Tag Archives: social security benefits

Saving for Retirement

My Comments: It’s a truism in our society that having more money rather than less money is a good thing. And retirement, by definition, is a time in your life when earning money to pay bills and enjoy life is not in the cards.

That being said, if you expect or need to transition to retirement, it would be helpful if you had the necessary financial reserves to make it happen on your terms. Here are 7 things financial advisers wish you knew about saving for retirement.

Holly Johnson, WiseBread April 19, 2017

Wish you had a crystal ball for retirement planning? Most of us do, and for good reason.

Even if you’re sure you’ll have enough money to retire, there are no guarantees until you get there. If your nest egg runs short, it will be far too late for a do-over.

This is where a financial adviser can help. A financial adviser will know if you’re heavy on risk, not diversified enough, failing to maximize tax advantages, or simply not saving enough.

They will also make sure to take into account your lifestyle and preferences to ensure you’re on the right path to your ideal retirement, and not just following a cookie cutter plan that’s not going to be the right fit.

We asked financial advisers for some of the most important ideas they wish their clients understood when it comes to money, retirement, and the future.

1. Social Security will be around in some form
Andrew McFadden, a financial adviser for physicians, says many clients refuse to accept that Social Security will still be around when they retire. This is especially true if they are part of Gen X or Gen Y, he says, since they are decades away from receiving benefits.

However short on funds we may be, the Social Security Administration projects the ability to pay around 75% of current benefits after the fund is depleted in 2034. This is a key detail, notes McFadden, since many people hear Social Security is going bankrupt and refuse to acknowledge any benefits in their own retirement planning.

“It’s not all roses, but that’s still a far cry from those bankruptcy rumors,” says McFadden. “So lower your expectations, but don’t get rid of them altogether.”

2. It’s OK to “live a little” while you save for retirement
Russ Thornton, founder of Wealthcare for Women, says too many future retirees sacrifice living now for their “pie in the sky” dream of retirement. Unfortunately, tomorrow isn’t promised, and many people never get to live out the dreams they plan all along.

“So many people assume they can’t really live until they’re retired and not working full-time,” says Thornton. “Nothing could be further from the truth. Find ways to experience aspects of your dream life now, whether you’re in your 30s, 40s, or 50s.”

With a solid savings and retirement plan, you should be able to do both — save and invest adequately, and try some new experiences that make life adventurous and satisfying now.

“Don’t accept the deferred life plan,” he says. That future you dream about and plan for may never come.

3. The 4% rule isn’t perfect for everybody
Born in the 90s, the 4% rule stated retirees could stretch their funds by withdrawing 4% per year. The catch was, a good portion of those investments had to remain in equities to make this work.

The 4% rule lost traction between 2000 and 2010 when the market closed lower than where it started 10 years before, says Bellevue, WA financial adviser Josh Brein. As many retirement accounts suffered during this time, it was shown that the 4% rule doesn’t always work for everybody.

It doesn’t mean the rule should be thrown out completely though, nor should it still be followed like gospel. In fact, in 2015, two-third of retirees following the 4% rule had double the amount of their starting principal after a 30-year stretch. These retirees could have benefited from taking out more than the limited 4%, which could have meant an extra vacation each year, or another luxury that they were indeed able to afford.

There’s absolutely no denying the importance of making your retirement dollars last. But, after a lifetime of working and saving, you also deserve to enjoy those dollars to their full capability.

Bottom line, take time to re-evaluate your drawdown strategy every few years and make adjustments as necessary. While you don’t want to go broke in retirement — you also don’t want to miss out on all the incredible things this time in your life has to offer.

4. Retirement looks different for everyone
Minnesota financial adviser Jamie Pomeroy says he wishes people would abandon their preconceived notions on what retirement should look like. He blames the financial industry in part for perpetuating the idea that certain retirement planning accounts and products work for everyone. “They don’t,” he says.

