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Every year the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds aka Social Security gets a checkup on who is receiving Social Security benefits and projections on how long it can continue making those payments. The arrival of the report may not have the same anticipation of the winning Powerball numbers but with all of the talk lately about the Social Security fund running out of money the release of the report is eagerly anticipated.
The report was just released on May 31st, for the year ending 2012. It confirms that:
The report also states that the system now pays out more in benefits than it receives from the combination of FICA taxes and interest on its investments. It is projected that the Fund will be exhausted in 2033 and it will only be able to pay 77% of scheduled benefits after that happens. That would mean starting in 2033 if you were expected to receive $2000 a month in Social Security benefits, the fund would only be able to pay you $1540 a month.
There are many ways to fund the shortfall including increasing the full retirement age, increasing the FICA wage base, increasing the Social Security tax rate, or reducing the cost of giving annual increases in Social Security benefits (COLAs). To read more about them check out this article from MSN Money.
Unfortunately to address the issue we are dependent on political leaders to take action. Since the fund is not scheduled to be exhausted until 2033 we will probably have to wait 19+ years for politicians to take any action. Another option would be to attend one of my Social Security Planning workshops and learn strategies on how you can maximize the amount of money you receive from Social Security. You can read more about Social Security by downloading a free chapter from my book The Retirement Fitness Challenge: Shape Up Your Finances and Make Your Money Last a Lifetime.
I recently sent out a letter offering a free “Help Desk” service for a couple of weeks to answer questions you, your friends, or colleagues may have. The response has been great and I have received some great questions on a lot of different personal finance topics. Here are a few examples
– Can I transfer my E Savings bonds into my child’s 529 plan?
– Can I purchase my vested stock options using my IRA?
– What will rising interest rates mean to my bond portfolio?
– Is my 529 account penalized if my child receives a scholarship?
– Are there any ways I can improve my Social Security benefits?
If you have friends, family, or colleagues with any type of personal finance question – send them my way, I will do my best to answer it.
Annuities are contracts that are purchased by investors from insurance companies in exchange for promise of future payment. There are several types of annuities which exist, including variable, fixed, deferred, immediate, and indexed. Indexed annuities, the topic of this post are a type of annuity that grows at the greater of a) an annual, guaranteed minimum rate of return; or b) the return from a specified market index (such as the S&P 500). In a robust market, you will not achieve the actual performance of the index due to how the gains are added to your annuity, however in a down market you won’t ever lose your principal. The fact that principal cannot be lost makes fixed index annuities very popular with conservative investors who want a fixed stream of income that they cannot outlive.
Like other annuities indexed annuities can provide several key benefits to investors including a way to defer taxes and provide income during retirement.
I have included a couple of videos below that do a good job of explaining the basics of annuities and specifically indexed annuities in a way that is easy to understand.
The first video is by The Annuity Think Tank, a free website providing information about annuities. The second link is to a series of three videos by Allianz, an insurance company that sells annuities. The first video provides the basics of annuities, the second one contains information about fixed index annuities, and the third video markets their strength as an annuity provider.
All types of annuities have their pros and cons. If you would like to discuss whether an annuity makes sense for you I’d be happy to talk.
For most of us, the Fourth of July promises the opportunity to relax, a few days on which to do precisely “nothing important.” It’s a time for sizzling burgers on the grill, spiking volleyballs at the beach, and shouting our approval as fireworks blast colorful patterns in the night sky.
There’s nothing wrong with taking advantage of a well-earned day off and relaxing with family and friends. But there are lessons to be learned from Independence Day, great lessons that underscore the courage and commitment upon which this country was founded – lessons about success.
When it comes to motivation and training, you’ll often hear advice thrown about, such as “Be a leader,” Act decisively,” and “Never give up.” We’ve heard about these ideas so often, they’ve become clichés that have lost some of their meaning. So let’s use this July 4 as the perfect time to look at such advice operating in a revolutionary context.
Read the 7 lessons the founding citizens of this country can still teach us today.
A last minute deal was not made and on July 1st and millions of current and former college students saw the interest rates on their loans double to 6.8%. This may not sound crazy, but consider this: the 10-year Treasury rate is just below 2.5% and the 30 year Treasury rate is 3.5%.
The new, higher rate will affect about 7 million students and families, who qualify for the loans based on financial need. The government, the issuer of these student loans is set to pocket a record $50 billion on student loans this year. Of course the government’s profit will rise if rates rise.
The student loan rate raise can be crippling, but just as important is dealing with the much bigger issue of college costs. The cost of college is going up 5%, 6%, 7%, 8% every single year. College costs have increased more than 1,100 percent over the past 35 years. Even health care costs haven’t surged as much, climbing just 601% during that same period. To put things into perspective, it is projected to cost $500,000 for a child born today to attend four years of school at Syracuse University when they would start attending college in 18 years.
Why have they raised so much: it’s because the government makes it so easy to get a loan. It sounds a lot like what happened in the housing market over the past decade in the housing market where the government made it so easy to obtain a mortgage. Will the education industry go through the same crash?