Reflections on the US National Debt. Will we do what it takes to shrink it?

by Dr. Jeffrey Lant

So, President Obama’s bipartisan deficit commission headed by former Wyoming Senator Alan K. Simpson (R) and former Clinton Chief of Staff Erskine B. Bowles (D) has issued its preliminary report.

It is a stark, sobering document.  It says, in glaringly specific ways, that we as a nation have blithely spent too much too long, unconcerned like Mad Magazine’s Alfred E. Newman: “What me worry/”

Well, we have partied and now wake up to a colossal headache of global  proportions.  Now what?

President Obama, understanding that Congress needs help with this hot potato,early on in his term issued an Executive Order on the matter. Per this order, a panel of 18 members was created; 12 are members of Congress. Six are private citizens of impeccable pedigree.  Fourteen of these commissioners must agree before the panel can send any recommendations to Congress, which they must do shortly.

What the commissioners recommend… so far

The commissioners were given a breath taking charge by the president: either recommend $4 trillion dollars in budget cuts and savings and/or raise that sum in tax revenues. Everything was on the table; nothing was sacrosanct and inviolable. In short, “deal with it, boys and girls, for the good of the nation!”

The commissioners, selected for a gravely serious purpose, took the matter seriously, and have produced a serious document… the more so since others both within the Congress and out continue to play “gotcha politics” on the matter. Not so the commissioners. They set about their vital work with a will that promises to be sadly lacking in a Congress which will ultimately decide on what to do. Here is the  heart of what they reported.

Item: deep cuts in domestic and military spending

Item: gradual 15-cents-per-gallon increase in the federal gasoline tax

Item: limiting or eliminating popular tax breaks (including the home mortgage deduction) in return for lower rates.

Item: benefit cuts and an increased retirement age for Social Security.

It is all sensible, logical, necessary and desirable. It is also DOA because only the commissioners have the will to make changes… and they don’t have the power to save a penny or increase tax revenues Thus, under the heading “Fools rush in where angels fear to trend”,  here are my thoughts and recommendations. Mr. and Mrs. America and all the ships at sea, take note.

1) We live in supremely selfish times where no one is willing to give up anything.

  • “Ask not what you can do for your country. Ask what your country can do for you.”
  • I start from the proposition that making the necessary changes to the budget will arouse the wrath of Americans nationwide, whatever Tea Party budget- balancing tenets they espouse. Everyone entering into this necessary budget shrinking debate should expect two certain things: up front high-blown patriotic rhetoric about sacrifices willingly made ; behind the scenes bare knuckle fighting of the crudest variety to protect the haves… no matter how grossly illogical and piggish their benefits.

2) Tackle Social Security first. It is the easiest to rehabilitate.

  • It is time someone told the American people, who treat tampering with Social Security as the third rail in politics (touch it and die), the truth. The entitled, immovable age of 65 is the cynical legacy of Europe’s most successful politician, Prince Otto von Bismarck.  He’s the man who engineered the unification of Germany. Looking for a way to undermine the burgeoning late 19th century Socialist movement (very strong in Germany) he asked actuaries to find a number where most men would be dead and only voteless women left. Pensions would begin then. Otto and his conservatives get the credit… but have to pay little! Actuaries said age 65 would do the trick… and so it has remained.
  • Since Bismarck’s day, however, there have been huge improvements in health and longevity, thereby making the number 65 less an “entitlement” than a fantastic gift from the government for many years, to the detriment of succeeding (and rightly concerned) generations who foot the bill.
  • Note: Congress should bite this bullet early and deep. Whereas the president’s commissioners want to raise the age by gradual stages to year 69, instead make the magic number go to 71 for those in reasonable health who can work. It’s the right thing.

3) Make each member of the Congress take a pledge to eschew “gotcha politics” on this matter.

  • In our brutally tit for blood-letting tat Congress to say A (like “you voted to slash military spending”) immediately fuels the opposition to return (B) a  blow of equal or greater intensity (like “you voted to gut all domestic spending programs”). This gets us no where and fuels national rage about “do nothing” congresses.
  • Members of Congress raise money to clobber each other. That’s what they do. They’ve been doing it since Minute 1 of the new republic. Now some aspiring statesman should, in the name of getting to yes with this budget imbroglio, say “basta!” and ask all members, on both sides of the aisle, to join him and appreciably move towards the solution we must have. Make working together politically attractive and a “must”; do this and the politically pusillanimous who constitute the core of the Congress will rush to embrace it.

4) Urge the president to spend his (admittedly diminished) political capital to solve this problem — even at the risk of losing a second term.

  • Americans love big men who focus on big things which benefit the nation in big ways. Let our now wounded president do this and secure a truly significant and majestic legacy.
  • President Obama could rise to the occasion and say, “The issue of securing a balanced, lean, fair budget and with it the sound future of the nation is so important, I intend to make it my Number 1 priority. It is crucial that America get this benefit, and if it costs me my second term, so be it. It is the right thing to do.” (P.S. Not only would this be statesmanship in the grand manner, but this wounded man would sail to a second term and a legacy of substance and real worth.)

