Is Social Security Really Just A Ponzi Scheme?

September 20, 2011

There’s been a lot of talk over the last several years and most recently by a Presidential candidates about whether Social Security is nothing but a Ponzi scheme. Well folks, Social Security is not a Ponzi scheme. It may feel like one. But it’s not.

Here’s why…

A Ponzi scheme is investment fraud knowingly perpetrated so that early investors are paid off with money from later investors. This is done specifically to encourage more investors to take part. (Remember: If it’s too good to be true, it probably is.) Of course, the scheme’s perpetrators keep a lot of the money for themselves. Social Security lacks both the fraudulent intent and profit-making motive of a Ponzi scheme.

How was Social Security Supposed to be Funded?

Designed as a pay as you go system, the system was never designed with the idea of creating an individual savings account for each working adult. Social Security is a pool of money held in trust that pays benefits to our retired workers that have met set eligibility requirements. So, although the payment formula allows for payments based upon contribution levels, we are not necessarily supposed to be getting back the same dollar amount that we paid into Social Security. Further, the working public and their employers are supposed to be carrying the tax burden for the country’s qualified Social Security recipients. Like it or not, the Social Security system is as designed

Jane Nowak is a CERTIFIED FINANCIAL PLANNER™ specializes in AT&T Retirement Plans, Women’s Retirement and Financial Planning for Women. Located in the Smyrna, Marietta, Vinings area of Atlanta, GA, Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently had articles quoted and published on-line at the NASDAQ, Yahoo Finance, Womenetics.com, Smart Money Chicks, Fox Business News, CreditCards.com, U.S. News and World Report and Financial Planning Association (FPA) websites.

Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC

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Beware! Financial Pitfalls of Living Together

July 12, 2011

There are many ways to describe an unmarried committed relationship. Some of the ones that I’ve heard over the years are: ‘living in sin’, cohabitating, shacking up, domestic partnership, civil union and living together. In fact the US census bureau has recently come out with new data that shows that the number of couples living together has recently risen by 13% nationwide[1] . Southern states are leading the way with the largest percentage increase in cohabitating couples from 2009-2010.

I don’t know if this change is driven by the current economy, unemployment, baby boomer children who have seen what divorce can do to a family and won’t marry, commitment phobia or just a willingness to report cohabitation when surveyed by a government agency. All moral judgment and any speculation as to the reasons for increased in cohabitation aside, living together presents some really serious financial challenges that many of us in an unmarried union may simply be taking for granted.

If you are living with someone in a committed relationship, did you know that?

  • Social Security provides no spousal benefits to an unmarried partner
  • Health care benefits paid for by an unmarried partner are taxable income to the recipient
  • There is no divorce court for unmarried couples
  • If unmarried, your property does not pass to your partner like it would if you were married
  • There are no uniform legal guidelines for dividing your shared property if your relationship ends

In fact,  whether we are talking about a same-sex couple or an opposite-sex couple in states where cohabitating unions are not recognized or governed by law[2], several aspects of your  financial lives should be carefully considered to avoid common pitfalls. Financial areas that unmarried couples need to pay particular attention to are:

  • Insurance planning
  • Naming beneficiaries including: 401ks, IRAs, SEPs, insurance policies, annuities etc.
  • Titling of financial/bank accounts and property
  • Health Insurance
  • End of life planning with powers of attorney, health care powers of attorney, trusts and insurance

As more adult couples choose to cohabitate, in the absence of the protections given by law to married couples, unmarried couples should  meet with financial and legal professionals who understand how to best provide for unmarried partners financial and legal needs.

 Remember that: privileges given to married couples do not necessarily apply to couples in non-legally recognized relationships.


 [1]Survey data from January 2009 to July 2010 US Census Bureau and ACS (American Community Survey)Working Paper on the Change in Cohabiting Couples from 2009 to 2010.