“Some enjoy retiring to the beach, some take mini-retirements before reaching a retirement age, some work part-time in retirement, and some just want to spend time with their grandkids,” he says. “The concept of retirement is dynamic, ever-changing, and defined very differently by lots of different people.”

To find the right retirement path and plan for your own life, you should sit down and decide what you really, truly want. Once you know what you want, you can craft a realistic plan to get there.

5. Investment returns aren’t as important as you think
According to North Dakota financial adviser Benjamin Brandt, too many people focus too much energy on their investment returns — mostly because they are an immediate and tangible way to gauge the success or failure of our financial plans.

Investment returns should only be judged in the proper scope of a long-term financial plan, and “over decades,” he says.

In the meantime, our behavior can make a huge impact when it comes to reaching your retirement goals. By spending less and saving more, for example, we can avoid debt and potentially invest more money over the long haul. Those moves can help us retire earlier whether the market performs the way we hope or not.

6. Small changes add up
When it comes to retirement planning, many people feel overwhelmed right away. For example, some people may realize they need $1 million or more to retire and give up before they start.

Financial adviser Jeff Rose of Good Financial Cents says this could change if everyone realized how small changes — and small amounts of savings — add up drastically over time.

“Someone who invests just $200 per month for 30 years and earns 7% would have more than $218,000 in the end,” says Rose. “Now imagine both spouses are saving, or that they boost their investments incrementally over the years.”

As Rose points out, a couple who invests $500 per month combined and earns 7% would have more than $566,000 after 30 years.

Looking for ways to save money and invest more will obviously make this number surge. If you boost your contributions each time you get a raise, for example, you’ll have considerably more for retirement. Remember even the smallest contributions can greatly add up over the years.

7. Don’t forget about long-term care
Joseph Carbone, founder and wealth adviser of Focus Planning Group, says many future retirees are missing one key piece of the puzzle, and that piece could cost them dearly.

“I wish many of my clients understood the biggest hurdle from passing wealth on to their heirs is long-term care costs,” says Carbone. “Whether it is home health care, assisted living, or the dreaded nursing home. It is real and it is scary.”

According to Carbone, most people have no idea how much long-term care costs and fail to plan as a result. “Even though the average stay is only 2.7 years in a nursing home, the total cost for those 2.7 years could be well over $400,000,” he says

To help in this respect, Carbone and his associates suggest working with an attorney who specializes in elder law. With a few smart money moves, families can prepare for the real possibility of using a nursing home at some point.

One more thing advisers wish you knew
While financial advisers don’t know everything, their years of experience make them painfully aware of what lies ahead for those of us who fail to plan. And, if there’s one thing financial planners can agree on, it’s this: The sooner we all start planning, the better off we’ll be.

Cheap Electricity and Food

My Comments: Over the next 25 years, the US will resume it’s role as THE major global economic influence. You can argue it will happen as a result of bringing coal mining jobs back to Appalachia or because there will be a wall built along our Mexican border, one built by Mexico with help from China to keep Americans out, but it will happen.

Right now we’re the only industrialized nation on the planet with a food surplus. I’m reminded again of comments by Thomas P. M. Barnett several years ago. He said our ability to grow food and export our surplus would position us as the dominant nation on the planet. Wars will be fought not over energy but over food.

With projected advances in solar technology suggesting a 30% or more net increase in efficiency, tribal pressures to promote coal, oil, and perhaps even natural gas will diminish. Let’s hope so. BTW, that’s my dad on the tractor in 1933 in Vermont.

by Joseph Hincks / December 15, 2016

Solar power is becoming the world’s cheapest form of new electricity generation, data from Bloomberg New Energy Finance (BNEF) suggests.

According to Bloomberg’s analysis, the cost of solar power in China, India, Brazil and 55 other emerging market economies has dropped to about one third of its price in 2010. This means solar now pips wind as the cheapest form of renewable energy—but is also outperforming coal and gas.

In a note to clients this week, BNEF chairman Michael Liebreich said that solar power had entered “the era of undercutting” fossil fuels.

