THE Retirement Thread (merged)

[Tyler_JC]

If the payroll tax cap is eliminated, the marginal tax rate for people earning more than the current cap would be over 50%.

This means that for each additional dollar a person earned, more than half of it would go to the government.

Personally, I consider that to be highly unfair.

[vision-master]

Guess we can go with system like Mexico? See!

[Tyler_JC]

Guess we can go with system like Mexico? See!

I'm not sure if I follow...

[Ludi]

If the payroll tax cap is eliminated, the marginal tax rate for people earning more than the current cap would be over 50%.

This means that for each additional dollar a person earned, more than half of it would go to the government.

Personally, I consider that to be highly unfair.

I've found the best way to avoid paying taxes is to avoid making money.

[Bas]

If the payroll tax cap is eliminated, the marginal tax rate for people earning more than the current cap would be over 50%.

This means that for each additional dollar a person earned, more than half of it would go to the government.

Personally, I consider that to be highly unfair.

I've found the best way to avoid paying taxes is to avoid making money.

Another good way would be for America to stop invading other countries; doesn't about half of all governments spending in America go to the military? (no wonder there's no money for a child healthcare bill, you spend all your tax dollars abroad ; )

[Pretorian]

I dont understand what are you worring about folks. Lack of funds? Too many boomers to pay for? So what? Noone said that they will be rolling in butter while cruising in Caribes. My father worked 28 years in a coal mine, in the region where each 1 mln tonnes claimed 17 lifes and countless injuries/prof. deceases. On top of that he did 4 years in the Army servicing intercontinental missiles with toxic liquid fuel, and 3 years on some poisonous position at a huge metal-melting factory. In 1993-94 he was getting a whopping dollar as his retirement payment. Yes, $1 a month. Since an absolute majority of baby-boomers didnt work as hard as him, and a bunch of them didnt do anything at all, what makes you think its not doable here?

[WisJim]

An important part of our retirement plan was to have a productive (in food and energy) homestead completely paos for, with tools to do everything that we could imagine needing to do to continue eating and living in reasonable comfort, also paid for. Since we decided on this plan in the mid 1970s, we bought our first 120 acres of bare land for not much over $100 and acre, built a house (paying cash as we built), installed a wind electric and PV system, and then when we moved after a number of years, we sold it for enough to buy our "new" place and get the old house livable. We moved the wind/solar stuff as the new owners of the first place had no interest in them, and we have added to the system in the last 18 or so years. Although I expect to get some Social Security, at least for awhile, my income after retiring from my current employment will be dependent partially on a new part-time career (I intend to "work" until I am unable to), and partly on retirement funds that I feel are much more secure than the government's social security system. No matter what happens, we should be in much better shape than most people, and live in a neighborhood of supportive people who are for the most part used to doing lots for themselves, such as raising meat animals, gardening, horse farming, maintaining their homes and equipment, etc.

[Plantagenet]

You sound like you've made wise plans and some good choices WisJim.

Congrats on putting yourself into a great situation. Cool!

[greenworm]

so I'd say on net they will probably use at least the same amount of energy and/or gas.

In terms of the boomers I wouldn't agree with this at all.

They will drive less, period. I don't care how cold their old bones get, eliminating a daily driving commute is way more oil than turning up the thermostat a couple of degrees. Although I'm not a boomer, being retired has eliminated a 50 mile roundtrip commute as well as eliminated a $2000(2002 numbers) yearly heating bill, I'd bet it's close to $3000 now, God, I don't even want to think about it.

I bumped into my neighbor this morning and asked if he could come up with rough numbers on his oil consumption before and after retirement and he guessed he uses about three quarters less of what he used while being employed. Once again this is because he can offset oil with his free time by burning wood, not representative of the population, however, I believe on average each boomers is going to use a quarter less at least.

[Ferretlover]

I was talking with a friend who works for the tax people yesterday and learned how inflation works to the government's advantage when it comes to the deluge of retirees soon to hit, not sure if this is unique to Canada or not.

Lets start with Retirement Savings Plans, similar to IRA's in the U.S.A. When you put in to these you get a tax break, every dollar you contribute is shielded from income tax. When you take out, advertised as a time when your tax bracket is expected to be lower, every dollar withdrawn is subject to income tax. Sounds fair on the surface, but reality is different.

Most importantly, there is inflation to consider. In my case, I've contributed for about 30 years now, but my savings bought so much more back then. If I take out $10,000 when I retire, that will likely buy no more than $2,500 that I put in. But, its all subject to tax. Its like the government is a silent partner, every time you make a buck in these plans, the government makes about 27 cents, which also compounds over time. You'd think Canada was a Communist country or something with this scheme, you actually end up making investing decisions which create new taxes for the government. It is the government primarily which has inflated our money so that over 35 years it will only buy 25% of what it bought back then.

