No. of Recommendations: 12
JLC analyzes,

Article talks about benefits buying 34% less than 18 years ago (from 2000-2018).

With average rate of inflation, prices of things double every 20 years (more or less), thus buying 50% less.

So it would seem that retirees are a little ahead of the game.

</snip>


It's 34% less after making the adjustment for inflation. The reason it's not keeping up with inflation is that the market basket used to calculate the CPI differs from the market basket of goods and services typically purchased by retirees.

Here's the detailed study.
https://seniorsleague.org/assets/2018-Loss-of-Buying-Power-R...



intercst
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No. of Recommendations: 1
Borrrring.
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No. of Recommendations: 24
And the GOP want's to cut SS and Medicare ???

Billionaires need more tax breaks, d@mn it. Where are the billionaires going to get more tax breaks if we don't punish the poor and elderly financially?

Make America Great Again by throwing granny under the bus.
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"Medicare Part B monthly premium $45.50 $134 195%
Prescription drugs annual out-of-pocket $1,102 $3,172.72 188%
Home heating oil (gallon) $1.15 $3.22 181%
Medigap $119 $306.64 158%
Propane gas (gallon) $1.01 $2.60 157%
Real estate taxes $690 $1,579.06 129%"


Yep, we didn't 'drill, baby, drill' back then.....and so we pay the piper. Oil and propane are climbing and will likely stay high.

Yep, thanks to modern medicine, Medicare Part B and Medigap are skyrocketing......all those gazillions of tests 'just to be sure' cost money. Moola. Even then, Medicare folks pay only less than 30% of actual cost of the care they receive.(as a group).

Real estate taxes? Well....more people demand more services....so it is going to cost more. And that's only less than 2% a year increase in taxes over 20 years..more like 1.5%....and I'm sure house prices have gone up more than that.


Nothing new here folks.....

So far, my annual prescriptions cost me about $40 a year..... last one was a co-pay of a buck.

Just a whine about the future of SS......where 20 year olds might get nothing, and sooner or later it WILL be means tested and reduced accordingly...... the moolah simply isn't there.



t
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No. of Recommendations: 3
Article talks about benefits buying 34% less than 18 years ago (from 2000-2018).

With average rate of inflation, prices of things double every 20 years (more or less), thus buying 50% less.

So it would seem that retirees are a little ahead of the game.

JLC
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No. of Recommendations: 4
"The market basket of goods & services purchased by the average retiree looks nothing like what's used to compute the CPI (e.g., housing and medical expenses are a much bigger part of the average retiree's budget.)

And the GOP want's to cut SS and Medicare ???"

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Funny.
I have not seen anyone propose cutting SS or Medicare.

I have seen reports where the SS and Medicare systems are pouring out
more money than they take in - and that benefits may end up being cut if
congress does nothing long enough. But everything I see says that more and
more people are going on Medicare, Social Security, Disability SS, and Medicaid.

I have seen reports about Food Stamps dependence has dropped. That is reported to be
a good thing - more people are employed and do not need the support. Whether that
will remain the case is arguable.

Howie52

Generally, if somehow or other the program needs to be changed - people in congress need
to do something and talk about options. I don't know how that can happen if the fears
of elderly folks losing buying power (which was real - and likely continues to be real to
some degree) is raised. SS has always been one of the issues where fear keeps the political
folks from talking about change. Why do you want to stoke that fire and keep a failing
system from being changed?
Maybe if you wait 3 or 7 years a different administration might come in - but the fear you
plant today will stay around an awfully long time.
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No. of Recommendations: 12
JLC analyzes,

Article talks about benefits buying 34% less than 18 years ago (from 2000-2018).

With average rate of inflation, prices of things double every 20 years (more or less), thus buying 50% less.

So it would seem that retirees are a little ahead of the game.

</snip>


It's 34% less after making the adjustment for inflation. The reason it's not keeping up with inflation is that the market basket used to calculate the CPI differs from the market basket of goods and services typically purchased by retirees.

Here's the detailed study.
https://seniorsleague.org/assets/2018-Loss-of-Buying-Power-R...



intercst
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No. of Recommendations: 28
Howie writes,

<<Funny.
I have not seen anyone propose cutting SS or Medicare.>>

</snip>


House GOP plan would cut Medicare, Medicaid to balance budget
https://www.washingtonpost.com/news/business/wp/2018/06/19/h...

</snip>


It's necessary to cut Medicare to preserve the Billionaire Tax Cuts enacted earlier in the year.

intercst
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No. of Recommendations: 1
"Article talks about benefits buying 34% less than 18 years ago (from 2000-2018).

With average rate of inflation, prices of things double every 20 years (more or less), thus buying 50% less.

So it would seem that retirees are a little ahead of the game.

JLC "

*************************************************************

Cost of living estimates really depend on how individuals spend. Housing
costs, food, utilities, gasoline - and spending patterns vary a bunch from
one person to another. But elderly folks do tend to spend more on health-care
- and drug costs. There you have the double impact of not only increased prices
(the overall impact of the healthcare legislation appears to have increased the
rise in healthcare prices to me - you may have different experiences) but also there
are more medical services available for the elderly. And if the new services are
available they will be used. Who can say "no" to the improved materials used for
joint replacements, heart surgery and all the rest? We live in wonderful times
where more options are available - and there is a cost for those "wonderful times".