Bloomberg reports that 2016 has seen remarkable falls in the price of electricity from solar sources, citing a $64 per megawatt-hour contract in India at the tart of the year, and a $29.10 per megawatt-hour deal struck in Chile in August—about 50% the price of electricity produced from coal.

Ethan Zindler, head of U.S. policy analysis at BNEF, attributed much of the downward pressure to China’s massive deployment of solar, and the assistance it had provided to other countries financing their own solar projects.

“Solar investment has gone from nothing—literally nothing—like five years ago to quite a lot,” Zindler said.

When the numbers come in at the end of 2016 the generating capacity of newly installed solar photovoltaics is expected to exceed that of wind for the first time: at 70 gigawatts and 59 gigawatts respectively, according to BNEF projections.

The 7 Elements of a Successful Retirement

My Comments: Just 7? No, there are lots more, but you have to start somewhere.

The first element reflects my personal approach to this. There has to be a real understanding of the difference between strategies and tactics. There’s a reason that seems militaristic because it is. I’ve just borrowed it to use in financial planning.

Nick Ventura/Apr 12, 2017

Start with well-defined goals, and revisit them at least annually. The closer you get to retirement, the more often you should sit down and think about your overall retirement strategy. In Ernie Zelinski’s “How to Retire Wild, Happy and Free,” the author makes the argument that setting your retirement goals expands far beyond managing your finances. Retirement planning should encompass all areas of your lifestyle, from where you live and where you travel to how you spend your day and what truly are your income requirements. Cookie cutter percentages and rules of thumb serve merely as benchmarks. Successful retirement planning requires flexibility and the willingness to look at all aspects of your life.

Many people get great satisfaction from work. So, if you are retired, and you like to work, pick something you like to do and gain emotional satisfaction from that activity. This includes working for charitable causes, hobbies, family involvement, etc. These “jobs” may or may not come with financial remuneration. But that’s not the point; many people derive emotional satisfaction and self-worth from working.

Another aspect of retirement is lifetime learning. Staying relevant in today’s technology economy requires a willingness to learn and adapt. Consider this: most medical professionals would agree that 20% to 30% of medical knowledge becomes outdated after just three years. Keeping current on technology and medicine will certainly enhance your retirement success.

Budgeting is more than setting a top-line spending number based on a pre-arranged percentage. Often times, we work from the bottom up, exploring what a client actually spends, instead of what they think they spend. It is not uncommon for individuals to drastically underestimate their spending on non-essential items. How much is your cell phone bill? Cable bill? Groceries? Starbucks?! We encourage clients to look at these as recurring payments. Not $140 a month, but $1,680 a year. Big difference, right? Getting as granular as possible is liberating when planning your retirement income.

While many planners suggest that a client will need two-thirds of their working salary to live comfortably in retirement, our experience shows that they may need anywhere from 50% to 150%. That’s a big range. Only by taking the time to define your goals, and the expenses that accompany them, can we put an accurate “spend” and “income” figure on a retirement portfolio. Even the best crafted budget has to be flexible. Emergencies happen. Grandkids happen. Sadly, health concerns happen. For both positive and negative circumstances, budgets can, and will, expand and contract. Build contingencies into your budget and income plan for a successful retirement.

Let’s consider income. Retirement income can come from many sources. Social security, pensions, retirement accounts, annuities, dividends, even earned income. As financial planners, we often hear stories from clients who “forgot” that they had earned an pension from an employer that they had left decades ago.

Take the time to go through your employment history and discover what benefits you may have forgotten. The impact could be meaningful from a cash-flow perspective. Inheritances can also create retirement income. Again, we often see clients receive an inheritance and immediately spend it. We’d rather go with the gift that keeps on giving – by investing the inheritance along the same lines of a retirement asset and creating a lifetime income stream.

