL SECURITY CHECK!!!

WHERE DID THAT MONEY GO?

Remember, not only did you and I contribute to Social Security but your employer did, too.

It totaled 15% of your income before taxes.

If you averaged only $30K over your working life, that’s close to $220,500.

Read that again.

Did you see where the Government paid in one single penny?

We are talking about the money you and your employer put in a Government bank to ensure you and me that we would have a retirement check from the money we put in, not the Government.

Now they are calling the money we put in an entitlement when we reach the age to take it back.

If you calculate the future invested value of $4,500 per year (yours & your employer’s contribution) at a simple 5% interest (less than what the Government pays on the money that it borrows) –

After 49 years of working you’d have $892,919.98 . If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit!

If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month.

THE FOLKS IN WASHINGTON HAVE PULLED OFF A BIGGER PONZI SCHEME THAN BERNIE MADOFF EVER DID.

Entitlement my foot; I paid cash for my social security insurance!

Just because they borrowed the money for other government spending, doesn’t make my benefits some kind of charity or handout!!

Remember Congressional benefits? — free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days.

Now that’s welfare, and they have the nerve to call my social security retirement payments entitlements?

They call Social Security and Medicare an entitlement even though most of us have been paying for it all our working lives, and now,when it’s time for us to collect, the government is running out of money.

America’s Retirement Disaster: 50% of Boomers have less than $12k in retirement savings

A disaster is in wait for Americans in their retirement years.

Put simply:

Too many Americans are dependent on the government (Social Security and public pensions – more on that below), instead of putting aside savings to ensure our financial security in our “golden” years.

Jim Quinn of The Burning Platform blog, has put together a bar graph that shows how perilously little Americans have in retirement savings:

After a lifetime (presumably) of working, the median Boomer household (age 55 to 64), has managed to accumulate only $12,000 in retirement savings. $12,000 isn’t even enough to support one person, much less a household, for a year. Since “median” is that figure that divides a population into two halves, this means that 50% of Americans age 55 to 64 have less than $12,000 saved for their retirement.

As Quinn colorfully puts it: “These 55 to 64 year olds are up shits creek without a paddle. No wonder the percentage of over 55 people working is at an all-time high.”

But it’s not just the Boomers: Every age bracket has been living in a land of delusion. The median retirement savings of all non-retirement age Americans, 25 to 64 years old, is only $3,000. The entire country has bought into the ”live for today” mantra.

And if you think you can rely on government in your “golden” years, think again.

To begin, Social Security is broke. There is no “trust fund” because for years, the federal government has been dipping into that “trust fund” to make up for its budget deficits. The “trust fund” is an accounting fiction that exists only on paper.

To make matters worse, even if we go by the mythical “trust fund,” Social Security will go broke in 4 years, by 2017, when it will pay out more in benefits than it takes in. In the 1950s, there were roughly 5 workers for every retiree; today, it is roughly half of that. With 78 million Baby Boomers moving into retirement, the demands on Social Security will be even greater in the coming years ahead. With demographics heading in the wrong direction and a much slower-growth economy, the Social Security Administration has moved up its estimate that the Social Security Fund will be exhausted entirely by 2033.

The first Social Security program to go broke will  be Social Security Disability (SSD), which has seen the biggest number of recipients dependents in the 4 years 8 months of the Obama presidency. Today, more than 28 million Americans who are of working age claim to have a disability – a level higher than at any other time in recorded history. But there are good reasons for us to question how many of the 28 million SSD recipients are actually disabled. (See Many on Social Security Disability can but don’t want to work,” Aug. 3, 2013.)

According to a Social Security trustees report released in April 2012, SSD will run out of cash in three years, by 2016, when incoming payroll-tax revenue will cover only 79% of SSD benefits. Because the plan is barred from running a deficit, disability aid would have to be cut, which means SSD recipients will get only about 80% of the monthly payments they used to get.

Then there’s public or government pension, whether federal, state, or local.

As I explained in my post of August 18, 2013 (“Why there will be many more Detroits – in one chart”) and as the graph below shows, public employees pensions are, without exception, severely underfunded because they are based on the expectation that whatever money that’s paid into those funds gets 7% to 8% interest. The only problem is the Federal Reserve is and has been suppressing interest rates to an anemic 1-2% because if the Federal Reserve lets interest rates go up, our already gargantuan national debt of nearly $17 trillion (some say it’s actually $70 trillion) will balloon even quicker.

underfunded pensionsJim Quinn grimly concludes:

“We have trillions in unfunded Social Security obligations that won’t be paid. Cities and States have trillions in unfunded pension and health benefits that won’t be paid. The government and its citizens have lived above their means for decades and haven’t saved for a rainy day or their futures. [...] There is no possible scenario where this ends well or can be solved by another government solution. It’s too late.”