Then there is that assumption about lower tax rates. But, in my case, the combination of my work pension and the Canada Pension Plan puts me in spitting distance of the $53,000 "clawback" threshold for the government Old Age Security payments. So, in reality I'll be "clawed back" over 68% for every dollar I withdraw for an RSP. That was not in the "original deal", it was something they put in about ten years ago. They want you to save for retirement, but if you do, they penalize your Old Age Security payment. I wonder how many Canadians will be at the clawback point? I'd guess many will be, most middle income people for sure. But, he Old Age Security program was originally sold by the politicians to be a universal income program for older Canadians, not just the poor.

The there is another option, just leave it in to compound. Seems neat, the money grows with no tax applied, right? But, this is the Catch 22 of them all. When I die, as everybody does, then the government taxes whatever is left in the RSP as if it was income earned in the year you die. Let's say my fund grows to $400K this way. Well, guess waht? Between the federal and provincial tax, my estate would pay out 40% on that amount.

So, there is really is no truth in advertising. I suspect very few people will end up a lower tax rate on their output, versus their input, to these RSP programs.

My friend figures there is about $2.4 trillion now in RSP plans. It would seem that the government's share (federal and provincial) of this may well work out to over $750 billion. Yes, that is billions.

Is this program some unique Canadian scam, or does it work that way in the U.S. and other countries too? And, does the government factor these huge amounts coming to them as an asset on their balance sheets? And, why should we ever expect the government to control inflation, when it works out to their financial advantage?

I think if the Canadian government was subject to truth in advertising legislation, they'd be sued big time.

[Pops]

I am not an expert on anything Denny but my plan is not to invest in any fund or company where strangers control my money and have their next paycheck as their foremost concern.

My thought is to keep my kids close and invest in them in as many ways as I can.

Old fashioned and fallible I know but it worked, mostly, till a generation ago…

[fireplaceguy]

Is this program some unique Canadian scam, or does it work that way in the U.S. and other countries too? And, does the government factor these huge amounts coming to them as an asset on their balance sheets? And, why should we ever expect the government to control inflation, when it works out to their financial advantage?

I think if the Canadian government was subject to truth in advertising legislation, they'd be sued big time.

You're exactly right - inflation is just another form of tax. Aren't your RSP's controlled by the gov't much like our Social security? If so, what would make the Canadian system unique is if the money's actually still in there!

Here in the US the "trust fund" (*) is broke - they've been spending every cent of the surplus for 40 years now to mask the size of the real deficits they're running. Nothing left but a bunch of IOU's in there, and those good only as long as our fiat money system and house of cards hydrocarbon based economy holds on to the point that the bastards can still collect taxes...

The pension checks mailed tomorrow morning are covered by taxes collected last night. Google "Ponzi"...

Acton was right: "Power corrupts, and absolute power corrupts absolutely..."

Pops - you have the best idea. Things are coming full circle...

FPG

(*) Gotta love it: The "trust fund" is something you can't trust that has no funds, just as the "Federal Reserve" isn't Federal and has no reserves. (To think some people want these petty little shits running healthcare. Once you get past the profoundly grim nature of this whole reality, it's downright funny - kinda like peak oil, we have peak corruption and peak gullibility as well...)

[Denny]

Aren't your RSP's controlled by the gov't much like our Social security? If so, what would make the Canadian system unique is if the money's actually still in there!

Here in the US the "trust fund" (*) is broke - they've been spending every cent of the surplus for 40 years now to mask the size of the real deficits they're running. Nothing left but a bunch of IOU's in there, and those good only as long as our fiat money system and house of cards hydrocarbon based economy holds on to the point that the bastards can still collect taxes...

The pension checks mailed tomorrow morning are covered by taxes collected last night. Google "Ponzi"...



(*) Gotta love it: The "trust fund" is something you can't trust that has no funds, just as the "Federal Reserve" isn't Federal and has no reserves. (To think some people want these petty little shits running healthcare. Once you get past the profoundly grim nature of this whole reality, it's downright funny - kinda like peak oil, we have peak corruption and peak gullibility as well...)

In Canada, RSP's are individual accounts in which money is deposited at the whim of the contributor, and which provide income tax deductions at that time, but on which everything comig out is income taxed.

Our Canada Pension Plan is more like your social security system, we make routine payroll deposits, matched by employer, it goes into a central fund. However, now our central fund is managed by a special board, and must meet actuarial commitments. It actually has many physical investments, even foreign real estate, and stock investments. It is financially healthy since it was restructured back in 1998, up to then our government used it as a cheap source of funds borrowing.

I am not sure what is equivalent in the U.S. to the Old Age Security benefits, these are monthly payments provided to Canadians over 65, based simply on their age and years of Canadian residency, not based on deposits made. It used to be universal, but now the government is in essence making it means tested.

[Tyler_JC]

Aren't your RSP's controlled by the gov't much like our Social security? If so, what would make the Canadian system unique is if the money's actually still in there!

Here in the US the "trust fund" (*) is broke - they've been spending every cent of the surplus for 40 years now to mask the size of the real deficits they're running. Nothing left but a bunch of IOU's in there, and those good only as long as our fiat money system and house of cards hydrocarbon based economy holds on to the point that the bastards can still collect taxes...