Invest for your whole life.
Just as your budget is not going to be static during your retirement years, the idea that your investment portfolio should never change is obsolete as well. We live in a world of massive disruption and change. Years ago, retirees would abide by the rule taking 100%, subtracting their age, giving them the “appropriate” allocation to the equity market (blue chips only!). Today’s world does not permit such simplicity of thought.

This philosophy created an asset allocation for retirees that was heavily dependent upon the fixed income markets. Risk in today’s fixed income markets is considerably less predictable. When creating income in a portfolio, investors should examine many different sources of income. Is it time for fixed or variable rate income sources? Are dividend producing stocks inexpensive or overvalued? Is real estate a proper asset to produce income? Can alternative investments like MLP’s create an income stream? In finding these answers, a successful retirement income stream can become multifaceted and flexible.

Some investors have opted for “all-in-one” strategies, where a glide path mutual fund encompasses their entire retirement portfolio composition. These funds become gradually more conservative the closer an investor gets to retirement. Some funds manage “to” the retirement date, while others manage “through” the retirement date. If you own one of these vehicles, do you know what the fund is designed to accomplish? These funds use historical data to project out into the future the ideal asset allocation. We don’t know what the future holds, and advocate investments that have the ability to be flexible.

Successful retirement comes down flexibility. Flexibility of goals. Flexibility of income streams. Flexibility of spending. Flexibility of retirement investments. Flexibility of the overall plan. As you design your retirement plan, take the time to build in flexibility. It will help build peace of mind, and lead to a more successful retirement.

Nick Ventura is the founder and chief executive of Ventura Wealth Management.

Donald Trump’s Big Problem

My Comments: To my Trump supporting friends, this is not a rant against our president. Governments work, or don’t work, on vastly different rule sets than does private enterprise. Government is a public enterprise and the outcomes by their very nature will be markedly different. His skills as a businessman don’t necessarily translate effectively to the public world he now inhabits.

The words written by Matthew Yglasias below are the observations of someone well versed in the mechanisms by which decisions are made at the highest levels of government. These decisions almost always appear somewhere in the 24 hour news cycle, and which, to a greater or lesser degree, affect ALL of us regardless of our age or status.

by Matthew Yglesias on April 17, 2017

Donald Trump doesn’t know what he’s talking about. This became clear when he said he realized dealing with North Korea was “not so easy” after 10 minutes with the Chinese president.

Dealing with complicated problems is an occupational hazard faced by outsiders in all fields — and there’s never been a president who is more of an outsider to the realm of public policy. Consequently, a lot of his assertions about critical matters of public concern are based on … nothing at all. As president, he is fitfully coming into contact with concrete policy choices, actual information, and well-informed people. And it’s making a difference.

That’s the dynamic behind many of this spring’s jarring policy reversals on backing out of NATO, Chinese currency manipulation, and relations with Russia.

And to the extent that Trump is replacing ignorance with information and bad policy with good policy, it deserves to be celebrated rather than mocked. But the wild swings themselves are disturbing and have consequences. And Trump’s actual habits around issuing ignorant pronouncements and failing to obtain sound information don’t appear to have changed. Most fundamentally of all, Trump’s laziness and ignorance leave him easily manipulated.

Some of the things he’s “learned” since taking office aren’t true, like when Paul Ryan convinced him Republicans had to do health care reform before tax reform. And as his equal-opportunity openness to both new information and new “information” become clearer to all interested parties, the race will be on to manipulate the president and incite further chaos in American public policy.

Trump didn’t realize being president is complicated

Trump’s basic worldview, as articulated on the campaign trail, was that all the major dilemmas of American public policy had easy solutions. The reason the problems had not been solved already was that America’s political leaders were too stupid, too corrupt, or too “politically correct” to solve them.

This is a reasonably widespread view of things among the mass public, but as Trump has been discovering since taking office, it’s not true.
• Trump pronounced in February that “nobody knew health care could be this complicated” until he sat down to look at legislative options.
• Earlier this week, he explained that he’d changed his mind about North Korea after speaking to Chinese President Xi Jinping because “after listening for 10 minutes, I realized it’s not so easy.”
• Having talked it over with his economic and foreign policy advisers, Trump has realized that China stopped manipulating its currency some time ago, and that slapping the country with an official currency manipulator designation would impair cooperation on other issues, like the aforementioned North Korea.