Is it too late?

The one chance we have is if we get a pro-growth leader in the White House and a pro-growth party in both houses of  Congress.

America is rich in energy resources. We can be independent in energy if we want to, instead of being reliant on oil imports from the troublesome Middle East.

If we give free rein to oil exploration and development — instead of the Obama regime’s obstruction and hampering, in pursuit of the chimera of “green” energy by wasting millions of taxpayer dollars on unprofitable, corrupt, and ultimately bankrupt solar energy ventures like Solyndra (which alone received $535 million in never-repaid “loans” from the POS) — we can not only become energy independent but also create millions of jobs. The economy will grow and with that, we can grow ourselves out of our unfunded liabilities and our national debt.

We had that chance in 2012 with Mitt Romney. :(

See also:

~Eowyn

Wednesday Morning Quickie.

This Just In!!!   Check Your Mail..

Just wanted to let you know – today I received my 2013 Social Security
Stimulus Package. It contained two tomato seeds, cornbread mix, two
discount coupons to KFC, an ‘Obama Hope & Change’ bumper sticker, a prayer rug, a machine to blow smoke up my arse and a ‘Blame it on Bush’
poster for the front yard. The directions were in Spanish.
Yours should arrive soon.

~Steve~

H/T   Jean

Social Security benefits: pay more for less

Is Social Security still a good deal for workers?

WASHINGTON (AP)People retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.

Previous generations got a much better bargain, mainly because payroll taxes were very low when Social Security was enacted in the 1930s and remained so for decades.

“For the early generations, it was an incredibly good deal,” said Andrew Biggs, a former deputy Social Security commissioner who is now a scholar at the American Enterprise Institute. “The government gave you free money and getting free money is popular.”

If you retired in 1960, you could expect to get back seven times more in benefits than you paid in Social Security taxes, and more if you were a low-income worker, as long you made it to age 78 for men and 81 for women.

As recently as 1985, workers at every income level could retire and expect to get more in benefits than they paid in Social Security taxes, though they didn’t do quite as well as their parents and grandparents.

Not anymore.  A married couple retiring last year after both spouses earned average lifetime wages paid about $598,000 in Social Security taxes during their careers. They can expect to collect about $556,000 in benefits, if the man lives to 82 and the woman lives to 85, according to a 2011 study by the Urban Institute, a Washington think tank.

Social Security benefits are progressive, so most low-income workers retiring today still will get slightly more in benefits than they paid in taxes. Most high-income workers started getting less in benefits than they paid in taxes in the 1990s, according to data from the Social Security Administration.

The shift among middle-income workers is happening just as millions of baby boomers are reaching retirement, leaving relatively fewer workers behind to pay into the system. It’s coming at a critical time for Social Security, the federal government’s largest program.

The trustees who oversee Social Security say its funds, which have been built up over the past 30 years with surplus payroll taxes, will run dry in 2033 unless Congress acts. At that point, payroll taxes would provide enough revenue each year to pay about 75 percent of benefits.

To cover the shortfall, future retirees probably will have to pay higher taxes while they are working, accept lower benefits after they retire, or some combination of both.

“Future generations are going to do worse because either they are going to get fewer benefits or they are going to pay higher taxes,” said Eugene Steuerle, a former Treasury official who has studied the issue as a fellow at the Urban Institute.

How can you get a better return on your Social Security taxes?

Live longer. Benefit estimates are based on life expectancy. For those turning 65 this year, Social Security expects women to live 20 more years and men to live 17.8 more.

But returns alone don’t fully explain the value of Social Security, which has features that aren’t available in typical private-sector retirement plans, said David Certner, legislative policy director for AARP.

Spouses can get benefits even if they never earned wages. Children can get benefits if they have a working parent who dies. People who are too disabled to work can get benefits for life.

Because of spousal benefits, most married couples with only one wage earner will continue to get more in benefits than they pay in taxes for the foreseeable future.

“You are buying this lifetime inflation-protected benefit that you can never run out of and that will always be there for you,” Certner said. “It protects your spouse, protects your family and protects you from disability.”

Certner noted that private pensions, retirement savings and home values took a big hit when the economy collapsed, putting a dent in the retirement plans of many Americans.