[2] Currently the states of New York, Vermont, New Hampshire, Connecticut, Massachusetts, Iowa and the District of Colombia allow same-sex marriage. Seven additional states allow for domestic partnerships and civil unions. http://www.stateline.org/live/details/story?contentId=347390

About Jane Nowak, CFP® – MoneyGal2020

Jane Nowak, CFP® is a Financial Planner who specializes on AT&T retirement and benefit plans and on Women’s Retirement and Financial Planning for Women. Located in NW Atlanta suburbs Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently had articles published or has been quoted in articles published online at  NASDAQ, Womenetics.com, Fox Business News, Smart Money Chicks, CreditCards.com and Financial Planning Association websites.

Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC


Money Isn’t The Culprit In Most Divorces -Or is it?

October 26, 2010

Are Money Problems Still #1?   

I don’t know if it is time to debunk the myth or to embrace it as fact, that couples continue to divorce solely because of money problems. For many years, money was cited as the #1 reason for divorce in America. Recently, money problems are no longer said to be the #1 reason for divorce. However, money issues do still appear in the ‘top 5’ reasons for divorce in America.

No matter where money issues stand as reasons for divorce, there are two things that every couple can do to improve their success when facing their money problems as a unit.

Communicate in Appropriate Doses

Regardless of who you read or talk to I believe that honest communication is the key to heading off and handling money problems in a relationship. Like many women, I am of the notion that communication is key. Often, our men think that we communicate too much. So, if that is the case for you too, plan to have your financial conversations in small doses. Tailor the length of discussions to suit the less communicative spouse. But, do make sure that you have comprehensive talks about finances.

Use Your Disagreements to Build a Stronger Relationship – Give Up the ‘Blame Game’

When serious money issues enter the relationship picture, band together to solve your problems together. Yes, that’s right. Refocus yourselves on solving the problems and not engaging in the ‘blame game’.

Playing the ‘blame game’ puts the focus on making your partner wrong and you right. This will only serve to corrode and cause resentment in your relationship. 

Working together to resolve money issues will make you both stronger and more confident in your problem solving capabilities as a couple.

Money is just one of the areas that can definitely cause strife in a relationship. No matter what the financial issue, don’t be afraid to talk and to find common ground. If you can’t work it out, seek professional help.

 If you married with a commitment for the long-term, don’t let money issues drive you apart. Skills learned and earned when solving difficult problems will help to hold you together in the  ‘for better or for worse’ times that you will no doubt face together. 

Jane Nowak is a Financial Planner with Kring Financial Management in Atlanta, Ga. Jane’s practice focuses on Women’s Retirement Planning and Financial Planning for Women. Her articles have been published on-line at NASDAQ, Financial Planning Association , SmartMoneyChicks.com and Womenetics.com. Follow Jane on Twitter at: http://twitter.com/moneygal2020

 


Reverse Mortgages – Buyer Beware

July 12, 2010

 

I am following everything that gets published on line with regard to retirement and retirement income planning. Over the past week, I have seen a recent flood of  “blog posts” are that are touting the benefits of a reverse mortgage. -These posts are identical and appear on different blog sites.

Please be careful. These are simply poorly disguised sales pitches. They want you to use the equity in your home to finance your lifestyle.

I am not a fan of reverse mortgages . This is especially important advice for undisciplined spenders, -you know who you are!! Using your home to fund retirement is typically a terrible idea. Unless you are in dire financial circumstances, do not even think about using your home as a piggy bank!

Before entering into this type of contract, always, always, always, seek professional advice from a CPA, CFP , attorney or trusted professional.

Jane Nowak is a Financial Planner with Kring Financial Management located in Atlanta, Ga. Jane’s practice focuses on Women’s Retirement Planning and Financial Planning for Women. Her articles have been published on line at NASDAQ, Financial Planning Association and Womenetics.com. Follow Jane on Twitter at: http://twitter.com/moneygal2020


‘Retirementology’ book review: Why Americans fail at saving – USATODAY.com

June 29, 2010

‘Retirementology’ book review: Why Americans fail at saving – USATODAY.com

via ‘Retirementology’ book review: Why Americans fail at saving – USATODAY.com.