Trump’s reversal on Russia and Syria doesn’t yet have a pithy quote attached, but it’s a fundamentally similar issue. During the campaign, Trump again and again called for the United States to take a tougher line on Iran and a softer line on Russia. From a broad, hazy, distant view of the world heavily colored by ethnic nationalism and Islamophobia, this combination of ideas makes sense.
But the real world is, well, complicated. Trump’s desire to cozy up to the Gulf states and confront Iran led very quickly to conflict with Moscow — which anyone could have explained to candidate Trump had he cared to ask.

Trump decided the Export-Import Bank is good after talking it over with the CEO of Boeing, and a handful of high-level meetings have convinced him that NATO is worthwhile after all.

Trump still hasn’t learned how to learn

A lot of this is change for the better, but the fact that it keeps happening suggests Trump has not really internalized the key lesson.

Peter Baker of the New York Times reports that “only after he publicly accused Mr. Obama of having wiretapped his telephones last year did [Trump] ask aides how the system of obtaining eavesdropping warrants from a special foreign intelligence court worked.”

One particularly chilling example of Trump’s casualness about information gathering is that Michael Crowley and Josh Dawsey report he was asking aides for information about why Assad would use banned chemical weapons only after American Tomahawk missiles had destroyed Syrian military targets. The shocking truth is that it’s probably Trump’s own rhetoric about Syria in particular and chemical weapons in general that led Assad to think there would be no consequences for violating his 2013 agreement.

A clearer and better-organized policy process could potentially have avoided the gas attack, the subsequent perceived need for a US military response, and the inevitable worsening of relations with Russia that resulted from it.

The other turnabouts are also a little alarming. Like Trump, I am not deeply versed in East Asian security issues and long had a fuzzy impression that China could make North Korea do basically whatever it wanted. Then I went on a journalists’ tour of China, organized by the Chinese government, during which Chinese officials argued fairly persuasively that this is wrong. But I didn’t just take their word for it. Having had my thinking challenged, I went and checked to see if credible Western experts agreed — and indeed they do.

After all, one problem with simply changing your mind after talking to a well-informed person is that lots of well-informed people are nonetheless wrong or pushing a partial agenda. In my experience, business lobbyists on both sides of the Export-Import Bank issue are deeply informed — better informed than I am, for sure — and make somewhat persuasive arguments. Trump tends to resolve this kind of situation by simply agreeing with the last person he talked to.

Trump is “learning” things that aren’t true

The fundamental problem here is that what Trump “learns” is sometimes actually bad information.

Baker also reported that before becoming president, Trump “had never heard of the congressional procedures that forced him to push for health care changes before overhauling the tax code.”

One reason Trump had never heard of these procedures is that he was not familiar with congressional procedure. But another reason Trump didn’t realize that procedural rules in Congress forced him to push for health care changed before overhauling the tax code is that this isn’t true.

Since becoming president, Trump has several times referred vaguely to complicated statutory requirements that forced him to prioritize Obamacare repeal. His explanations of this are invariably fuzzy because in fact there is no statutory requirement for him to do health care reform before he works on tax reform.

Instead, this “health care before tax reform” idea was simply Paul Ryan’s legislative strategy. Ryan wants to pass a tax reform plan with a party-line vote, which means he needs to use the budget reconciliation process to avoid a Senate filibuster.

You can’t write a reconciliation bill that increases the deficit over the long term. So Ryan’s plan is to repeal the Affordable Care Act — which, among other things, would sharply reduce taxes on the rich, but would avoid increasing the deficit since the cuts will be offset by spending less on insurance for the poor and middle class. Then, having locked that tax cut into place, Republicans could move on to a revenue-neutral tax reform using the lower revenue number as the baseline.