“When you have that combination of factors, Social Security becomes more and more important,” Certner said. Social Security is financed by a 12.4 percent tax on wages. Workers pay half and their employers pay the other half. Self-employed workers pay the full 12.4 percent.

The tax is applied to the first $110,100 of a worker’s wages, a level that increases each year with inflation. For 2011 and 2012, the tax rate for employees was reduced to 4.2 percent, but is scheduled to return to 6.2 percent in January.

The payroll tax rate was only 2 percent in 1937, the first year Social Security taxes were levied. It didn’t surpass 6 percent until 1962.

About 56 million people now collect Social Security benefits, a number that is projected to grow to 91 million in 2035. Monthly benefits average $1,235 for retired workers and $1,111 for disabled workers.

I’m not holding my breath that I may ever see any of my Social Security benefits.  In four years, by 2016, the first of the Social Security funds — SS disability — will be in full collapse.

DCG

See any seniors?

SEE ANY GRAY HAIR ? ?

See any gray or white hair or any older retired folks amongst the crowd?
Social Security Office In Milwaukee

A friend went to the social security office this week to file for Medicare because it is the only way to keep medical insurance when you turn 65. He took a picture of the waiting room. Please tell me if you can find a retired person in the place!

It’s called “disability” insurance! You no longer have to wonder why SS is broke!
These people do not pay into the system nor are they disabled!

Our country is going broke on this fraud! Go down to your SS office and check it out!

Remember in November 2012!

h/t Anon

DCG

America is in a Depression, not a Recession

The Liberal Establishment Media keep singing their happy tune that the U.S. economy is improving, albeit slowly. But a liberal economist says otherwise.

Paul Krugman is a Nobel Prize-winning economist, an op-ed columnist at the New York Times, and an Obama supporter. And Paul Krugman thinks we are in a depression.

On December 11, 2011, Krugman wrote: “It’s time to start calling the current situation what it is: a depression.” Most recently, in his column of May 10, 2012, Krugman thinks matters have not improved. As he puts it: “How did we get stuck in what now can only be called a depression?”

When we think “depression,” images of the Great Depression’s soup and bread lines in the 1930s automatically spring to mind. We don’t see people lining up in those lines today, so this must mean America is not in a depression!

Wrong.

The reason why we don’t see those lines is because those who otherwise would be standing in those lines are getting food from the welfare state’s profusion of programs — food stamps, unemployment benefits, Aid to Families with Dependent Children, Social Security Disability, student loans…. Americans’ dependency on Government programs currently makes up as much as 35% of personal incomes.

In other words, what we have is a Hidden Depression.

Lance Roberts writes in his article on the Hidden Depression for StreetTalkLive, May 14, 2012:

Behind the mainstream media’s attention to the daily economic numbers there is a hidden economic depression running along the underbelly of the country.  High levels of unemployment have kept pressures on wages even as work hours have lengthened.  This, of course, is assuming full time employment.  In reality many individuals are working but either part-time at one or more jobs to make ends meet or working full-time as a temporary hire at reduced wage levels.  The declines in real income are evident.  The burgeoning labor pool and demand for work is suppressing wages as companies opt for increasing productivity and streamlining employment to protect corporate profit margins.  However, as the cost of living is affected by the rising food, energy and healthcare prices without a compensatory increase in incomes – more families are forced to turn to assistance in order to survive.

[...] Without government largesse many individuals would literally be living on the street.  The chart [below] shows all the government “welfare” programs and current levels to date.  The black line represents the sum of the underlying sub-components.  While unemployment insurance has tapered off after its sharp rise post the financial crisis, social security, Medicaid, Veterans’ benefits and other social benefits have continued to rise.   The government “safety net” is already under tremendous strain as the number of “workers” supporting the system has fallen markedly over the last 30 years.

[...] For the average person these social benefits, however, are critical to their survival as they make up more than 22.5% of real disposable personal incomes.  With 1/5 of incomes dependent on government transfers it is not surprising that the economy continues to struggle as recycled tax dollars used for consumption purposes have virtually no impact on the overall economy.

More disturbing is that this huge increase in demand on “welfare” support in its various forms does not include the more than 46 million Americans which are dependent on the Supplemental Nutrition Assistance Program (SNAP), or more affectionately known as “food stamps.” Without this assistance the basic needs of survival for many families can not be met. 

[...]the reality is that recycled tax dollars have been proven to generate little or no economic growth which is evident from recent GDP data.  Astoundingly the total benefits in 2011 rose above $71 Billion which was a 107% increase from 2008.  Yet we are told the economy is improving?

