Archive for February, 2009

How Secure Is Social Security?

Written by admin on February 28, 2009 – 5:05 am -

If you’re retired or close to retiring, then you’ve probably got nothing to worry about–your Social Security benefits will likely be paid to you in the amount you’ve planned on (at least that’s what most of the politicians say).  But what about the rest of us?

The media onslaught

Watching the news, listening to the radio, or reading the newspaper, you’ve probably come across story after story on the health of Social Security.  And, depending on the actuarial assumptions used and the political slant, Social Security has been described as everything from a program in need of only minor adjustments to one in crisis requiring immediate, drastic reform.

Obviously, the underlying assumptions used can skew one’s perception of the solvency of Social Security, and even experts disagree on the best remedy.  So let’s take a look at what we do know.

According to the Social Security Administration (SSA), approximately 54 million Americans currently collect some sort of Social Security retirement, disability or death benefit.  Social Security is a pay-as-you-go system, with today’s current workers paying the benefits for today’s retirees.

How much do today’s workers pay?  Well, the first $102,000 of an individual’s annual wages is subject to a 12.4% Social Security payroll tax, with half being paid by the employee and half by the employer (self-employed individuals pay all of it).  This money is put into a big holding tank–the Social Security trust fund–and is used to pay out current benefits.

The amount of your retirement benefit is based on your average earnings over your working career.  Higher lifetime earnings result in higher benefits, so if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily.

Your age at the time you start receiving benefits also affects your benefit amount.  Currently, the full retirement age is in the process of rising from 65 to 67 in two-month increments, as shown in the following chart:

Birth Date

Normal retirement age

1940

65 and 6 months

1941

65 and 8 months

1942

65 and 10 months

1943-1954

66

1955

66 and 2 months

1956

66 and 4 months

1957

66 and 6 months

1958

66 and 8 months

1959

66 and 10 months

1960 and later

67

You can begin receiving Social Security benefits before your full retirement age, as early as age 62.  However, if you retire early, your Social Security benefit will be less than if you had waited until your full retirement age to begin receiving benefits.  Specifically, your retirement benefit will be reduced by 5/9ths of 1 percent for every month between your retirement date and your full retirement age, up to 36 months, then by 5/12ths of 1 percent thereafter.  For example, if your full retirement age is 67, you’ll receive about 30 percent less if you retire at age 62 than if you wait until age 67 to retire.  This reduction is permanent–you won’t be eligible for a benefit increase once you reach full retirement age.

Demographic trends

Even those on opposite sides of the political spectrum can agree that demographic factors are exacerbating Social Security’s problems, namely, life expectancy is increasing and the birth rate is decreasing.  This means that over time, fewer workers will have to support more retirees.  According to the Social Security Administration (SSA), in 1950, there were 16 workers per beneficiary, today there are 3 workers per beneficiary, and within 40 years there will be just 2 workers per beneficiary.

The SSA predicts that in 2017, Social Security will begin paying out more money than it takes in.  However, by drawing on the Social Security trust fund that, on paper, is supposed to receive today’s payroll surpluses, the SSA estimates that Social Security should be able to pay promised benefits until 2041.

The caveat is that money in the trust fund isn’t exactly like money in your pocket–various administrations have used the money to pay for general government spending, leaving the trust fund with only a legal obligation to be paid back. To do so, the federal government would need to reduce other spending, borrow money, or raise taxes–a hurdle that might factor into the final solution.

Possible fixes

While no one can say for sure what will happen (and the political process is sure to be contentious), here are some solutions that might make the final cut:

  • Allow individuals to invest some of their current Social Security taxes in “personal retirement accounts” (the centerpiece of President Bush’s plan)
  • Raise the current 12.4% payroll tax
  • Raise the current ceiling on wages currently subject to the payroll tax
  • Raise the retirement age beyond age 67
  • Reduce future benefits, especially for wealthy retirees
  • Tie initial benefit levels to a more modest price index instead of the current wage index
  • Allow the Social Security program itself to invest in assets other than government bonds

Uncertain outcome

Members of Congress and President Bush still support efforts to reform Social Security, but progress on the issue has been slow, and domestic priorities are shifting.  However, the SSA continues to urge all parties to address the issue sooner rather than later, to allow for a gradual phasing in of any necessary changes.   Although debate will continue on this polarizing topic, there are no easy answers, and the final outcome for this decades-old program is still uncertain.

In the meantime, what can you do?