Ryan has his reasons for wanting to do it this way, and those reasons to involve procedural arcana. But nothing is being forced on anyone here. It’s simply a choice he made and then apparently tricked the president into endorsing.

Things are going to keep getting harder

Trump is currently dealing with extremely difficult issues for the simple reason that he is the president of the United States and the issues the president deals with are generally complicated and difficult. But in all honesty, he hasn’t yet handled any truly hard cases.

Even something as tough as a North Korean nuclear test or a Syrian chemical weapon strike is, fundamentally, a ripe issue that the professionals in government have had a long time to chew over. What inevitably happens over the course of an administration is that some genuinely unpredictable crises emerge. There could be an infectious disease outbreak, or revolution in the capital of a friendly autocracy, or a recession, or a bank failure, or a terrorist attack.

Unforeseen crises truly put a leader and his team to the test, drastically altering the policy space and creating opportunities to push new agendas.

Sometimes, as with the Obama administration’s response to the Ebola outbreak of 2014, a crisis can be successfully resolved by persevering with an approach that is met with initial criticism on Capitol Hill and cable news. Other times, a crisis can be an opportunity for people with strong opinions and poor judgment to push the country into a reckless misadventure, as with the Bush administration’s invasion of Iraq.

Based on what we know of Trump’s decision-making, it’s difficult to imagine him doing the former and very easy to imagine him doing the latter.

Social Security Is Failing Because the Program Is Antiquated

My Comments: This is far and away the most coherent overview I’ve read that addresses the problems faced by Social Security going forward. Now we have to convince the politicians that it’s in everyone’s best interest to take remedial action.

Sean Williams | Apr 8, 2017

The data doesn’t lie: a majority of seniors rely on Social Security to meet their month-to-month expenses come retirement. According to the Social Security Administration (SSA), 61% of retired workers currently receiving benefits counts on those benefits to comprise at least half of their monthly income.

But this vital source of retirement income is also causing retired workers, pre-retirees, and tens of millions of working Americans grief. The latest annual report from the Social Security Board of Trustees estimates that the program will begin paying out more in benefits than it’s receiving each year in revenue by 2020, eventually resulting in the depletion of its more than $2.8 trillion in spare cash by 2034. If this spare cash is completely exhausted, the Trustees have implied that a benefits cut of up to 21% could be needed on an across-the-board basis (i.e., for current and future retirees) in order to sustain payouts through the year 2090. That’s not a comforting outlook for the aforementioned majority of retired workers who count on Social Security each month.

Social Security’s biggest problem is that it’s antiquated

If there’s one thing Social Security isn’t short of, it’s finger-pointing as to why the program is headed down an unsustainable path. Some blame the baby boomer generation for their poor saving habits and early Social Security claims, which are expected to weigh heavily on the worker-to-beneficiary ratio. Others point to lengthening life expectancies, or the political divide in Washington. There’s no shortage of blame to go around.

However, the real blame for Social Security’s seemingly imminent budgetary shortfall can probably be placed on lawmakers who’ve chosen to allow an antiquated program to take care of our nation’s retirees.

Social Security was signed into law more than 81 years ago in Aug. 1935. When the first payment was made in 1940, senior citizens weren’t living anywhere near as long as they are now. Additionally, the costs that comprised a good chunk of today’s expenditures for retired workers (housing and medical care) weren’t outpacing inflation by much, if anything, in the 1940s.

The last significant overhaul to the Social Security program came during the Reagan era with the passage of the Amendment of 1983. These Amendments introduced the taxation of Social Security benefits, and increased the full retirement age (the age at which an individual becomes eligible to receive 100% of their monthly benefit) in the decades to come, to name a few of the changes.

While there have been some changes to the Social Security program since 1983, there’s been no major overhaul to the extent of the 1983 Amendments.

Now, here’s what today’s seniors are left with.

