Concerns about the health of Social Security have been voiced since the program’s first days of existence. Policy debates center on how much revenue the payroll taxes generate and whether or not this revenue can match the expected outflows of the program. Other debates involve which inflation measure is the best one to use for indexing benefits. This debate usually includes a trick to slow the spending by using an inflation index that is lower than the Consumer Price Index. Lost in most discussions of Social Security is the large impact this program has on the US economy. Many senior citizens rely solely on Social Security to fund their retirement. The US economy actually relies on Social Security as a major component of consumer spending. Most economists estimate that consumer spending ...

Judging from the headlines, California is on the cusp of collapse. The state of California certainly has a sizable budget gap, just like they do every year. There are also a number of people leaving the state to escape the taxes and companies that are fleeing regulation. The news coverage leaves little doubt that California faces a grim future. Yet, the state somehow continues to function and keep millions of its residents. The budget problem is the latest crisis. However, budget shortfalls are a problem that other states face every year and hundreds of cities and countries across the nation also face. The current problems are most likely worsened by the impact of the deep recession. Unemployment in the state has decreased the amount of income taxes collected at the same time the governmen...

When Facebook sold stock to the public, a number of millionaires and a few billionaires were minted in the initial public offering. While others debate whether the stock is worth the price investors are paying, we can look at the IPO for lessons that apply to our financial situations and find ways to make our retirement planning more comfortable. Facebook’s founders are young and rich, the perfect overnight success stories. However, the reality is that they didn’t acquire their wealth overnight. Facebook is a social networking site that was launched in early 2004. Overnight success and billion-dollar fortunes took eight years to accumulate. Lesson #1: don’t anticipate overnight success Granted, eight years is pretty fast, but it shows that hard work and at least some amount of ti...

A newly retired couple will need an estimated $240,000 to meet their health care expenses over the course of their lives. Fidelity Investments releases their estimate every year and the mutual fund giant reports that health care costs are increasing again, after dipping slightly last year. This year’s total is up about 4 percent from a year ago. Annual increases have averaged about 6 percent since Fidelity published its first estimate in 2002. How the Fidelity report was conducted The study is based on projections for a 65-year-old couple retiring this year with Medicare coverage. The estimate includes Medicare’s premiums, co-payments and deductibles, and out-of-pocket prescription costs. The study assumes the couple does not have any other insurance, and then incorporates a life expec...

A few years ago, homes were considered investments and many people bought them expecting to enjoy rapid appreciation. Those days are gone and home buyers are rediscovering another reason to buy a home – they need somewhere to live and buying can be more affordable than renting for most, especially given recent trends in rental prices. According to a recent article in the San Diego Union-Tribune, rents in San Diego County are rising as prospective renters are facing increased competition for apartments. The rental market has become more competitive because home buying has become a more difficult process. The need for a larger down payment and tighter credit standards has excluded many from the real estate market. Others have chosen to rent because they are concerned that home prices could...

As everyone knows, this is an election year. Although many analysts on cable news networks, Sunday morning talks shows and in major newspapers claim to know who will win in November, the reality is that no one knows. Anything can happen on the long road leading up the elections. We do know one thing, however: in years when an election is hard-fought, politicians seem to believe that fear sells best. That means politicians from both parties will highlight the stress the federal government’s budget faces, and Social Security will be the centerpiece of that debate. Some politicians will question the long-term sustainability of Social Security, pointing out that the trust fund is expected to run out of money at some point in the future. This is all based on projections and estimates. The tru...

We are not taking sides in the political debates that surround the California state budget, but we do believe that everyone can learn something about spending, and budgeting, from watching the action in Sacramento. The obvious lesson to draw from California and almost every other government is that chronic overspending leads to big problems. Gimmicks help many of them, including California, technically balance their budget or at least show a lower deficit than private sector companies with similar spending patterns would. What went wrong for California’s budget? Governments have largely reached this point where they suffer from chronic budget deficits because they failed to set priorities in many cases. In California, some are appalled that the state spends more on prisons every year...

When you retire, you no longer have to go to work everyday. Most people choose to live within a reasonable distance of where they work and buy a home within commuting distance. After retirement, there is no longer a need to live within commuting distance and retirees must make a choice on whether they will keep their existing home or sell it and move somewhere that they want to live. Ignoring this choice is actually a choice to keep their existing home. Why sell your home in anticipation of retirement? There are a number of reasons to consider selling your home. The home may be larger than what you need or want in retirement. It could also be in a neighborhood that you no longer want to live in. Many families decide where to live based on the quality of the schools in an area. But once the...

European governments face debt problems that seem to threaten the survival of the euro. The future is uncertain, as it always is when major economic events are concerned. On this side of the lake, however, our main concern with this debt crisis is what the potential impacts could be on our own retirements and on the retirement income of those who have already retired. Some tactics in the fight again a collapse in the Euro One of the government responses to the crisis has been a series of austerity budgets. Government spending is being cut back so that deficits can be reduced and even balanced at some time in the future. The impact of these budget cuts will have serious impacts on the citizens of the countries involved. Some countries are even considering cutting back on retirement benefits...

Social Security benefits vary based on when you start taking them. You are eligible for full benefits at your full retirement age (which will be between 65 and 67 depending on when you were born). You can start taking benefits earlier than that, but beware that the monthly payment may be up to 20 percent lower if you do. Delaying benefits results in an increase in the amount you receive every month. In case those rules aren’t complex enough, married couples have additional choices which offer their own set of penalties and benefits. A spouse is eligible to receive half of their spouse’s benefit level. Assuming the wife earns more, if the husband in this example is able to receive $750 a month but his wife’s benefits total $2,000 a month, filing for the spousal benefit would increase ...