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Archive for August 2008

August 20, 2008

Current retirees slated to receive big Social Security benefits increase

Next year, current recipients of Social Security can expect the biggest annual increase in benefits in 25 years.

After decades of miniscule increases—last year’s was a paltry 2.3%—the Social Security Administration expects that next year’s benefits will be about 6% higher than this year’s. To be exact, if there’s no additional inflation, the increase will be 5.7%, but that’s an unlikely scenario given the soaring costs of food, oil, and other essentials.

How should future retirees view this development? It depends.

Without a doubt, recipients of Social Security can rightfully expect their benefits to keep pace with inflation—otherwise, they’re getting poorer. And while there’s no proof, rumors persist that the government manipulates the CPI to rein in so-called entitlements like Social Security. In any event, retirees will need the 6% increase just to hold their ground.

On the other hand, the “return on investment” of Social Security has been high for current retirees and is dropping. The well is running dry. If current retirees are too well taken care of, the cuts that future retirees will have to suffer will be all the worse. Where’s the fair break-even point? We’re still working on that. Stay tuned…

August 18, 2008

Business Week: July Inflation a “Real Scorcher”

According to recently released figures quoted in Business Week, July’s inflation rate was double that predicted by economists.

Consumer prices increased by 0.8%, due largely to the rise in energy bills. As it stands now, the current year-over-year inflation rate is the highest it’s been in over 16 years.

It’s hoped that the current decrease in energy prices will bring the total year inflation numbers back down.

In any event, rising unemployment claims coupled with rising prices continue to raise the specter of 1970s-style “stagflation.”

August 16, 2008

Is an “encore job” right for you?

If you’re a baby boomer nearing retirement age, and have been fortunate enough to be able to put aside a substantial nest egg, you may be in an “in between” place: ready, willing, and able to leave your job and try something else, but not ready to give up working entirely.

In the past, people in this position often did volunteer work, and that’s still a viable option. But more and more baby boomers are pursuing a different option: a new job that often involves public service, and usually doesn’t pay as well as one’s career job did, but that provides a deeper level of satisfaction. Marc Freedman, author of Encore: Finding Work That Matters in the Second Half of Life, calls these occupations “encore jobs.” Richard Leider and David Shapiro go even further, and talk about “putting your whole self into the second half of life.”

A recent article at TwinCities.com gives several examples. You can find thousands more real-life stories of people who have created meaningful encore careers at encorecareers.org.

August 14, 2008

Social Security Celebrates its 73rd Birthday

Though it has arrived with little fanfare, today, August 14th, is a major day for future retirees. On this day, in 1935, President Roosevelt signed the Social Security Act into law. —and so, with the stroke of a pen, was created a guaranteed income stream for virtually all American senior citizens.
[Read more]

August 13, 2008

Future retirees beware: Wall Street is lobbying to get its hands on your pension money

The big Wall Street banking and investment firms—the same fine people who brought us the subprime credit meltdown and the mortgage crisis—are now lobbying lawmakers to allow them to buy up and manage your pension fund money.

According to a recent Business Week report, roughly $500 billion—that’s half a trillion dollars—is currently sitting in so-called “frozen” pension plans. These are corporate pension plans that are closed to new members. Because corporations are cutting pension plans, new pension funds become frozen every day, and the trend is expected to continue. Among well-known companies with frozen plans are Alcoa, HP, Verizon, and IBM.

Currently, many of these plans are underfunded due to many reasons, such as fluctuations in the stock market. When this happens, the corporations can be forced to make up the shortfall. Thus, it’s no surprise that many companies would love to get rid of the pension plans even though they’re full of valuable assets.

And it’s no surprise that big Wall Street firms would love to take them over. They could charge their typical fees of 1% to 2% annually to manage them. That equates to billions of dollars of your hard-earned cash that would be gobbled up.

But the danger isn’t limited to a few percent points per year. As Business Week further reports, if the moneymen get the way, some 44 million future retirees’ money could be put at risk
[Read more]

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