Howie52

But I can believe that costs rise more than COLA provides. Always used to before there
were COLA - and government never really does a spiffy job at providing services.
Ask folks depending on the VA.
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No. of Recommendations: 3
"Howie writes,

<<Funny.
I have not seen anyone propose cutting SS or Medicare.>>

</snip>

House GOP plan would cut Medicare, Medicaid to balance budget
https://www.washingtonpost.com/news/business/wp/2018/06/19/h......

</snip>

It's necessary to cut Medicare to preserve the Billionaire Tax Cuts enacted earlier in the year.

intercst "

*************************************************

What I keep reading is that tax revenues have increased and are at new highs - despite
or potentially the result of the "Billionare Tax Cuts". The CBO is working with
projections that are based on past data (which is all they have)- and if the current tax
revenue is actually at a new record high, the projections may well be wrong.

Thanks for the link. I had not seen that in the news.

Howie52
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No. of Recommendations: 17
Ironically, the rate of poverty for those 18 and under is nearly twice that for those over 65.

http://federalsafetynet.com/us-poverty-statistics.html

https://www2.census.gov/programs-surveys/demo/tables/p60/259...

Furthermore, the poverty rate for white old farts is even lower. See above.

Age has been shown to be positively correlated with both wealth and income

https://www.stlouisfed.org/~/media/files/pdfs/hfs/essays/hfs...


Snippet:

Although there may be downsides to old age, those 62 and older can take heart in knowing that the odds are in favor of them being wealthier than younger people. And the gap has widened considerably in the last quarter century - in favor of old people.

Maybe it’s just me, but it appears those who are for tax cuts for the wealthy, as a general rule, tend to be older. I don’t see a lot of millennials on the tax cut bandwagon.

Hell, the minute you leave the workforce, you get an immediate 7.65% tax cut. If you have qualified dividends/long term capital gains, you’re taxed at a 0 rate if you stay below what is now the 22% marginal rate.

Those complaining about taxes are mostly old white people, who, ironically, are taxed more lightly than others and who are far more likely to be Republican.

Had I known at a younger age how lucrative it was to be old, I’d have gotten older sooner. OTOH, I still wouldn’t be a Republican.

CLF
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...I still wouldn’t be a Republican.

We have owned property in rural Maine for 25 years and spent summers here since we both retired in our mid-50’s in 2001. One of the things we have observed is that a lot of business done with small local business owners is done with cash. This may seem to be a smart thing to do from a tax perspective, but it has not so smart consequences.

1. The business owner may pay lower income taxes in a given year by not reporting cash income, but is shortchanging him/herself because he/she is not paying a percentage of the unreported into SS and is thus lowering the lifetime payout.

2. Not reporting cash income can have a deleterious effect on your ability to get a loan if your paper trail income is too low. We saw that happen with a father/son team of house painters who are friends of ours. They were turned down for a loan to buy a rental property they wanted due to insufficient income. We were pretty sure they had sufficient income, but the the paper trail said no.

It’s “honey do” time. More later, maybe.

CLF
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Hey Churchy

Many lobstermen have made nothing for years, even decades. However, they have a fine house, new trucks, a new boat, snow machines and kids who got a complete education. They go on vacation in the winter to warmer places.

It's common for small businessmen and women - and not just lobster people - to minimize income to avoid taxes, they also skip workers comp and all the other "nanny state" rules, often much to their regret. Rural Maine has had a rough run in the time you've been here, as have many US rural areas.
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CLF:"Although there may be downsides to old age, those 62 and older can take heart in knowing that the odds are in favor of them being wealthier than younger people. And the gap has widened considerably in the last quarter century - in favor of old people."

Well, duh! THose 62 and older have had a lifetime to accumulate a nest egg. It must really take a scatterbrained liberal to not understand that. Most 'younger folks' are busy at work, just starting out, having to buy everything from household furniture to cars to baby stuff.

- - ----

CLF:"Maybe it’s just me, but it appears those who are for tax cuts for the wealthy, as a general rule, tend to be older. I don’t see a lot of millennials on the tax cut bandwagon."

Oh, I'm sure Millennials in high tax states are all for tax cuts. Heck, half their paychecks can vanish after deductions for fed and state tax, FICA 1 and 2, health insurance....then of course, high real estate taxes....high sales taxes on the part they actually get to keep, plus out of sight home prices in many markets where millennials want to live.

And most 'older folks' aren't wealthy. They've got to live 20-30-40-50 years on their nest egg, not adding to it since they aren't working......or likely to inherit since their parents are long dead....

Oh, and Millennials, being young, haven't usually had the opportunity to 'inherit' from their parents as they are still alive. LIkely they'll receive a bunch of 'wealth' when that event occurs in the future.

- - -----

CFL:"Hell, the minute you leave the workforce, you get an immediate 7.65% tax cut."

And a 100% paycut!

- - ------

CFL" If you have qualified dividends/long term capital gains, you’re taxed at a 0 rate if you stay below what is now the 22% marginal rate."

HO ho......I"m paying a lot more than the ZERO rate on dividends.....and that also applies to those working.....many have enough dependents to pay ZERO income taxes. What, half the people in the US pay ZERO income taxes after deductions!

