Cyprus Reminds The World To Diversify Our Assets And Never Trust The Government

Funny Bathroom SignImagine diligently saving $100,000 over 10 years only to wake up the next day to see $93,250 in your account. Now imagine having to fork over $99,000 of your $1,000,000 nest egg right before you plan to retire. The Cyprus president has basically negotiated a 6.75% tax on all deposits under €100,000 and a 9.9% tax above this amount in order to receive bailout money from the EU!

There are so many things wrong with this scenario:

* Trust of the government is now completely broken.

* The government is asking savers to foot the bill instead of spenders.

* The policy promotes moral hazard as any reasonable person will simply spend everything they have and wait to get bailed out by more fiscally responsible citizens.

* The media will capture images of bank run frenzies, causing more panic to spread to anybody who has access to a TV or internet connection.

* Citizens of weak EU countries like Portugal, Italy, and Greece may start withdrawing cash further hurting their economies.

* Equity risk premium rises causing a sell-off in stock markets overall which dampens returns, earnings, and corporate enthusiasm for spending and hiring.

HOW THE CYPRUS BANK RUN IS RELEVANT TO YOU

The Solution To Social Security Problems: Die Young & Stay Single

Presidio Golf Course In RetirementImagine working for 40 years, each year paying Social Security taxes and dying at the age of 62 with no spouse to bequeath. The Government is going to secretly laugh at you because they now get to keep the hundreds of thousands of dollars you paid into the system for free, baby!

Meanwhile, if you get married the Government will make sure to tax you at a higher rate (marriage penalty tax) to ensure they get more of your money and perhaps even deter you from getting married so they can pay out less in Social Security benefits. Makes you think, doesn’t it?

Why else do you think the income threshold for a 35% income tax rate stays at $400,000 and jumps to only $450,000 for a married couple instead of $800,000? Not sticking to the $200,000/$250,000 income threshold for tax increases helps thousands of people living in expensive areas survive. Ironically, the $200,000/$250,000 income threshold was more fair since $50,000 divided by $200,000 = 25%. Now, $50,000 divided by $400,000 is just 12.5%. The Government is sexist and wants one spouse to just stay at home or make less money if they get married. Absurd!

The maximum taxable earnings amount for Social Security (OASDI) taxes is roughly $113,700. There is no limitation on taxable earnings for Medicare’s Hospital Insurance (HI) taxes.

The Social Security tax for 2013 reverts back to its normal rates. The tax rate for 2013 is:

  • Employee-portion: 6.2% of wage earnings, up to the maximum wage base of $113,700;
  • Employer-portion: 6.2% of wage earnings, up to the maximum wage base of $113,700;
  • Self-employed persons: 12.4% of net self-employment income, up to $113,700.

For 2011-2012, the employee-portion of the Social Security tax was reduced from 6.2% to 4.2%. Self-employed persons also received the same reduction from 12.4% to 10.4%.

WHAT ARE YOU GOING TO DO ABOUT BEING SHORTCHANGED?

Financial Moves To Make Before And After The Fiscal Cliff

fiscal-cliff-santoriniI never thought we’d go over the fiscal cliff, but it turns out the chances are now over 50% after Boehner’s Plan B can’t even get enough Republican support. Raising the absurdly low income threshold for tax increases from $250,000 per couple to $1 million per couple sounds like a fantastic compromise.

Nobody making over $1 million will ever publicly complain about their taxes going up unless they want to face the mob. Those making less than $1 million a year will get their moral victory of sticking it to the real rich, who are the millionaires and billionaires of America, not the couple making $350,000 living in San Francisco with two kids. They are well to do, but they aren’t rich when it costs $1.5 million for a starter home!

Since Obama proposed a $400,000 income level before taxes will go up, and Republicans can’t even agree on a $1 million income level until taxes go up, it’ll come to no surprise if a deal doesn’t happen before year end. I was really hoping for something in between $400,000 and $1 million so they could move on with the real issue, which is overspending! It’s baffling why the government can’t take steps to spend within its means.