The pension checks mailed tomorrow morning are covered by taxes collected last night. Google "Ponzi"...



(*) Gotta love it: The "trust fund" is something you can't trust that has no funds, just as the "Federal Reserve" isn't Federal and has no reserves. (To think some people want these petty little shits running healthcare. Once you get past the profoundly grim nature of this whole reality, it's downright funny - kinda like peak oil, we have peak corruption and peak gullibility as well...)

In Canada, RSP's are individual accounts in which money is deposited at the whim of the contributor, and which provide income tax deductions at that time, but on which everything comig out is income taxed.

Our Canada Pension Plan is more like your social security system, we make routine payroll deposits, matched by employer, it goes into a central fund. However, now our central fund is managed by a special board, and must meet actuarial commitments. It actually has many physical investments, even foreign real estate, and stock investments. It is financially healthy since it was restructured back in 1998, up to then our government used it as a cheap source of funds borrowing.

I am not sure what is equivalent in the U.S. to the Old Age Security benefits, these are monthly payments provided to Canadians over 65, based simply on their age and years of Canadian residency, not based on deposits made. It used to be universal, but now the government is in essence making it means tested.

Social Security:

Pay ~6% of the first $100k you earn for your entire working life.

Employer contribute a similar %.

Between age 63 and 67 you can retire.

If you retire at 63 your benefits are lower than if you retire at age 67.

However, based on life expectancies and actuary tables, it ends up being the same benefit.

Payouts are determined based on your 10 best years (or more accurately, 40 quarters) of income.

[Ferretlover]

I see this article by a former aerospace engineer who says we should target 15% to 20% of our savings to fund retirment. See CNN Money - "Retire Rich"

I think that is far too high. I have managed to scrimp and save around 8% typically, ranging from about zero in years when I had to buy a car, to about 15% when I got a fat bonus. On top of that, my employer deducts another 7% toward the pension plan, but its tax deductable. It was touch and go back years ago when my wife did nto work and we had kids to feed and a mortgage to feed too. Even then, I think I managed to squirrel away about $2k a year mionimum. Touch wood, I think I am in good shape for retirement when I hit 60 down the road. I actuall now am managing to donate a good bit of my income to faith based charities. Gives a tax deducaton in this world and some bonuses in the next.

I understand the typical American is actually into "negative"
savings these days, which sounds ominous in the event of a recession. So, even getting positive savings would be a step ahead.

[smallpoxgirl]

Retirement? Aren't you the optimist.

[I_Like_Plants]

None. No income for one thing. and it's impossible to save, it's taken away from you no matter what you do.

Only things that can be "saved" are skills, knowledge of foraging, hunting, sniper skills, you can "save" by keeping yourself in good physical shape, and you can "save" in terms of, if you buy a tool or a gun or anything useful, never sell it.

Guns will get you through times of no money better than money will get you through times of no guns.

I plan to leave Mother Earth a legacy though by taking a lot of humans with me when I check out!

[roccman]

With inflation tapping on the door of 15%...I would say saving 15% is not going to cut it.

Retirement is like God, Santa, and the Easter Bunny...it does not exist.

[Denny]

Guns will get you through times of no money better than money will get you through times of no guns.

I plan to leave Mother Earth a legacy though by taking a lot of humans with me when I check out!

Somehow, I don't see improving my gun skills as a useful plan as I get older. If I manage to make it my 80's, I expect my co-ordination and eye sight will be pretty crappy, something I can't control - nor can you.

I hope you aren't actually looking forward to "taking a lot of humans with you". Its one thing by necessity, but I sense a certain element of optimism in your thoughts concerning this prospect. That is scary stuff.

[lawnchair]

Hard to say. I spend quite a bit less than I make, overall, and I don't make much in the national scheme of things. Being childless, being fairly happy (so not needing many toys), and living in a very, very cheap part of the country all help.

I also have debts, though. Student loans and mortgage. Paying just over the minimums on them, since at their absurdly low fixed rates, it's nice to have the flexibility now, and they're a bet on hyperinflation (which I don't think is probable, but as I boy I collected Hungarian Pengo and Weimar Mark postage stamps, so the possibility has always been in the back of my mind).

The question is, how little can you live on in 'retirement'? I assume I'll have the house paid off, and continue to have brutally simple tastes and no particular wanderlust. The only variables are the baseline cost of food (pasta, rice, potato, flour, lentils, beans + extensive gardening), basic utilities (wood heat helps here), non-health insurances, taxes, and health care. Subtract the last two, my life would fit pretty okay at $4000 a year and free time and I could quit pretty damn soon at quite young. I have no idea how bad taxes will get, though, or how much I'll eventually wish I had to spend clinging to life. Obviously, the cynic slacker in me is thus in favor of socialized (paid for by progressive taxation) health care. On a slightly less cynical note, I do think socialized health care would substantially contain the outrageous cost increases.