- --------

CFL:"Those complaining about taxes are mostly old white people, who, ironically, are taxed more lightly than others and who are far more likely to be Republican."

Ho ho ho...you mean no one in California or NY or CT complains about $10,000 and $20,000 real estate tax bills? Ha......or the 10% state income taxes in CA and 13% in NYC?

Well, you just said it.....'older white folks' don't pay the FICA 1 and 2 taxes as they are retired...along with older African Americans and Hispanics and Native AMericans..... the latter group not paying any state taxes either if they had enough income if they live on 'reservations' and are part of very profitable gambling operations....


- -----

CFL:"Had I known at a younger age how lucrative it was to be old, I’d have gotten older sooner. OTOH, I still wouldn’t be a Republican."

Well, when you croak, you don't owe ANY taxes ANY LONGER. You anxious to get to that point?

Obviously, you happily paid boatloads of taxes as a democrat, and still don't realize that if you had been a Republican, you would have likely contributed a lot less 'revenue' to the IRS to fund a lot smaller , lot less intrusive federal bloated bureaucracy of micro-regulation.


t.
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"We have owned property in rural Maine for 25 years and spent summers here since we both retired in our mid-50’s in 2001. One of the things we have observed is that a lot of business done with small local business owners is done with cash. This may seem to be a smart thing to do from a tax perspective, but it has not so smart consequences."

It's also a matter of pay me now or pay me later.

Likely saves them a lot of dollars both short term and long term.

- - ----

CLF:"1. The business owner may pay lower income taxes in a given year by not reporting cash income, but is shortchanging him/herself because he/she is not paying a percentage of the unreported into SS and is thus lowering the lifetime payout."

Ah....but also you forget that as your income goes up, you get less and less of your contribution back. A minimum wage earner will get a lot higher percentage of his money back vs a high income earner hitting the max who gets much, much, much less back per dollar 'donated'.

If you save/invest that extra cash......you'll wind up way ahead.

- - -----

CFL:"2. Not reporting cash income can have a deleterious effect on your ability to get a loan if your paper trail income is too low."

It can also make it so you don't NEED a loan, or can put up a big deposit to secure the loan, or get owner financing.

- ------

CFL:" We saw that happen with a father/son team of house painters who are friends of ours. They were turned down for a loan to buy a rental property they wanted due to insufficient income. We were pretty sure they had sufficient income, but the the paper trail said no."

They should have been saving the extra bucks. Probably just worked enough hours during the year to get by.

In many summer locations, folks work six months a year......then go on unemployment for the next six........(same in winter resort type places where they get 'winter jobs' and goof off all summer on unemployment as they are 'laid off' at the end of the season. Happens all over New England and upstate NY and who knows where else.

Met a beach bum in HI 10 years ago. He'd work 3-4 months. lived out of his van and had a friend where he could park van at night. Save up a nest egg, then take the rest of the year or year and a half off until he ran short on cash. Rest of year, he would spend days at the local beach park - had showers there - wonderful beach. Nice HI climate all year long. Van ws set up for sitting at beach. Had his hi-fi system and battery TV. He might eat out once a day at bargain 'early bird' or similar - rest of meals in van. Do his daily swim - talked to tourists and other beach goers. Park at friends house overnight when park closed at 9pm ....... HI had 'free' health care so that wasn't an issue. BUt he was likely in his 40s.

- -- -

Was he worried about SS? I doubt it.....

--

And the guys in ME might have qualified for food stamps and other state benefits. Now ObamaKare for $7.83/month?



t.
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Okay, we've all seen numbers showing that SS and Medicare are not sustainable in their current form. We've all seen evidence that politicians don't like making hard choices. But the economics are still there, even when the policy makers play ostrich.

So what's going to happen? I don't know the details, but here's the general shape of things that I consider likely for planning purposes:

Social Security will continue to be indexed for inflation, but the measures will be fiddled with enough so that it doesn't really cover all of inflation. This phases in a benefit cut over a long period of time, and disguises it enough so that most voters won't scream. That's the phenomenon the originally cited article is talking about.

Medicare is going in the same direction as employer provided and individually purchased health insurance, though it is getting there more slowly. Premiums will go up, and benefits will go down. Right now, at age 62, I buy a Bronze plan through the marketplace. In 2017, the plan actually paid about 5% of my premiums as benefits. I used my HSA to pay the rest of my medical costs, which were about 50% of my premiums and less than 50% of my deductible. Effectively, I had an expensive insurance policy protecting my asset base from a financially catastrophic medical situation for one year. Otherwise, I basically paid for my own health care.

For planning purposes, I expect that either when I'm 65 or a few years later, Medicare benefits will have changed such that as long as I'm reasonably healthy I'll pay Medicare premiums and otherwise basically pay for my own health care. The coverage will mean something when my medical picture changes to be service costing big bucks instead of maintenance for a pretty healthy guy in his 60s.

Effectively, I expect Medicare to transition to being what a high deductible plan is now: Insurance covering my asset base for a financially catastrophic medical situation, but not paying for most routine care. Yeah, it will cover the flu and shingles vaccines, plus one routine physical per year; but that's stuff that wouldn't break my budget even if it weren't covered.
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"Many lobstermen have made nothing for years, even decades. However, they have a fine house, new trucks, a new boat, snow machines and kids who got a complete education. They go on vacation in the winter to warmer places."