[...] As the ability to source income from traditional support programs becomes limited or exhausted – individuals can become very creative.  Two of the most interesting areas that have been tapped to support basic consumption needs since the beginning of the “great recession”is student loans and disability insurance.

The number of individuals claiming disability has surged to the highest levels on record since beginning of the last recession. What is most notable, however, is when the surge of individuals claiming disability began – exactly two years from the beginning of the financial crisis. This is when the 2 years of extended unemployment insurance began to run out. [...] Today, more than 28 million Americans who are of working age have a disability – a level higher than at any other time in recorded history.

However, if you cannot claim disability why not just say you are going back to school?  [...] The chart [below] shows only the federal student loan program which has surged 400% since the end of the last recession and is now the federal governments largest financial asset comprising 31% of its balance sheet.  However, in reality, student loan debt in total, which including private label loan programs, has now reached $1 trillion.

[...] Even as the media trumpets that the Fed has saved the economy from a “depression,” it might just be a statistical victory at best.  The government may say this is not the 1930′s where bread lines formed outside the corner soup kitchen, however, for many American’s the only difference is that they are found at the mailbox and online instead.

~End of Lance Roberts’ article~

+++

America’s national debt now exceeds our GDP and is closing in on $16 trillion. It doesn’t take an Albert Einstein to know that our super-extended welfare state cannot continue as it is. Indeed the danger signs are already visible.

In four years, by 2016, the first of the Social Security funds — SS disability — will be in full collapse.

Brian Faler reports for The Washington Post, May 30, 2012:

“The disability program pays benefits averaging $1,111 a month, with the money coming from the Social Security payroll tax. The program cost $132 billion last year, more than the combined annual budgets of the departments of Agriculture, Homeland Security, Commerce, Labor, Interior and Justice. That doesn’t include an additional $80 billion spent because disability beneficiaries become eligible for Medicare, regardless of their age, after a two-year waiting period. The disability program is projected to exhaust its trust fund in 2016, according to a Social Security trustees report released last month. Once it runs through its reserve, incoming payroll-tax revenue will cover only 79% of benefits, according to the trustees. Because the plan is barred from running a deficit, aid would have to be cut to match revenue.”

It is anticipated that by 2016 when the Social Security disability program runs out of cash, this will trigger a 21% cut in benefits to 11 million Americans — people with disabilities, plus their spouses and children — many of whom rely on the program to stay out of poverty.

By 2017, one year after its disability program goes bust, the main Social Security program itself will be in trouble, paying out more in benefits than it takes in. In the 1950s, there were roughly 5 workers for every retiree; today, it is roughly half of that. With 78 million Baby Boomers moving into retirement, the demands on social security will be even greater in the coming years ahead. With demographics heading in the wrong direction and a much slower growth economy, the Social Security Administration has moved up its estimate that the Social Security Fund will be exhausted entirely by 2033.

~Eowyn

Why Big Govt ain’t going away

As many as half of U.S. households are recipients of government benefits.

Phil Izzo reports for the Wall Street Journal, May 26, 2012, that recent Census Bureau data show 49.1% of the U.S. population live in a household where at least one member received some type of government benefit in the first quarter of 2011. Many likely received more than one.

The 49.1% of the population in a household that gets benefits is up from 30% in the early 1980s and 44.4% as recently as the third quarter of 2008. The increase in recent years is likely due in large part to the lingering effects of the recession.

As of early 2011, 15% of people lived in a household that received food stamps, 26% had someone enrolled in Medicaid and 2% had a member receiving unemployment benefits. But even without the effects of the recession, there would be a larger reliance on government. The Census data show that 16% of the population lives in a household where at least one member receives Social Security and 15% receive or live with someone who gets Medicare. There is likely a lot of overlap, since Social Security and Medicare tend to go hand in hand, but those percentages also are likely to increase as the Baby Boom generation ages.

With increased government spending comes the need to pay for it, and if taxes aren’t going to increase that means deficits. Nearly three-quarters of Americans blame the U.S. budget deficit on spending too much money on federal programs, according to a Gallup poll last year, but when the conversation turns to which programs to cut, the majorities are harder to find. For example, 56% of respondents oppose making significant changes to Social Security or Medicare.