Excerpt from the article:

Many of us are making classic mistakes in the way we invest, spend, save, borrow and earn money.

Five of the greatest gaffes:

•We buy into the “red zone” hype. Salsbury dings the financial-services business for pushing the “retirement red zone” concept — a period starting just five years before retirement and ending five years into retirement.

“Millions of Boomers may be seeing red, but there is no zone in sight,” Salsbury says.

•We fall numb by “the number.” Another financial-services bogeyman is “the number” — the amount you supposedly need to comfortably retire. Salsbury maintains that nobody really knows what that number is.

•We’re not logical when it comes to saving for retirement. Americans worry about not having enough money to retire, yet fail to take advantage of savings programs available to them, Salsbury says.

A striking 70% of Gen Y workers don’t participate in employer-sponsored accounts, and more than 20% of workers 45 and older have stopped contributing to their 401(k)s.

•We’re nearsighted about investing. Behavioral economists call this “the recency effect.” You notice your mutual fund has soared in value over the past quarter or two, so you overload your portfolio with stocks. Or, after watching your stock holdings plummet, as in 2008, you go ultra-conservative and bulk up on money-market accounts.

•We pull money out of retirement savings before retiring. Salsbury says 46% of people cash out of their 401(k)s when changing jobs, rather than rolling the money over into another tax-deferred retirement plan.

‘Planning for retirement is more like a 50-year project than a 10-year project’

Shared by: Jane Nowak is a Financial Planner with Kring Financial Management located in Atlanta, Ga. Jane’s practice focuses on Women’s Retirement Planning and Financial Planning for Women. Her articles have been published on line at NASDAQ, Financial Planning Association and Womenetics.com. Follow Jane on Twitter at: http://twitter.com/moneygal2020


Ka-Boomers Have Retirement Funding Chasm, Not Gap

June 9, 2010

I think that I’ve just heard enough about the Ka-boomers (my name for the baby boomer generation because we are like a ticking time bomb) retirement shortfalls being referred to as a retirement funding gap. For many Americans, their retirement savings shortfall is not a gap it is an absolute and utter chasm! Can you say the size of the Grand Canyon?

Just the Facts

Why do I say that the retirement savings shortfall is a chasm? I will refrain from writing a litany of whys and I will try to limit myself to 3 salient points.
• 47% of Americans do not know how much money they will need to support themselves in retirement -just dandy! Let’s close our eyes and when we open them maybe the problem will have solved itself. If you don’t know how much you’ll need, how can you know how much to save for retirement?
• The savings rate for America over the last 20 to 30 years has been around 3%-5%.
And, a couple of years ago we even had a negative savings rate. Tell me how can you have a negative savings rate?
Also, how can you fund a decent retirement by saving just a few pennies on the dollar? That is if you even leave it in your retirement account. For some reason, we Americans feel like our necessities include like a fancy cars, speedboats, 4 wheelers, vacations, clothing and more pairs of shoes then a millipede could wear! I digress…
• For those Americans over age 55, 51% have saved less than $50,000. And, 58% have saved less than $100,000. With the median income around $50,000 per year, even $100,000 doesn’t sound like enough to fund a 15 to 20 year retirement for two people.

The Cure

Quit living on credit. Pay you credit cards in full every month. Defer gratification. Curb your need ‘to have to have’ more things. And, give the consumer (you) a rest from excessive spending.

Take care of your personal economy. Let another segment of the economy pull us out of recession. I think the American consumer needs to fuel his/her own financial security by saving more, more, more.

Jane Nowak is a Financial Planner with Kring Financial Management located in Atlanta, Ga. Jane’s practice focuses on Women’s Retirement Planning and Financial Planning for Women. Her articles have been published on line at NASDAQ, Financial Planning Association and Womenetics.com. Follow Jane on Twitter at: http://twitter.com/moneygal2020


Long-Term Health Care’s ‘Black Hole’

June 3, 2010

Long-Term Health Care’s ‘Black Hole’.


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