Well, if you work it right.....you depreciate your boat and equipment and 'break even' or pay just enough to qualify for minimum SS payment and get your 40 quarters in.... 10 years of 'work'.

Many real estate tycoons have made next to nothing for income, but have tremendous cash flow....,just use depreciation to write off most of income from rental properties, expense all their travel....cars....... use Starker trades to swap properties that have been fully depreciated to side step the tax man.......

And of course, with 'low income' their kids likely get full scholarships......

- - ------

"It's common for small businessmen and women - and not just lobster people - to minimize income to avoid taxes, they also skip workers comp and all the other "nanny state" rules, often much to their regret. Rural Maine has had a rough run in the time you've been here, as have many US rural areas. "

Why not? The rich do it. Warren Buffet didn't get rich, and B-H didn't get gigantic, by 'paying large amounts of taxes.. Same for Bill Gates, Larry Elison, Jeff Bezos......

Rural areas in many states have had a 'rough run' for the past 200 years. Nothing new here. Folks got by and still get by. St Lawrence County NY has been impoverished for over 100 years. Partly because of.....tax avoidance.........when folks don't report income, the feds crunch the statistics and say 'golly, this is a real low income impoverished area' and lavish all sorts of extra money on them..............in this and that program. .......perpetuating the cycle. Why 'earn' more money when you'll lose benefits?


t
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those 62 and older can take heart in knowing that the odds are in favor of them being wealthier than younger people. And the gap has widened considerably in the last quarter century - in favor of old people.

I wonder how much of Boomer's wealth is attributed to inheritance. Those statistics are probably available, but I have on idea where.

PF
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telegraph: "Ah....but also you forget that as your income goes up, you get less and less of your contribution back. A minimum wage earner will get a lot higher percentage of his money back vs a high income earner hitting the max who gets much, much, much less back per dollar 'donated'."

This smacks of BS! I started paying FICA taxes in June 1959 when I got a job at Disneyland selling balloons. I continued paying FICA taxes through January 2013 when I quit work and retired. I started receiving Social Security benefits in February 2013. When my July 2018 benefit is deposited in my savings account in August, I will have received more in Social Security benefits than I and my employers paid in FICA taxes.

The "bend points" in the PIA calculation guarantees that those with lower income will receive a greater portion of their AIME those with higher incomes. It does not mean, however, that those with higher incomes will receive less of their FICA contributions than those with lower incomes.

If you live long enough, you will always receive more in Social Security benefits than your and your employers FICA contributions. How long that takes depends on the age at which you claimed Social Security benefits.
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I wonder how much of Boomer's wealth is attributed to inheritance. Those statistics are probably available, but I have on idea where.

I was born 11 months too early to be a Boomer. My wife was born 23 months later and is a Boomer. My mother will be 96 this year. Her mother will be 100. I can guarantee that none of our wealth can be attributed to an inheritance.

I have difficulty imagining what one's family financial history must be like to believe that one would receive more than a nominal inheritance.
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I wonder how much Boomer’s wealth is attributed to inheritance.

Can’t answer for other Boomers, but I can say that for my siblings and myself, the answer is diddly squat. As a matter of fact, we were pitching in financially to support our mother in the last few years of her life as she wasn’t too careful about her spending habits.

In terms of numbers of people, I suspect it isn’t that high. 1 person inheriting $100 million will skew the number upward. Remember too, that the Baby Boom meant a significantly higher birth rate and that any inheritances would be spread across more people, watering down individual inheritances.

Of course, now the financial service “industry” is slobbering over the money Boomers will be leaving to Millenials.

https://www.google.com/amp/s/www.cnbc.com/amp/2016/11/29/pre...

The financial services “industry” kind of reminds me of Taz, the Looney Tunes Tasmanian Devil character.

CLF
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" I started paying FICA taxes in June 1959 when I got a job at Disneyland selling balloons. I continued paying FICA taxes through January 2013 when I quit work and retired. I started receiving Social Security benefits in February 2013. When my July 2018 benefit is deposited in my savings account in August, I will have received more in Social Security benefits than I and my employers paid in FICA taxes."

So you worked for 44 years and contributed? You only need 35 years....to max out. So you contributed (and your employer did) for another 9 years?

Of course, you forgot to include any interest. If you had put that money in the stock market, your monthly check would be triple, probably........ and if Uncle Sam had actually locked that money away for you rather than playing games with it.....well....

- -----

"The "bend points" in the PIA calculation guarantees that those with lower income will receive a greater portion of their AIME those with higher incomes. It does not mean, however, that those with higher incomes will receive less of their FICA contributions than those with lower incomes."

Duh! Of course it does. You'll get back less percentage wise being a high earner.

A low earner probably earning 1.5 times minimum wage will likely wind up with half of what you get making 5 or 8 times minimum wage.

- -----

"If you live long enough, you will always receive more in Social Security benefits than your and your employers FICA contributions. How long that takes depends on the age at which you claimed Social Security benefits. "

They figure that the average of when folks die is what they use to cough up benefits. Yeah, outlive the 'average' and you come out ahead...... Live to 120, and really beat them up.