It doesn’t sit well with me that our politicians went home for the holidays with such a huge issue still unresolved. We pay their salaries and huge pensions! I still have some hope for at least a “Fiscal Patch,” but just in case, here are some things to consider.

FINANCIAL MOVES TO MAKE BEFORE THE FISCAL CLIFF

How Tax Collectors Like The IRS Cleverly Rob You Of Your Money

Action Figure In HKEvery IRS person I’ve spoken to has curiously been kind. Yet, despite their kindness, I still feel my heart drop every time I get a letter from them. I’m not sure whether it’s because the movies always portrays the IRS agent as a bad man in a rain jacket, looking to shake down individuals for all they are worth. Or, perhaps it’s the fact it’s little ‘ol you vs. the omnipotent government that presents a no way out scenario. Whatever the case may be, dealing with the IRS sucks.

Those who work at the IRS or State Tax Collectors agencies are actually on your side. Sure, some have mandates from higher ups to milk you dry. However, most are willing to help you resolve your issues because they know how complicated taxes are in America. Perhaps this is one of the reasons why so many citizens have decided to just call it quits and not work!

One acquaintance I know worked for the IRS so of course I peppered him with questions to extract all the juicy details. I am against anybody paying more taxes than they need to. It’s just not right for the government to tax more than a typical person saves a year. If the government could show they can efficiently spend our money, then fine. But, they can’t even come up with a darn budget so forget it!

For all you conspiracy theorists out there, I think you’ll really enjoy this post.

AN INSIDER’S VIEW OF THE IRS

Solutions To The Fiscal Cliff: Time To Start Investing?

Fiscal Cliff Of Santorini, GreeceEverybody is worried about a fiscal cliff, so what the hell is it? In a nut shell, Bernanke coined the term in Feb 2012 as a way to describe massive spending cuts and tax hikes in January 2013 if there is no budget deal in Washington DC. Because the House is still controlled by the Republicans, and the Senate is still controlled by the Democrats, there is worry no legislation will pass given what happened during the debt ceiling debacle.

If no budget resolution passes, here’s what happens: 1) Federal income tax rates increase for those in the 33% and 35% tax brackets as the Bush tax cuts expire, 2) the payroll tax holiday disappears, 3) federal unemployment benefits completely vanish, 4) reimbursements get reduced to Medicare doctors, and 5) the debt ceiling stays the same, which forces across-the-board government spending cuts, including slashes in defense spending.

The fiscal cliff could amount to some $7 trillion worth of tax increases and spending cuts over a decade. This would do wonders to balance the budget to the dismay of free-spending politicians everywhere. The problem with such budget balance awesomeness is the abruptness by which policies are implemented. Even though ALL of us have known about the fiscal cliff for years, no policitian is willing to do anything until the last moment…. or more importantly, until they win the November 2012 elections to ensure power for the next four years!

I know I sound cynical about politicians, but open your eyes already! We work for the politicians, not the other way around. It’s our job to work as much as possible to keep our politicians in power so they can live great lifestyles and make lots of money while telling people what to do. Every single politician has told me, “Screw pension reform, because that’s my money!” Sweet.

Let’s address some key bickering points.

POINTS OF FISCAL CONTENTION 

Investment And Economic Outlook Post President Obama Victory

Now that President Obama has won, I’d like for us to have a mature discussion on the investment and economic outlook for the next four years. Let’s also touch upon how we should act in public now that big government is here to stay.

In order to create wealth, we must make reasonable assumptions about the future and invest accordingly. It’s important to remove our biases from the equation given we often see what we want to see and ignore everything else. We shouldn’t harp on the fact that over $2 billion dollars of campaign spending went into this election, which could have gone to help people in need.

If you are a raging right wing Republican, sorry, but your guy lost. Get over it. I got over the fact I stopped growing in the 9th grade. Your hope for smaller government, less taxes, less red tape, less welfare, less marriage equality, and a supposed balanced budget isn’t likely going to happen!

Remember to keep an open mind because creating wealth is the name of the game. Don’t let your stubbornness blind you. Let us begin.

ECONOMIC OUTLOOK