Retirement Planning (Don't Laugh)
The inspiration for today's article was, once again, advice Suze Orman laid on the unsuspecting public, which was brought to my attention by a long-time reader. Ms. Orman is now advising people whose mortgages are underwater to walk away. Just in case there is someone else left who doesn't know the ins and outs of the jingle-mail process, don't sneak away in the night. You must first consult a walking-away-from-your-mortgage blog or a law website and they should be able to get you a year or two of easy livin' as a squatter. That and advise you on the tax consequences from the fictitious gain on debt repudiation.
She then asked, a family member is entitled to a pension from his military service, a pension from the DoD, and compensation from the VA for disability. In your opinion, which of them will he actually collect when he is retirement age 20 years from now? Wait a minute, I said, what about Social Security; shouldn't he be getting that too? The most optimistic scenario I could conjure up was that at the very least, retirement benefits will be both means tested and income taxes will increase such that they will wipe out the benefit of having more than one source of retirement income. Of course, all other income will be affected as well, but she didn't ask me about that. And the retirement age will be brought in line with life expectancy; it was never intended that anyone would live long on Social Security or collect it in the first place.
I then added parenthetically, (it's these pensions, BTW, that the Treasury*, as of yesterday, isn't funding and will be "borrowing" from, similar to what happened to the Social Security Trust Fund). (The term "borrowing" here deserves it's own set of parentheses. The funds are in the form of treasury securities, which is debt. So the Treasury would be borrowing its own borrowed money.) I further advised her that there aren't enough people working in the private sector to pay retirement benefits to public-sector or Social Security recipients. Think about it, where does this money comes from? The .gov doesn't earn anything; it spends the tax revenues it collects and whatever it skims off drug smuggling.
But, back to my reader's family member. Giving full rein to my inner mean streak, I advised that he should also take into account that the buying power of the money he's saving now, if he bothers to save, will buy way less than half, maybe way less than a quarter of what it buys now. And by the time he retires, his house won't be worth enough to sell and buy a used car with the proceeds. But don't worry about him, I said, at least he knows in advance, unlike people his parent's age :-) It was at this point, I burst out laughing, not at my own wit, but at the absurdity of what we've been led to believe and, worse, that we believed it.
P.S.: I'm planning to write more often and here are a few of the subjects I'll be addressing:
What's New in Human Chip Implantation
Border Wars: the US Cartels vs. the Mexican Cartels
Follow-up: Radiation Poisoning and You!
Tide vs. Wisk: Which Nano-transmitters Make your Clothes Whiter?
Stuxnet: Guess Who Did It? **
*Geithner also threatened congress with not being able to pay interest due on treasury obligations if the debt ceiling wasn't raised. And the Austrian economists said hyperinflation couldn't happen here because the US could print to cover its obligations. Two reasons why that's wrong: the debt ceiling and foreigners may reject new, diluted US dollars, which is happening already. Even Mexico has put a limit on how many US$ can be exchanged for pesos in a month. Then there's runaway price inflation; who cares about the amount of dollars in circulation; if you don't have enough of them, it's inflation.
**One of the best TED talks I've seen: http://tinyurl.com/6yjm9jg
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