1. The taxation thresholds haven’t been adjusted for inflation in 34 years

The first issue is that the income thresholds that define what portion of Social Security benefits are taxable haven’t been updated in 34 years to account for inflation! When first introduced in 1983, individuals with earned income over $25,000, and joint filers with earned income above $32,000, could have 50% of their Social Security benefits taxed by the federal government. A decade later, the Clinton administration added another tax tier, allowing 85% of Social Security benefits to be taxed if a recipient’s annual income topped $34,000, or $44,000 for joint filers.

In 1983 and 1993, these taxation changes affected around 1-in-10, and nearly 1-in-5 households with seniors. By 2015, according to The Senior Citizens League, 56% of seniors owed at least some tax on their Social Security benefits. Had these thresholds kept pace with inflation, individual tax filers wouldn’t be hit until $57,107 (in 2015 dollars), and couples until $73,097.

2. The full retirement age hasn’t kept pace with life expectancy increases

Another issue with the Social Security Amendments of 1983 is that they phased in a two-year full retirement age increase over what amounted to a four-decade period. Beginning in 2017, the full retirement age will rise by two months per year, ultimately moving from age 66 to age 67 between 2016 and 2022 (the full retirement age of 67 applies to anyone born in 1960 or later). In other words, between 1983 and 2022, the full retirement age will have increased just two years.

However, actual life expectancies since 1983 have risen at a quicker pace. Data shows that the average life expectancy in 1983 was 74.6 years, compared to 78.8 years in 2015 according to the Centers for Disease Control and Prevention, an improvement of 4.2 years in 32 years. A slower-growing full retirement age means retired workers are potentially collecting Social Security for a longer period of time than ever before, which is weighing on the program.

3. More income than ever is escaping Social Security’s payroll tax

It’s probably also fair to say that quite a bit of wealthy Americans’ income is escaping Social Security’s payroll tax. As a refresher, Social Security’s payroll tax, which totals 12.4% and is often split down the middle between you and your employer, covers earned income between $0.01 and $127,200 as of 2017. This means earned income above and beyond $127,200 is free and clear of the payroll tax.

However, a quick look at the SSA’s wage distribution statistics from 2015 shows that 137,545 people earned at least $1 million. These individuals would have paid an aggregate of about $16.3 billion in payroll taxes in 2015 (based on the cap of $118,500 that year). However, these millionaires earned an aggregate of $340.8 billion in income in 2015. That’s over $324 billion dollars that escaped taxation because the maximum taxable earnings cap has been stuck growing at a snail’s pace (it’s tied to the Average Wage Index). And remember, I’m not including earned income between $118,500 and $999,999 in these figures, either. In other words, the program could be bringing in a lot more money for future generations of retirees if the payroll tax cap were adjusted.

4. Social Security’s COLA is inadequately taking into account the high expenditures seniors face

Lastly, the cost-of-living adjustment (COLA) that seniors receive most years (i.e., their inflation-based raise) isn’t coming anywhere close to reflecting the true inflation they’re dealing with when it comes to housing costs and medical care inflation. A quick review of medical care inflation and Social Security’s COLAs over the past 35 years shows that medical care inflation was higher in 33 of 35 years. This makes it practically impossible for seniors to make do with what they’re being paid since more of their income is going to pay for their medical care with each passing year.

Lawmakers are attempting to make a program that was developed in the 1930s and tinkered with heavily in the 1980s work for seniors in 2017 — and it’s clearly not working. Change can only come from Washington, but that’ll only happen once lawmakers realize that a good portion of the program, both from the revenue and benefits sides of the equation, needs to be refreshed for today’s senior citizens.

Stock Pickers vs Indexers

My Comments: Which approach is best for you? Not for me, but for YOU?

For the past dozen years or more, my efforts on behalf of clients to use historically good fund managers has largely failed. And not just because of what happened in 2008-09.

Yes, I still made my money as an advisor. But increasingly I couldn’t justify it in terms of the results. Many clients, listening to the likes of Jim Cramer on TV, decided they could get better results elsewhere. I hope they were successful but the odds were not in their favor. If you follow the link below, you’ll better understand why I say this.

