If something you thought to be true were not true, when would you want to know about it? In today’s world, with all the financial information from the media, radio, TV and websites, the truth can be redefined and actually be transformed into something that is not true. Simply put, if you repeat something over and over again, it will be perceived as being fact. Marketing companies use these tactics when marketing their products. So does the financial-services industry.
Take a look at an average American couple, who earned the average income during their lives and retired at the age of 65. Together, they earned about $47,000 in their final year of work. They would receive a joint Medicare benefit valued at $283,500.* The reality is, they would have paid only $43,000 in Medicare taxes during their working years. This represents a $240,000 loss to the government. Remember, this is only ONE husband and wife.
Recently I was reminded of a lesson in life that should be shared with everyone. There was a time in my life where I was in great physical shape. I used to work out at a local gym that was also known to train amateur fighters. One day while I was working out an older man came up to me and said "Hey kid, you look like you’re in pretty good shape . . . have you ever thought about boxing?” I said, "Not really” and he said "It’s the ultimate in conditioning and a skill that will change your life. I think you could be good at it.” He then said "Look, you’ve got nothing to lose and I can get you started.” I said, "What the heck, I’ll try it.”
Can average Americans borrow their way to prosperity? The answer is no. Years ago, America was based on strong family values. We were a "pay as you go” nation that learned the value of incomes and savings. Today, America has become a nation of consumers that has attached liens and promissory notes on much of its future income. Debt ratios of the average-American household have reached record highs. This is far different than the Founding Fathers of our nation could ever imagine. In the future, there will be unintended consequences in paying for the debts we carry.
Taxes are the largest transfers in your financial life. The most common taxes are the income tax and social security tax. As part of the payroll tax, over the past several years, these taxes have not gone up much. The other hundreds of taxes that don’t make headlines continue to go up almost on an annual basis. In recent years, taxes have increased about 42% faster than personal incomes. State and local taxes have increased over 100% faster than national incomes. You now have to work five months of the year just to pay your taxes.
In order to know where you want to go, you need to know how much time you have to get there. So your age and that of your spouse (if you’re married) will be the root of all your thinking. It will also be important to understand the dynamics of your family. Understanding the makeup of your family could change your approach to everything that you are trying to accomplish. If parents or grandparents are alive and well, then you must understand they may also represent value in your life.
Qualified retirement plans remain a mystery even to those who blindly believe in their purpose. It is commonly understood that these plans will create great amounts of money for retirement and, at the same time, save taxes for everyone who participates in them. The government, CPAs, accountants, news media, financial planners, banks, investment brokers, benefit managers, and yes, even your parents will tell you that this is true. But the truth today is an elusive commodity.
The debt problem will continue to grow. When the government overspends, which has been going on for about 75 years, its problems are passed on to us in the form of more or higher taxes and reduced benefits. The government’s solution is simple. When businesses overspend or their costs increase because of material costs, government regulation, increase in corporate taxes, labor, etc., the increases are passed on to us in the form of higher prices. Their solution is simple as well.
Surviving the 50% increase in the FICA tax that was stuffed down the windpipes of the Average American last January was hard to swallow considering that the average median income has gone down about 6-8% over the last four years. Now the mandatory tax, as described by the Supreme Court, is about to impact every Americans life through the Healthcare Act.
What was the recent Government shutdown about? Power And Money. It was not about you or your financial well being.
I bet no one saw this coming. A report from CBS, healthcare.gov Pricing can be off the mark. Really, what a surprise. Of course this comes from the Government that estimated the healthcare website would cost $83 million dollars and its cost is actually heading toward $400 million and in may cases the information is incorrect and/or the site does not work.