5)  Explain to America what is at stake. Then sell it to the nation.

  • John F. Kennedy’s father, Joseph Kennedy, was a marketing man. He stayed behind the scenes, raised money and gave sharp, sensible advice. Before the crucial Wisconsin primary in 1960, he told his son Jack that they would sell him “like soap flakes.” They did… he romped in the primary…. and got a crucial boost on the road to the presidency.
  • President Obama et al need to do the same thing now. Hire the best marketing brains on earth… brainstorm every benefit. Then go out and sell it to the nation. This matter of  the budget is not the most difficult problem this country has ever faced; it’s entirely solvable. What is necessary is to enlighten Americans, enlist their support and show them what to do. Then lock the Congress in a room and tell them to cut deals until the deed is done. And because cutting deals is what they do best, in due course the thing will be done. Then spread the credit, take the White House photographs… and start the next spending spree. For that is the American way.

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Harvard-educated Dr. Jeffrey Lant is CEO of Worldprofit, Inc., where small and home-based businesses learn how to profit online. _________________________________________

Is It Really Possible To Retire? Perhaps Sooner Than You May Think.

Retire Sooner With These Strategies

Do you find yourself feeling like you won’t ever have enough money to stop working? If so, it’s time to perk up. You can retire sooner than you think by making some changes now.

Enjoying Retirement by the Lake
Nothing like Enjoying Retirement

By Using Some or All of These Strategies You Can Retire Sooner Than You Ever Dreamed:

Identify activities that bring you joy and then create an income stream doing them. When you retire, you’ll have more free time to fill up. Why not do it engaging in activities you love and earning some money at the same time? Start your “cottage industry” now, while you’re working, just to try it out. Here are some examples:

  • If you like to make birdhouses for your yard, make extra to sell at local craft fairs or gardening shops.
  • Perhaps you get a kick out of being around elderly people. Start your own Elder Assistant business, charging families to “visit with and assist” elderly parents for a couple of hours a week.
  • Maybe you’ve developed a real love of gardening and taking care of your lawn. Consider mowing lawns in your neighborhood or planting bushes, weeding, and doing other gardening tasks for neighbors for a price.
  • The key is to think of ways to charge others to do what you love to do.

Think of creative ways to cut your expenses related to work right now. Consider the obvious costs, like carpooling, using public transportation, and carrying your lunch to work. Reduce every expense possible connected to your current work to reap the most savings and benefit your future retirement.

Open your mind to an adjusted lifestyle where you do more with less money. You can retire sooner if you learn to live more inexpensively now.

  • Purchase generic groceries.
  • Shop farmers’ markets for fresh produce.
  • Only buy meat that’s on sale.
  • Concentrate on “buy one get one free” offers at the grocery store.
  • Do your shopping at a discount grocery retailer.
  • Have Meatless Mondays.
  • Be more flexible about what you choose to eat, based on what’s on sale.
  • Reduce the level of cable television you pay for.
  • Get rid of your telephone land line and only pay monthly fees for your cell phone.

Live in a smaller house than you can afford. Your kids will eventually grow up and leave. Concern yourself with living conservatively and paying off the mortgage after you ensure all other bills are paid off. In a smaller home, you’ll live comfortably with fewer expenses.

Retain part-time employment now. Save 100% of what you earn from your second job and save it for retirement. Remind yourself daily that how you live, work, and save now will determine when you can retire and how you’ll live then.

Vow to learn how to delay gratification.Go back to the old-fashioned way of living where you save up to buy something. This way, you spend only cash to get what you want.  The delay in time that it will take for you to accumulate the money to pay for the item will help you determine how much you actually want the item.

 

When you’re truly committed to a goal of retiring sooner, you’ll keep your focus and follow through with these six strategies. You’ll quit working before you know it and love your simpler lifestyle!

Retirement Planning: Financial Fraud and Seniors

If you are retired or getting close to retirement, you probably have some great things going for you – like great credit, owning your home debt-free, and a substantial retirement nest egg. Sometimes these advantages can become our biggest weaknesses.

Unfortunately, these great things can also put you at greater risk for a range of frauds targeting senior citizens. In this article, we are going to look at three of the most common frauds perpetrated on seniors and what can be done to avoid being ripped off by thieves and scam artists.

Three Most Common Frauds Against Senior Citizens

Contractor Fraud

Odds are that your residence is going to need repair at some time during your retirement, especially if you’ve been living in it for the past 25 years. Contractor scams happen when the contractor starts doing repairs that are unnecessary and then often overcharges for the work, too.