The more people who receive benefits, the harder it’s going to be to make cuts, and it’s never popular to raise taxes. In some respects that argues for letting a combination of tax increases and spending cuts that is set to automatically hit in 2013 take effect. There’s just one problem: the Congressional Budget Office says it would sink the economy into recession. Letting the 2013 provisions come into force would be like dealing with a weight problem by cutting off your right arm.

And so, a long-term, well-planned diet is the only solution.

But where are the political leaders who are statesmen, instead of mere self-serving politicians, to tackle this?

~Eowyn

Ann Barnhardt Blast on Hagmann & Hagmann

WOW!!!!!

Ann Barnhardt is the guest (starting at the 9 minute mark) for a nearly 2-hour broadcast on the Hagmann & Hagmann Report and unloads on the contraception, social security, cultural corruption, the government corruption, the cult of Islam, the cabal of evil men who put their foreign-born puppet, Obama into power, and that’s just for starters.

Alan Simpson is a POS

Which former Republican senator thinks Obama is groovy and peachy and just way smarter than anyone alive?

The correct answer is “Alan Simpson”.

On August 5, 2011, referring to Obama’s debt ceiling negotiation with the Congressional Republicans, Simpson said in an interview with the Denver Post: “This guy is a little bit smarter than some of the guys who are trying to hammer him. They ought to give it up.”

Alan Simpson, a U. S. Senator from Wyoming for 18 years (1979-1997), was born with a silver spoon in his mouth. Alan’s dad was Milward Simpson, a former Governor of Wyoming (1955–1959) as well as a U.S. Senator from Wyoming (1962–1967) who voted against the Civil Rights Act of 1964.

Sen. Alan Simpson has been an outspoken advocate for access to abortion, calling the killing of tiny defenseless babies “the precious right of privacy”. He supports gay and lesbian rights, and is openly critical of the military’s “Don’t ask, don’t tell” policy.

In 2010, Obama appointed good ol’ Alan to co-chair the useless bipartisan deficit reduction group, the National Commission on Fiscal Responsibility and Reform.

When the commission issued its draft proposals to help erase the federal government’s then-$13.8 trillion debt — proposals that included raising the Social Security retirement age from 65 to 69 to bring in $1 trillion more in tax revenue — liberals and conservatives alike reacted with strong opposition. That prompted Simpson to whine to Wyoming’s Trib.com:

“I’ve never had any nastier mail or [been in a] more difficult position in my life. Just vicious. People I’ve known, relatives [saying], ‘You son of a bitch. How could you do this?’ We had the greatest generation — I think this is the greediest generation.”

Then Simpson poured oil on the fire he’d lit. In a letter responding to criticisms by a group representing older women, Simpson called Social Security “a milk cow with 310 million tits.” (You can read his e-mail here.)

That prompted this response from an anonymous farmer in Montana — a response that has gone viral:

“Hey Alan, let’s get a few things straight.

1. As a career politician, you have been on the public tit for FIFTY YEARS.

2. I have been paying Social Security taxes for 48 YEARS (since I was 15 Years old. I am now 63).

3 My Social Security payments, and those of millions of other Americans, were safely tucked away in an interest bearing account for decades until you political pukes decided to raid the account and give OUR money to a bunch of zero ambition losers in return for votes, thus bankrupting the system and turning Social Security into a Ponzi scheme that would have made Bernie Madoff proud.

4. Recently, just like Lucy & Charlie Brown, you and your ilk pulled the proverbial football away from millions of American seniors nearing retirement and moved the goalposts for full retirement from age 65 to Age 67. NOW, you and your shill commission are proposing to move the goalposts YET AGAIN.

5. I, and millions of other Americans, have been paying into Medicare from Day One, and now you morons propose to change the rules of the game. Why? Because you idiots mismanaged other parts of the economy to such an extent that you need to steal money from Medicare to pay the bills.

6. I, and millions of other Americans, have been paying income taxes our entire lives, and now you propose to increase our taxes yet again. Why? Because you incompetent bastards spent our money so profligately that you just kept on spending even after you ran out of money. Now, you come to the American taxpayers and say you need more to pay off YOUR debt.

To add insult to injury, you label us “greedy” for calling “bullshit” on your incompetence. Well, Captain Bullshit, I have a few questions for YOU:

1. How much money have you earned from the American taxpayers during your pathetic 50-year political career?

2. At what age did you retire from your pathetic political career, and how much are you receiving in annual retirement benefits from the American taxpayers?

3. How much do you pay for YOUR government provided health insurance?

4. What cuts in YOUR retirement and healthcare benefits are you proposing in your disgusting deficit reduction proposal, or, as usual, have you exempted yourself and your political cronies?