Aside from following the news to learn of any legislative developments, you should periodically check your Social Security earnings record to make sure that your earnings have been properly credited.  You can find this information on your Social Security Statement, which the SSA mails annually to every worker over age 25.  You will receive this statement about three months before your birthday.  Review it carefully to make sure your paid earnings were accurately reported–mistakes are common. Call the SSA at (800) 772-1213 for more information.

This statement will also estimate the amount of Social Security benefits you will be eligible to receive in the future, based on your actual earnings and projections of future earnings.  If you don’t receive this statement in the mail, you can request one by calling your local SSA office or through the Social Security website at www.ssa.gov.

 

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Credit Repair - Do You Need To Repair Your Bad Credit?

Written by admin on February 27, 2009 – 8:11 am -

Go to credit secrets bible review for more information about bad credit debt consolidation and debt consolidation options.

When you’re trying to build your credit and you’ve encountered several interruptions can be a real headache that you’ll want to avoid. In this article I am going to break it on down for you, since there are many sources that will take full advantage of you when the opportunity arise. If you feel bad simply because you can’t meet your bills expectations at the moment they arrive, then you are not alone. Believe it or not, but there are more people in the same situation than you might think or see. A lot of us calculate every week the amount we spend on groceries, which are constantly increasing, also other bills that are constantly on the rise. It seems at times it is a no win situation, but the fact is there is usually an answer to most problems.

The problem most times is some of us don’t have the means to find those solutions. This brings forth more stress and many times we feel that we are alone. If you’re trying to build your credit status you need to find the resources that can help you get results. The marketplace offers credit repair kits, which can lead us in the right direction to repairing credit, but the disadvantage is that many of the kits are expensive.

Let’s face it, not everyone has the money to spend on commodities that claim to help us. Some of us struggle harder than others just to survive. Life is forever changing and in order to keep up with the changes we all have to find a solution. Therefore, I am going to tell you where you can get a free credit repair kit. Your local library stores a wealth of information and it is free to the public. In most libraries that have credit repair kits, credit repair books, or debt management solution books. Anything you want at your disposal and it is all free information.

The library also has copy and fax machines often, and if you notice in the credit repair guide or kit, it will have copies of the letters you can write to your creditors. Make yourself some copies and once you fill them out as instructed, you are on your way to repairing your credit. The library also has guides or kits for filing bankruptcy. If you do not see a way out, then you may want to go this route. In most cases, you can do a Pro Bono Bankruptcy, which means you will represent yourself in the courtroom. I just wanted to let you know that if you file a Chapter 7 Bankruptcy, you will have monthly installments to make, but if you file Chapter 13 Bankruptcy then the courts wipe out all your debts.

The problem is that bankruptcies remain on credit files for up to ten years or longer. If you can avoid bankruptcy do so, however it is not the end of the world if you do. I know people personally that filed bankruptcy and was able to get loans for mortgage, cars and so on. If you know what you are, doing you can do anything no matter how bad your situation is. Avoid Debt Consolidation, simply because it is means you will be paying fees and costs to others to get out of debt, which only adds up the bills.

You might want to consider a Debt Counselor from a respected organization. It makes sense to check out any business first before spending money or asking for services. The BBB offers free information on organizations, businesses and corporations. Once you have investigated the service then you will know if the people are really trying to help you. Any service that tells you they can get you out of debt in no time at all is pulling your leg. The fact is even when you pay your bills your credit will continue to list all the bad debts, it will only say after the debt listed…Resolved.

One last note. Don’t forget to ask for a copy of your credit reports from TransUnion, Equifax, and Experian. You can find any information you need online. Knowing your status in life is the beginning of repairing bad credit.

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The Economic Stimulus Act of 2008

Written by admin on February 26, 2009 – 12:13 pm -

The Economic Stimulus Act of 2008 was signed into law on February 13, 2008.  The Act is intended to stimulate consumer spending in 2008, and features taxpayer rebate checks for more than 130 million individuals, as well as increased small business expense and depreciation limits, and increased loan limits for Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA).

Rebate checks

The Act includes a refundable recovery rebate credit for 2008. Even though this credit is a 2008 tax credit, starting in May 2008, rebate checks will be issued based on 2007 tax return data.  The credit is computed with two components: the basic credit and the qualifying child credit.