My approach today is to use one of the two major global index families and either give away my advice to those who will accept it, or charge what a few years ago was considered a ridiculously low fee. Some people just have absolutely no capacity to figure it out for themselves which is what gives people like me a license earn an income.

Clients have two basic choices: either do it all yourself, of find someone to help you. Regardless of that decision, the next step on the decision tree is how much unprotected exposure to the stock, bond and other markets can you live with.

The trauma from the crash in 2008-09 is still very much alive in peoples minds. To the extent you want exposure to the markets and at the same time protect your downside, there are some very clear solutions. To the extent you are OK with watching your assets crash and burn, indexes at least eliminate most of the management costs. This is a good thing.

Either way, I can sleep at night and not feel like caveat emptor is the ruling maxim.

The Brilliant Incoherence of Trump’s Foreign Policy

My Comments: This may be far too long to read in one sitting. But if, like me, you are willing to absorb some rather heavy reading, you may find yourself somewhat relieved by the message.

Stephen Sestanovich | May 2017

Every 20 years or so—the regularity is a little astonishing—Americans hold a serious debate about their place in the world. What, they ask, is going wrong? And how can it be fixed? The discussion, moreover, almost always starts the same way. Having extricated itself with some success from a costly war, the United States then embraces a scaled-down foreign policy, the better to avoid over commitment. But when unexpected challenges arise, people start asking whether the new, more limited strategy is robust enough. Politicians and policy makers, scholars and experts, journalists and pundits, the public at large, even representatives of other governments (both friendly and less friendly) all take part in the back-and-forth. They want to know whether America, despite its decision to do less, should go back to doing more—and whether it can.

The reasons for doubt are remarkably similar from one period of discussion to the next. Some argue that the U.S. economy is no longer big enough to sustain a global role of the old kind, or that domestic problems should take priority. Others ask whether the public is ready for new exertions. The foreign-policy establishment may seem too divided, and a viable consensus too hard to reestablish. Many insist that big international problems no longer lend themselves to Washington’s solutions, least of all to military ones. American “leadership,” it is said, won’t work so well in our brave new world.

With minor variations, this is the foreign-policy debate that the country conducted in the 1950s, the 1970s, and the 1990s. And it’s the same one that we have been having for the past few years. The rise of the Islamic State, the Syrian civil war, Russian aggression in Ukraine, and China’s muscle-flexing in East Asia jolted the discussion back to life in 2014. Presidential debates in 2015 and 2016 added issues (from Barack Obama’s Iran nuclear deal to his Asian trade pact) and sharpened the controversy.

Those of us in the foreign-policy business are always glad to have our concerns get this kind of prominence. Down the decades, these debates have tended to produce a consensus in favor of renewed American activism. Yet each version unfolds in its own way. The global turmoil of 2016 meant that nobody could be completely sure how this one was going to turn out.

We still don’t know. The advent of Donald Trump—his candidacy, his election, and the start of his presidency—has given our once-every-two-decades conversation extra drama and significance. Some commentators claim that Trump wants to cast aside the entire post–Cold War order. To others, he is repudiating everything that America has tried to achieve since 1945. Still others say he represents a break with all we have stood for since 1776 (or maybe even since 1630, when John Winthrop called the Massachusetts Bay Colony “a city upon a hill”).

That we talk this way is but one measure of the shock Trump’s victory has administered. The new president is raising questions about the foreign policy of the United States—about its external purposes, its internal cohesion, and its chances of success—that may not be fully answered for years. Yet to understand a moment as strange as this, we need to untangle what has happened. In this cycle, America has actually had two rounds of debate about its global role. The first one was driven by the 2016 campaign, and Trump won it. The second round has gone differently. Since taking office, the new president has made one wrong move after another.

Though it’s too soon to say that he has lost this round, he is certainly losing control of it. In each case, we need to understand the dynamics of the discussion better than we do.