It is you, Captain Bullshit, and your political co-conspirators called Congress who are the “greedy” ones. It is you and your fellow nutcases who have bankrupted America and stolen the American dream from millions of loyal, patriotic taxpayers. And for what? Votes. That’s right, sir. You and yours have bankrupted America for the sole purpose of advancing your pathetic political careers. You know it, we know it, and you know that we know it.

And you can take that to the bank, you miserable ASS.”

In his youth, Alan Simpson was a juvenile delinquent.

In high school, Simpson and some friends “went out to do damage” and torched an abandoned federal government war relocation structure, a crime now punishable by up to 20 years in prison. The gang also went shooting in their community, firing their 22 caliber rifles at mailboxes, blowing holes in several and killing a cow.

Simpson pled guilty to destroying government property and got two years of probation. Simpson’s words to the Court were “I was a monster.” [Source: Wikipedia]

Earth to Alan Simpson: You’re still a monster.

~Eowyn

5 Money Moves to Shelter Yourself From the Debt Storm

Now that Obama’s signed into law the Budget Control Addicted to Debt Act of 2011, here are 5 recommended money moves for ordinary Americans to make to protect ourselves from the fallout:

1. Reduce Your defense stocks and all government contractors

Since defense is targeted for billions of dollars of spending cuts, investors should dig into their 10K annual reports of companies to see how dependent they are on government work. Defense contractors are likely to lose business as these cuts work their way through the system, but so will other government contractors, and state contractors too, as already recession-pinched states will lose some federal funding. Charles Rotblut of the American Association of Individual Investors counsels,

“Stock investors who have companies that depend on government financing should monitor their holdings carefully. Infrastructure is at particular risk, because it’s going to be a lot harder for states to work on bridges, roads and highways.”

2. Relax a little about your bonds

With Congress making good on U.S. obligations, that diminishes the possibility of a ratings downgrade pushing Treasury rates up. And the bill’s budget cuts, which mainly don’t go into effect until 2013 at the earliest, could crimp economic growth, delaying the rise of interest rates. Don Martin of Mayflower Capital in Los Altos, California says, “Bonds are not as scary as before. The economy has hit stall speed and is beginning to slip back into a recession, so with the reduction of government stimulus caused by austerity this means that stocks will go down and bonds will go up.” Investors still may want to move their bond holdings to a less-concentrated, shorter-term or more cautious approach, but there’s less need to panic about them.

3. Pay off your student loans

The debt bill will eliminate the rebate that education borrowers get when they make a year’s worth of loan payments on time. But they still may be able to get an interest-rate discount if they arrange to make their payments automatically through a bank account debit.

Many graduate students will have to pay more for loans, as this deal eliminates the federal subsidies that paid interest costs on some of their loans while they were in school. Grad students may find it worthwhile to pay the interest themselves while they are in school, if they can, to avoid those costs compounding until after they graduate.

4. Defer your Social Security benefits

Every year that you defer starting your Social Security (SS) retirement benefits, they rise by almost 8%. The new law’s Super Committee of 12 may nip SS recipients’ cost-of-living adjustments (COLA). Starting your SS benefits early means you relinquish that 8% a year increase and, should the COLA be nipped, start giving up buying power sooner. Mark Berg, of Timothy Financial Counsel, a fee-only financial planning firm, advises: “That would be a significant problem for clients who rely on Social Security. We would encourage a wait approach on Social Security if the client can afford it.”

5. Pay off your debts and Save, Save, Save

Bedda D’Angelo, president of Fiduciary Solutions, a Durham, North Carolina, financial-planning firm, says: “If we have learned anything from this crisis, it’s not to depend on the government for anything. Entitlements change with the wind. Since pensions are being phased out too, the only sane thing to do is max out your tax-deferred retirement savings accounts.”

Advisers have been telling their clients to get defensive for some time: Investors who pay down their debts, move more of their bond money to shorter-term instruments and their stock money to defensive dividend-earning stocks will be better prepared for whatever the government throws at them next.

Money manager Daniel Romero, of Romery & Levin Wealth Management in Santa Ana, California, has had his clients building reserves, paying down debts and diversifying broadly into commodities, Japanese stocks, and natural resources stocks: “This is the fourth or fifth Armageddon situation that’s come across our desk in recent years. Just put yourself in a situation where it won’t affect you so much.”

[Source: Linda Stearn's article for Reuters, August 2, 2011]

H/t beloved fellow Anon.

~Eowyn