Other common variants include:

  • Taking payments in advance and then never completing any of the agreed upon work
  • Using admittance into your residence as a means to burglarize it
  • Convincing owners to be part of fraudulent insurance claims

Reputable contractors don’t generally go knocking on doors to drum up business. If your house needs some work done, it’s usually better to ask around for referrals or check out the contractors listed by your Better Business Bureau. Check out the contractor for complaints before consenting to have any work done.

Reverse Mortgage Fraud

Reverse mortgages can be a legitimate technique to draw out equity from your home These are most commonly referred to as home equity conversion mortgages (HECM). HECMs are insured by the Federal Housing Authority (FHA). They were created so that people 62 years and older could easily pull the equity from their principal residence and not be burdened with monthly payments.

 

A problem can occur with non-HECM reverse mortgage scams; typically, a senior is used as an unsuspecting pawn in a property-flipping scheme or billed huge fees by an unscrupulous “advisor” that simply handles standard paperwork in a normal HECM loan.

If you’re interested in a reverse mortgage, your bank or a reputable mortgage broker is a good place to start.

Investment Fraud

While people of all ages are taken in by various investment frauds, seniors seem to be targeted the most.

Always be skeptical and double check with a trusted professional when it comes to your life savings. Don’t succumb to any time pressure tactics; if it’s something that you have to decide right now, your answer right now should be “NO.” False time limits are a common technique to get people to commit their hard-earned money to a fraud.

 

In Conclusion

It doesn’t seem fair that anyone has to be on alert in retirement. You have earned the right to just relax, enjoy the fruits of your labor, and enjoy life. Unfortunately, however, you must remain on guard for those unscrupulous persons looking to make a fast buck at anyone’s expense. In many instances, simply verifying information with third parties or demanding more details in writing will discourage most scam artists.

If you are taken advantage of or spot a scam being offered to you, report it immediately. Hopefully the perpetrator will be stopped before he can harm anyone else.

Remember that scam artists are usually looking for the easiest victim. They can be very persistent when they believe there is money to be made, but they’re also very quick to go away when things don’t look promising.

Safe and Sound

You might be able to retire from your profession, but you can’t retire from being careful. Keep an eye on that nest egg and don’t turn it over to anyone that you haven’t checked and double-checked. Such vigilance will help you keep the savings you worked so hard for away from thieves.

 

Thinking of Donating Your 401k to Charity?

Leaving Your 401(k) to Charity?

Many of us wish to leave the majority of our assets to our loved ones, but we also want to offer some to charitable organizations. This is where some smart tax planning can really pay off.  One of the most important parts of setting up your 401(k) is naming a beneficiary. This ensures that your 401(k) can pass to someone without going through probate. However, the beneficiary will have to pay income tax on the 401(k) balance. The tax rate in this case can be very steep, depending on circumstances.

There are other assets that can be passed to your heirs that are not taxed as aggressively. For example, if you pass stocks held outside of a qualified account to your heirs, your beneficiaries are not responsible for any capital gains that were achieved while you held the stock. The current price becomes their new price-point.  Leaving your 401(k) to your favorite charity and leaving the more tax-advantaged assets to your heirs makes a lot of sense. A greater percentage of your wealth will pass to where you choose, instead of to the government. Charities, since they are non-profit organizations, are tax exempt. So they pay no income tax on assets they receive.

Planning ahead now will help you avoid common mistakes.

There are three primary issues that can create significant challenges when passing on your 401(k) to a charity:

  1. Imprecisely or inaccurately naming the beneficiary. Listing “Greyhound Rescue” as the beneficiary is likely to result in your money going through the probate process. Instead, you’ll want to write in something more along the lines of “Southern Florida Greyhound Rescue Society.”    Also, be sure to list the Tax ID number for the organization. Many Tax ID numbers can be tracked down at www.guidestar.com.
  2. Possession of the account. To avoid unnecessary taxation, it is imperative that the account passes directly to the charitable organization of your choice. If your heirs or your estate were to take possession of the account and then attempt to transfer the account to the charity, your heirs would be liable for income and estate taxes.
  3. Your spouse. If you wish to give your 401(k) to a charity, your spouse must sign a form agreeing to give up all rights to the account. Interestingly, this requirement is not necessary for IRAs.

Remember that you have options. Managing your estate is not necessarily all-or-nothing. You could name multiple beneficiaries and assign a percentage to each. You could also leave your 401(k) to your heirs, and your 401(k) would only pass to the charity if all the other listed beneficiaries were deceased

Also keep in mind that the Pension Protection Act of 2006 allows IRA holders to transfer up to $100,000 to charity without paying income tax on the withdrawal. You do have to be over 70 ½ years of age to qualify, however. So using your IRA for charitable contributions is also an option.

Leaving your 401(k) to charity can be a really smart move. The tax burden on passing your 401(k) to your heirs is considerable, while charities do not have to pay income tax. Be sure to realize the total tax burden created by your choices and plan accordingly. Estate planning is one area where the services of a professional can really pay off. Whatever you choose to do with your 401(k), good luck, and happy planning!