But I'd bet few folks at 100 say to their doc - 'hey, keep me alive so I can collect another 10 years in SS from Uncle Sam' as the reason they want to live to 110.



t.
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"I have difficulty imagining what one's family financial history must be like to believe that one would receive more than a nominal inheritance. "


Just own a house in CA or NYC area that you paid $12,000 back in after WW2........and stay in it for 30-40-50-60 years.

My parents bought a small 1 1/2 story house in NJ in 1948. Kept it until he retired in 1977 and retired to northern home on Lake George. Bought a piece of lakefront property and built 1700 sq foot home. That $12,000 in 1948 (bought on GI bill for like 2% interest rate too).....turned out to be worth $370,000 in 1999 when my mom passed.

My sister, now 70, bought a house in Gaithersburg MD back in the mid 70s. Think they paid well under $100K for it. Now worth $850,000 or so. Her kids likely to inherit nice bundle and that is only the house, plus she now owns the summer home on the lake and it is worth $800,000 or so.

Real estate! Stock accounts.

My Uncle lived in NC. Bought a used house in 1947......and stayed in it for 60 years or so until he was 90, then moved to assisted living place. House wasn't worth all that much when it was sold - maybe $85K - neighborhood had gone from 'right on the trolley line' to not so great part of town. But.....he was a LBYM type along with his wife.....didn't travel and only hobby was going fishing in a small boat from a small cabin he had down by the river. Did not have kids. But...he did buy MA Bell stock through the company plan for 45 plus years. Had nice company pension that more than covered his expenses - 45% of best years pay. Got SS too. And dividends. When he passed on, his estate was split up 6 ways. Nearly a million bucks.

The parents of most boomers were born during the Great Depression - and many learned LBYM habits from their parents.

Heck, my family ate out maybe six times a year and that was usually on vacation somewhere which was usually camping trips around the country. Never while home. No take out. NO ordering pizza. I never even had a pizza till I went off to college. There was a McD in town and I never went to it. A real treat was maybe stopping at a DQ type place a few times a summer.

- - --


And what is a 'nominal' inheritance to you?

t
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Churchy writes,

Of course, now the financial service “industry” is slobbering over the money Boomers will be leaving to Millenials.

</snip>


For the vast majority of people, the financial services industry is going to take more of their money in fees than the evil Gov't does in taxes.

intercst
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For the vast majority of people, the financial services industry is going to take more of their money in fees than the evil Gov't does in taxes.

Cite ?
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I had an expensive insurance policy protecting my asset base from a financially catastrophic medical situation for one year. Otherwise, I basically paid for my own health care.

Ironically, that is what the ACA is designed to do. Problem is, it is doing it at a ridiculous price. The public is finally figuring this out.

The hoax perpetuated by the creators of the ACA is that with it, uninsured Americans now finally have access to Quality Medical Care. But the ACA really has nothing to do with access....uninsured individuals have always had the ability to go to a local medical group, file out all their paperwork and become a self-pay patient, and get as much access as they wish, along with price discounts and no-cost financing (balance with minimum required payment) offered by many clinics (they don't have to fight with the insurance company on claims). Yes, the ACA does mandate certain preventive services, most of which a clinic will routinely provide anyway (e.g. obesity screening, diet counselling, blood pressure screening, tobacco use screening, etc). The big difference with the ACA is that for (something like) 85% of enrollees, someone else is paying for all or part of the premiums. This and the ability to get the ACA insurance with a pre-existing condition are making it unaffordable to most households who have the audacity to work and make more than 4X the national poverty level.

For a single person without any subsidies, premiums for a silver plan of $700/mo and $5,000 deductible means that person is paying about $13,400 per year before the insurance company pays anything, and this recurs each year. Only a very small number of individuals pay more than $5,000 per year out of pocket for medical services. So as mentioned, the average household pays for all medical expenses themselves and carry the ACA policy for protection from catastrophic loss. But high-deductible policies have actually existed for decades. I haven't looked at them in a while, but insurers used to offer a $2,500 deductible carry-over plans to get to age 65 for around a hundred bucks a month and with a max lifetime payout, usually $1MM.

BruceM
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I wonder how much of Boomer's wealth is attributed to inheritance.

This is a long and detailed BLS working paper I found. I have not read it entirely - only mined it for some facts I was looking for. A lot of the conclusions were very surprising to me, even counter-intuitive.

From other sources I see that the financial planners are claiming that $30T to $50T will be transferred from boomers to millennials over the next 30 to 40 years.

https://www.bls.gov/ore/pdf/ec110030.pdf

We found that on average over the period from 1989 to 2007 21 percent of
American households at a given point of time received a wealth transfer and these
accounted for 23 percent of their net worth. These figures are comparable to previous
studies of inheritances in the U.S. However, over the lifetime, about 30 percent of
households could expect to receive a wealth transfer, the mean value of these transfers
would be about $200,000 (in 2007 dollars), and these would account for close to 40
percent of their net worth near time of death.
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Cite?

Sure, it's just arithmetic. Wall Street averages a 2% per annum skim rate from it's customers in fees, commissions and trading costs. Over the 50-60 year investing horizon of the average person (e.g., started saving for retirement at age 30, die at age 80 or 90), Wall St is going to take more than half your money.

