David Kirkpatrick

March 16, 2010

Social Security …

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 4:03 pm

… a long national nightmare begins. Without reform, medical care will eventually bankrupt the nation and severely cripple businesses, both large and small, long before. Social Security is that other entitlement program bugaboo, and in a moment of just terrible timing, the chickens have finally come to roost with the program — this year Social Security did not collect enough payroll taxes to cover benefit payments for the first time in over twenty years.

So what, you say? Maybe not so much.

From the link:

For more than two decades, Social Security collected more money inpayroll taxes than it paid out in benefits — billions more each year.

Not anymore. This year, for the first time since the 1980s, when Congress last overhauled Social Security, the retirement program is projected to pay out more in benefits than it collects in taxes — nearly $29 billion more.

Sounds like a good time to start tapping the nest egg. Too bad the federal government already spent that money over the years on other programs, preferring to borrow from Social Security rather than foreign creditors. In return, the Treasury Department issued a stack of IOUs — in the form of Treasury bonds — which are kept in a nondescript office building just down the street from Parkersburg’s municipal offices.

Now the government will have to borrow even more money, much of it abroad, to start paying back the IOUs, and the timing couldn’t be worse. The government is projected to post a record $1.5 trillion budget deficit this year, followed by trillion dollar deficits for years to come.

Social Security’s shortfall will not affect current benefits. As long as the IOUs last, benefits will keep flowing. But experts say it is a warning sign that the program’s finances are deteriorating. Social Security is projected to drain its trust funds by 2037 unless Congress acts, and there’s concern that the looming crisis will lead to reduced benefits.

“This is not just a wake-up call, this is it. We’re here,” said Mary Johnson, a policy analyst with The Senior Citizens League, an advocacy group. “We are not going to be able to put it off any more.”

March 1, 2010

Health care reform won’t help self-employed tax issue

As a self-employed freelance writer, I completely understand the pain of the odd taxes and hoops of red tape the IRS has put in front of the self-employed sole proprietor. Too bad none of the reform ideas floating around include helping those smallest of businesses.

From the link:

By a quirk in the tax code, self-employed workers who buy their own health insurance essentially pay an extra tax on their premiums. They’re the only taxpayers in the system who pay taxes on premiums, which count as a business expense for corporations and pretax income for employees. Because self-employed workers have no corporate employers to match their payroll tax contributions to Social Security and Medicare, they pay double the rate of wage and salary workers in a levy known as the self-employment tax equal to 15.3% of their net earnings. That’s on top of regular state and federal income taxes, and the income they spend on health premiums is not exempt.

The nation’s 9 million self-employed—sole proprietors with few or no employees, contract workers, and freelancers—constitute about 8% of the total U.S. labor force, according to the Bureau of Labor Statistics. (The Census Bureau counts 22 million sole-proprietors, but it’s not clear how many of those may be payroll workers as well.) “You correct this, think of the widespread health benefit you would give to so many people,” says Kristie Arslan, executive director of the lobbying group National Association for the Self-Employed (NASE), which represents the self-employed in Washington.

October 22, 2009

Retirement income …

Filed under: Business — Tags: — David Kirkpatrick @ 12:33 am

… should be a major part of any retirement plan. Dutifully contributing to an IRA, 401(K) or pension plan, making long-term investments with retirement in mind and contributing to Social Security throughout a career all help you prepare for retirement, but the real question is how much actual retirement income will you have when the time comes to begin tapping your retirement nest egg.

From the link, here’s a starting point from the Baby Boomers Retirement Network:

Will you have enough money for retirement?  That’s a big question.  In fact it’s the big question for many baby boomers!  In this section we will guide you through some of the uncertainties you need to consider: life expectancy, social security income, inflation rates, spending patterns, rates of return on investments, to name a few.  When you work out answers on these issues, you will be able to piece together the whole picture and see where you come out.

There are five areas you should focus on when figuring your retirement income during retirement planning:

1. The cost of retirement and uncertainties when budgeting your retirement. You should consider points such as life expectancy, the projected inflation rate, how much money you expect to spend, and many more variables.

2. You should understand your Social Security income. Take the time to learn the ins and outs of the Social Security system.

3. Take a look at your investment income and portfolio management. Most likely you won’t be able to retire on Social Security alone.

4. Forecast your expected expenses. Create a realistic budget to determine how much retirement you need each month.

5. Be prepared to be flexible and have a plan ready in the event your expenses exceed your retirement income.