Eligible individuals are generally entitled to a basic credit equal to the greater of:

  • Net income tax liability (generally, total tax liability less nonrefundable tax credits other than the child credit) up to $600 ($1,200 in the case of a joint return)
  • $300 ($600 in the case of a joint return) if an individual has either (1) a minimum of $3,000 in earned income.  Social Security benefits, and veterans’ disability payments; and gross income greater than $8,950 for single individuals and married individuals filing separate returns.  $17,900 for married individuals filing a joint return.

If you’re eligible for any portion of the basic credit, you may also be eligible for a credit of $300 per qualifying child. In general, you’re eligible to claim a $300 credit for each child who:

  • Qualifies as your dependent, and
  • Is under age 17 (and will not reach age 17 in 2008), and
  • Is your son, daughter, stepchild, sibling, stepbrother, stepsister, or a child or grandchild of one of these individuals

Higher income limitations

The recovery rebate credit is phased out for individuals with higher incomes.  Specifically, your total rebate credit (the sum of both the basic credit and any qualifying child credit) is reduced by 5% of the amount by which your adjusted gross income (AGI) exceeds $75,000 ($150,000 if you file a joint return with your spouse).

For example, a married couple filing a joint return with two qualifying children is potentially eligible for a total rebate credit of $1,800 ($1,200 basic credit and $300 per qualifying child), assuming their net income tax liability is at least $1,200. If the combined AGI of the couple is $160,000, however, they will be entitled to a credit of only $1,300 (their AGI exceeds $150,000 by $10,000; 5% of $10,000 is $500; $1,800 - $500 = $1,300).  If the combined AGI of the couple was $186,000, they would be entitled to no rebate credit at all.

Assuming that you’re otherwise entitled to the full basic credit, your total rebate credit is limited (or phased out entirely) according to the following AGI ranges:

Rebate checks: Other considerations

  • When you file your 2008 federal income tax return in 2009, you’ll reconcile the amount of the credit you’re entitled to with any rebate payment you’ve received.  If it turns out that you’re actually entitled to a larger credit based on your 2008 tax return, you’ll get the difference as a tax credit.  But, if it turns out you should have received less than you got as a rebate check, you won’t have to pay back the difference.
  • The IRS has announced that rebate checks will be mailed out beginning in May, and payments will continue through the spring and summer.  Rebate checks will be directly deposited if you select that option on your 2007 federal income tax return.
  • If you file your 2007 federal income tax return after April 15 (even if you file a valid extension), you will receive your payment later.
  • The Department of the Treasury will not issue checks after December 31, 2008.

Other provisions included in the Act

Section 179 expense elections for small businesses

Small businesses may elect under Internal Revenue Code (IRC) Section 179 to expense the cost of qualifying property rather than recover such costs through depreciation deductions. Prior to the Act, the maximum amount that a business could expense for 2008 was $128,000 of the cost of qualifying property placed in service for the taxable year.  The $128,000 amount was reduced (but not below zero) by the amount by which the cost of qualifying property placed in service during the taxable year exceeded $510,000.  In general, qualifying property is defined as depreciable tangible personal property that is purchased for use in the active conduct of a trade or business.

The Act increases the $128,000 and $510,000 amounts under IRC Section 179 for taxable years beginning in 2008 to $250,000 and $800,000, respectively.

Special first-year bonus depreciation

The Act allows an additional first-year “bonus” depreciation deduction for qualifying property in 2008:

  • The additional first-year depreciation deduction is equal to 50% of the adjusted basis of qualified property
  • The additional first-year depreciation deduction is allowed for both regular tax and alternative minimum tax
  • There are no adjustments to the allowable amount of depreciation for purposes of computing a taxpayer’s alternative minimum taxable income with respect to property to which the provision applies
  • The basis of the property and the depreciation allowances in the year the property is placed in service and later years are appropriately adjusted to reflect the additional first-year depreciation deduction
  • A taxpayer may elect out of additional first-year depreciation for any class of property for any taxable year

Increased loan limits

  • Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) conforming loan limits are increased from $417,000 to 125% of the median home price of an area, up to $729,750.  This increase is effective for mortgages originating between June 30, 2007, and January 1, 2009.
  • For Federal Housing Administration (FHA) mortgages approved through December 31, 2008, the FHA loan limit also increases to 125% of the median home price of an area, up to $729,750 for a single family property. Additionally, if market conditions warrant, the Secretary of Housing and Urban Development has the discretion to raise the FHA ceiling for specified areas or sizes of residences up to $829,750.

 

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