Meanwhile investment income is taxed more lightly than wages & salary. A married couple can withdraw $77,200/yr tax free from a stock portfolio. That's a 4% withdrawal from a $2MM plus portfolio since at least some of the withdrawal is likely to be a "return of capital".

The Dave Ramsey Endorsed Local Provider (ELP) Shaft Detector
http://www.retireearlyhomepage.com/daveramsey.html

</snip>


intercst
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Rural Maine has had a rough run in the time you’ve been here, as have many rural areas.

Yes, it has. I remember being being a bit shocked when it was announced 4 years ago that the Verso mill in Bucksport was going to close. I see that the site will be used to create a salmon farm in the near future.

http://www.wabi.tv/content/news/Salmon-Farm-to-be-Built-on-S...

Before it closed, I occasionally would stop outside the mill and watch the switching going on. Yes, I’m weird.

https://m.youtube.com/watch?v=huykU8hn4KE

From time to time, we go up to Skowhegan and I check to make sure the SAPPI mill is still going. We also buy our shoes at the New Balance outlet in Skowhegan. Haven’t bought shoes anywhere else for years.


CLF
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CLF:"We also buy our shoes at the New Balance outlet in Skowhegan. Haven’t bought shoes anywhere else for years."

Lynchburg VA had a shoe factory back in the 1970s. Before the foreign competition put them out of business. They had an outlet store that sold 'seconds'.. Usually a slight imperfection in the stitching you'd have to look hard to see....or a nick in the leather. Like 33%of list price and good leather shoes. Bought a few pairs and they lasted for over a decade. By the 1980s the shoe factory shut down and jobs went out the door. Lynchburg had 3 large companies - GE mobile radio - Babcock and Wilcox - boilers and nuclear fuel rods.......and the 'college industry including Lynch-burg College, Randolph Macon Women's college, and another private girls college just to the north.

GE cut back mobile radio and moved half of it to South Carolina. B&W reduced operations and got out of half it's business line.

The college industry is now the largest there - with the then small 'Liberty University' of Jerry Falwell growing to tens of thousands of people...... not much other industry there any longer but a lot of small businesses serving the community. Definitely in the heart of the 'bible belt'.........

Spent 13 years there before I moved on......to greener pastures.


t.
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No. of Recommendations: 7
telegraph:

So you worked for 44 years and contributed? You only need 35 years....to max out. So you contributed (and your employer did) for another 9 years?

My employers and I contributed for 54 years and 7 months. This gets rounded up to 55 years by Social Security. The 35 years used in the AIME calculation started in 1977. By then I was classified as a "maximum wage earner" as my annual earnings exceeded the amount insured by Social Security.

The first 19 years consisted of part-time jobs while in high school and college plus military service during the Vietnam war. I wouldn't have wanted any of these years included in the 35 years used to determine my AIME.

- -----

The problem that I had with your earlier response to CLF was your assertion that "as your income goes up, you get less of your contribution back."

It's when you claim Social Security and your lifespan not your income that determines whether or not you receive more in Social Security benefits than you and your employers contributed to FICA. Most Social Security beneficiaries will receive more in benefits than was contributed to FICA.
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The market basket of goods & services purchased by the average retiree looks nothing like what's used to compute the CPI (e.g., housing and medical expenses are a much bigger part of the average retiree's budget.)

And the GOP want's to cut SS and Medicare ???



So...they haven't cut it yet? And yet, the SS payments have lagged way behind the CPI for over a decade? If only some president, and his party which had a majority in both houses of the legislature, could have done something about that and not left this broken system for the next administration.
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"It's when you claim Social Security and your lifespan not your income that determines whether or not you receive more in Social Security benefits than you and your employers contributed to FICA. Most Social Security beneficiaries will receive more in benefits than was contributed to FICA. "

Less of course, all the investment income that would have accrued if you had it in private accounts.

Yep, sure enough, you get back maybe 'more' but absolutely none of the gains you would have gotten just in the SP500 index with dividends re-invested.

And as a percentage, you get back less each month compared to a low wage earner - percentage wise!


t.
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And yet, the SS payments have lagged way behind the CPI for over a decade?

SS payments are adjusted for CPI each year. But it's for CPI-W ("Consumer Price Index for Urban Wage Earners and Clerical Workers"), which doesn't really reflect the expense dynamics of those that are on SS.
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Most Social Security beneficiaries will receive more in benefits than was contributed to FICA.

One might wonder where is this extra money coming from.
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Rayvt writes,

Most Social Security beneficiaries will receive more in benefits than was contributed to FICA.

One might wonder where is this extra money coming from.

</snip>


The same place the money came from to fund the expensive and embarrassing multi-trillion dollar misadventure in Iraq & Afghanistan.

intercst
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Most Social Security beneficiaries will receive more in benefits than was contributed to FICA.

One might wonder where is this extra money coming from.


Social Security is like most other insurance schemes. Current revenue from premiums is used to pay current benefit claims. If revenue is greater than benefit claims, the excess revenue is moved to a fund to pay future benefit claims. When benefit claims exceed revenue, money is taken from the fund to pay current benefit claims.

In addition to FICA contributions, Social Security receives the Federal Income Taxes on the first 50% of our Social Security benefits.

Some of us will be lucky enough to contribute to Social Security until the day we die. ;)
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No. of Recommendations: 7
"It's when you claim Social Security and your lifespan not your income that determines whether or not you receive more in Social Security benefits than you and your employers contributed to FICA. Most Social Security beneficiaries will receive more in benefits than was contributed to FICA. "

Less of course, all the investment income that would have accrued if you had it in private accounts.

Yep, sure enough, you get back maybe 'more' but absolutely none of the gains you would have gotten just in the SP500 index with dividends re-invested.


I was 14 when I started working at Disneyland in 1959. I was paid $0.025 for each balloon that I sold. Nate Louis Enterprises, my employer, and I contributed roughly $12 to FICA that year.

The first S&P 500 index fund wasn't created until 17 years later on 31 December 1975. I'm not sure why you keep banging on about something that wasn't an option.

By the time the first S&P 500 index fund was created, I already owned 200 shares of the original AT&T and 100 shares of Pacific Power & Light plus I had an original IRA that could only be offered by Savings & Loans.
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I would so love to hear any stories you have about what it was like to be a cast member at Disneyland in 1959. I take it you were a contractor and not worling for Walt Disney directly?

-----
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Disclaimer: This post is non-professional and should not be construed as direct, individual or accurate advice
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Fool Code of Conduct: http://tinyurl.com/FoolCode
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. If revenue is greater than benefit claims, the excess revenue is moved to a fund to pay future benefit claims.

Well, actually no. The excess just goes into the US general fund and is spent. And an annotation is made "Dear department of the FedGov Social Security: IOU $XXXX, Signed, FedGov General Fund."

In addition to FICA contributions, Social Security receives the Federal Income Taxes on the first 50% of our Social Security benefits.

Well, no. When you file your 1040 you write a checkout to the IRS, amount based on your taxable income & deductions. 50% to 85% of your SS benefit is taxable income. The check you write to the IRS goes into the General Fund. None of what you pay to the IRS goes directly to SSA.
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No. of Recommendations: 3
Social Security is like most other insurance schemes. Current revenue from premiums is used to pay current benefit claims. If revenue is greater than benefit claims, the excess revenue is moved to a fund to pay future benefit claims. When benefit claims exceed revenue, money is taken from the fund to pay current benefit claims.

I take exception to that. I used to be the computer guy that provided all the data to the actuaries so they could develop their pricing and reserving projections, and then collected those projections for reporting to management.

Insurance is required to hold money in reserve for the expected amounts to be paid out. It typically goes from IBNR reserves (Incurred But Not Reported) to Case reserves (reported, but not yet paid) to Case paid. In the end, everything moves Case paid. Some lines of insurance have longer tails than. Auto collision is usually short-tailed (all moved to paid with a year or so), while malpractice is often long-tailed (payments over many years, even a lifetime).

On the most basic level, the current reserve amounts are the present value of all expected payment streams (including earnings on the reserves while held). The premium charged should cover those amounts plus allow for a profit.

In no way could SS pay out the present value of all expected payments.
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"In addition to FICA contributions, Social Security receives the Federal Income Taxes on the first 50% of our Social Security benefits."


Only if you are in a high enough tax bracket to even owe any income taxes and that money goes to the Treasury, not SS accounts. Many retirees pay zero income taxes.....and up to 85% of SS benefits may be taxed for higher income retirees but is paid to the US Treasury and instantly spent on pork projects.


t
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No. of Recommendations: 1
And the guys in ME might have qualified for food stamps and other state benefits. Now ObamaKare for $7.83/month?

SNAP (what some call food stamps) is a federal POVERTY program. Obamacare has minimum income requirements. Unemployment is available for 13 weeks to those who are available and an prove ongoing search for work, seasonal workers are not eligible for off season benefits.

You can go out to eat at a soup kitchen but I usually opt for a restaurant.
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Only if you are in a high enough tax bracket to even owe any income taxes and that money goes to the Treasury, not SS accounts. Many retirees pay zero income taxes.

I'm sure that there are some retirees that have no income tax liabilities. I don't know anyone that is in that class.

Unfortunately, my annual RMD withdrawals ensure that I owe income taxes on 85% of my Social Security benefits in addition to the RMD. All of my retired colleagues are in the same boat. Our problem may be because our careers were in STEM occupations.

Heck, even my 96-year old mother has to pay income taxes on a portion of her Social Security benefits. She was the one that warned me about Social Security benefits being taxable income when I started contemplating retirement.
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No. of Recommendations: 26
MCCrockett writes,

Heck, even my 96-year old mother has to pay income taxes on a portion of her Social Security benefits. She was the one that warned me about Social Security benefits being taxable income when I started contemplating retirement.

</snip>


Having an income large enough to trigger a taxable SS benefit is something one should aspire to rather than complain about.

intercst
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Having an income large enough to trigger a taxable SS benefit is something one should aspire to rather than complain about.

Well, when the qualifying dividends from your taxable account are greater than your SS benefits and you’re still
in the 0% bracket on dividend taxation, it’s pretty much a wash. There was a time when all dividends were taxed even if you were in one of the lower two marginal brackets.

CLF
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No. of Recommendations: 12
Well, no. When you file your 1040 you write a checkout to the IRS, amount based on your taxable income & deductions. 50% to 85% of your SS benefit is taxable income. The check you write to the IRS goes into the General Fund. None of what you pay to the IRS goes directly to SSA.

No, taxation of SS benefits is collected by the IRS, just as it collects SE tax from the self employed...but those funds go into the SS Trust Fund, not into general tax revenue. The only time general tax revenue has been used to fund SS benefits was 2011/12 when Congress reduced individual payroll SS tax by 2% so the general fund had to reimburse the SS Trust Fund for those two years only.

https://www.fool.com/retirement/general/2016/05/23/how-is-so...

BruceM
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Age has been shown to be positively correlated with both wealth and income

Which raises a couple interesting questions: Does money buy you better health, or does "doing smart things" increase your chance of both good health and good income? Does the ability to defer gratification benefit a person by focusing more on one's long term health and investments?
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I had an original IRA that could only be offered by Savings & Loans.

I also had one of those...a 15.5% CD. It's hard to believe such a thing existed.
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Having an income large enough to trigger a taxable SS benefit is something one should aspire to rather than complain about.

The regret could be that one had a lot of room in the 15% tax bracket for years, only to be paying taxes later at 25% (or more). Had the retiree done some Roth conversions, the RMD would be lower and possibly bring down the SS taxed amount.
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No. of Recommendations: 8
Had the retiree done some Roth conversions, the RMD would be lower and possibly bring down the SS taxed amount.

No, it's pretty darn hard to bring it down very much.

The thresholds are so low that if you have any other significant income your SS gets taxed. For MFJ, the 50% threshold is $32,000 and 85% is $44,000.

When you look closely and accurately at the math and the multi-year cash flows, it turns out that Roth conversions don't have much of an effect. Primarily, you pay the tax earlier rather than later.
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When you look closely and accurately at the math and the multi-year cash flows, it turns out that Roth conversions don't have much of an effect. Primarily, you pay the tax earlier rather than later.

I would think that doing Roth conversions now while the tax rate is lower would save something on the other side. With significant RMDs, I expect to be in a higher tax bracket at 70 than I am now at 60 when I am retired, and so doing the conversion over the next 4 years will save us taxes.

I realize this is a good problem to have, and not everyone has RMDs at that level, but we do, and so we will save taxes by converting for the next few years to fill up that lower bracket. This is also before we take SS, so I'm not adding income from that as well.

As usual with all things financial, everyone's situation is different, so there is no one-size-fits-all strategy, and YMMV.
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When you look closely and accurately at the math and the multi-year cash flows, it turns out that Roth conversions don't have much of an effect. Primarily, you pay the tax earlier rather than later.

Except the math has changed with the TCJA. Even if the current rates do become permanent (not a given because of the deficit impacts of the TCJA), the use of the chained CPI will tend to move taxpayers towards the higher brackets. So, it's pay lower rates now and pay higher rates later.

AJ
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So, it’s pay lower rates now and pay higher rates later.

Yeah, about that. The last full calendar year I was employed (2000), I was in the 31% marginal bracket. Now it’s 12%. Of course, while still employed, I was paying into SS and Medicare.

Ask me if I’m worried.

CLF
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Yeah, about that. The last full calendar year I was employed (2000), I was in the 31% marginal bracket. Now it’s 12%. Of course, while still employed, I was paying into SS and Medicare.

Ask me if I’m worried.


To each his own.

I'm single and with just a 6% growth assumption, will start out with 6 figure RMDs if I do nothing. With chained CPI moving the brackets an average of 2.5% a year, the RMD alone will put me well into the 22%/25% bracket. Add in 85% taxable SS near the max, a small pension and some rental income, and I will be well into the 24%/28% bracket, if not higher - just like when I was working. So paying taxes on conversions at 22% will mean paying a lower rate, and paying them at 24% would mean, at worst, paying the same rate. As always, YMMV.

AJ
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"I'm single and with just a 6% growth assumption, will start out with 6 figure RMDs if I do nothing. "

Over 70 and taking out RMDs. Didn't have that many years to stash cash in the 401K at work - maxed out back then and no 'catch ups' back then. Retired almost 20 years ago this year. Never touched the 401K converted to an IRA. Spins off a nice chunk of cash - five figures - and likely to increase over time if the market cooperates. IRA is 50/50 at this point and I see no reason to change it.

While working, didn't have the opportunity naturally to change it, and no ROTHS back then either.

Last year I worked, I wound up with a year's separation pay paid on Dec 31. Double my salary that year for tax purposes. Ouch.

Next year I had to sell some company stock options. Another 'ouch' tax year.

Converted 401K to IRA. Wasn't all that much 20 years ago.......but naturally some good years in the market skyrocketed it.....

Be nice to have 'six figure RMDs' but I stashed a chuck of change in mutual funds and individual stocks, so I'm doing quite well. At this point, having been LBYM most of my life, I'm having trouble trying to ramp up my spending. If I don't my heirs will get to spend a whole bunch of money.

t

t.
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I had an original IRA that could only be offered by Savings & Loans.

I also had one of those...a 15.5% CD. It's hard to believe such a thing existed.


Yup! Unfortunately the last time the the CD renewed before I transferred the IRA to a local brokerage, the rate had fallen to 11.1%.

"Those were the days my friend
We thought they'd never end
..."
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I also had one of those...a 15.5% CD. It's hard to believe such a thing existed.

And inflation meant that prices were higher every time you went to the grocery store. Not really wishing for that again.
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