Bankruptcies Soar For Seniors

[bobblehead]

Interesting article. It will get a whole lot worse with Obama in office. Obama wants a 28% (McCain 0%) tax on home sale profit, which will help wipe out equity earnings for seniors. He wants 39.6% dividend tax (McCain 15%0, which will help wipe out gains in money invested in stock market, IRA, mutual funds, college funds, life insurance, retirement accounts, etc. Obama wants a 49% inheritance tax (McCain 0% up to 5mil) on everything a person wants to pass on to their family after they pass on. So if you own a home and want to give it to a child, they will have to sell it (and pay 28% on the profit) just to pay the 49% tax on the inheritance. Welcome to retirement, Obama style. You better hope you get a publisher's clearing house giveaway from Ed McMahon....

2 notes, it won't evaporate earnings it will turn it over to gov't and "needy" people who manage to do such good things with wealth that they are always broke.

Second, I know some seniors who are very active in liquidating their assets and moving them overseas to avoid confiscation upon their death....good deal for sweden, our savings get to help prop their economy.

[Maxie the Taxi]

Just recall that when these people were working, it was not so common to invest in stocks, and there weren't the investment options that there are today. Many people relied on company benefits and retirement plans that were pulled out from under them. Many also believed that they could count on Social Security to take care of them and they were, of course, wrong. The end result is that they've had to continue working long after the traditional retirement age and if the stock market takes a major dump when it's time for your retirement, you could experience some of the same issues if you're not diversified enough.

It seems to me people have been investing in the stock market for years and way more people have profited from it than not. Sure you couldn't invest in derivatives years ago, but mutual funds and federal reserve notes have a long history. And I'd be willing to bet that the vast majority of companies' benefits and pensions paid off as promised.

The problem with the people cited is that they were probably living on the edge their entire life. A hospital housekeeper? Selling boat tickets to tourists? You're not going to accumulate a fortune doing that. And Frank and Hazel Peters don't seem like the brightest lights in Hastings.

And whose fault is it that they can't count on Social Security or that they value of any money they managed to save in 53 years has depreciated over 50% due to inflation?

I'll take my chances on stocks and bonds, at least I have a say on which stocks and bonds I will stake my future. The only say I have on social security, the value of the dollar and runaway taxes and spending is a single vote. And I'll bet Frank and Hazel Peters voted their whole lives...for the New Deal, The Fair Deal and every other deal those slick Washington politicians sold them.

And what did they get for all those votes? A raw deal as smelly as the black water coming through their pipes.

The moral of the story? It's obvious, keep trusting the politicians. Keep encouraging them to tax more and spend more and take more and more say away from individuals. Keep giving that say to them.

We will never learn.

[MJZiggy]

Who said anything about trusting politicians or taxing more? I was just commenting on your comment about stupid people whose retirement plan consists of investing their life savings in a single-wide.

And for the record, my folks live in a seniors trailer park in Madison and pay $163 a month in lot rental. That trailer is nicer than some apartments I've had in my day. We want them to move to assisted living but they're balking at the $800 a month (I couldn't get a studio in a bad neighborhood here for that).

[GBRulz]

An assisted living facility for $800 a month? I would be afraid. Very afraid.

[mraynrand]

Interesting article. It will get a whole lot worse with Obama in office. Obama wants a 28% (McCain 0%) tax on home sale profit, which will help wipe out equity earnings for seniors. He wants 39.6% dividend tax (McCain 15%0, which will help wipe out gains in money invested in stock market, IRA, mutual funds, college funds, life insurance, retirement accounts, etc. Obama wants a 49% inheritance tax (McCain 0% up to 5mil) on everything a person wants to pass on to their family after they pass on. So if you own a home and want to give it to a child, they will have to sell it (and pay 28% on the profit) just to pay the 49% tax on the inheritance. Welcome to retirement, Obama style. You better hope you get a publisher's clearing house giveaway from Ed McMahon....

This is depressing as hell. Thank god I'm socking money away in a Roth. Please don't tell me Obama wants to take that away from me too.

Relax, Scott. I got one thing wrong there. I think Obama only wants a 45% inheritance tax, not 49, as I first reported. But my understanding is that the limits on the Roth IRA are actually scheduled to change in the next year (to your benefit, right?). Don't be surprised if Obama would go after that as well.

Also, there is his 50 Billion stimulus package - 25 billion to help states pay off their debt, and another 25 Billion for 'infrastructure.' Given that 65% of state expeditures are on Medicare, Medicaid, and Education, and that much of the infrastructure he talks of is for schools, it essentially is another mechanism for entitlement payouts and a huge payout to the Teacher's unions and other unions. But to get the feds to pay off state debt - YIKES!

Actually, the infrastructure being discussed is a little bit for schools, but the payout for the states is mainly intended to repair crumbling roads and bridges--the need for which was highlighted in the I-35 bridge collapse and Congress is already acting on it according to the engineers' PAC.

That's in the second 25 Billion. And that's in addition to the pork-laden (over 6300 pork projects) - 280+ billion dollar transportation bill from 2005 (which may have been added to - I forgot). But that's OK, let's keep the pork and the federal (your) money rolling....

[Tyrone Bigguns]

An assisted living facility for $800 a month? I would be afraid. Very afraid.

Someone is turning a profit on 8 hundy. This i gotta see.

Ty has seen some rank places...they make the poorhouses and debtors prisons of Dicken's seem like the 4 seasons.

[MJZiggy]

I just go by what the folks tell me. I can't be there to oversee...Dad may be a little far gone, but if they try and mess with Mom, she'll be on the phone to whoever'll listen right up to the Governor!

[bobblehead]

Just recall that when these people were working, it was not so common to invest in stocks, and there weren't the investment options that there are today. Many people relied on company benefits and retirement plans that were pulled out from under them. Many also believed that they could count on Social Security to take care of them and they were, of course, wrong. The end result is that they've had to continue working long after the traditional retirement age and if the stock market takes a major dump when it's time for your retirement, you could experience some of the same issues if you're not diversified enough.

Also recall that was before supply siders decided that the fed constantly cutting rates to stimulate the economy drove down returns on "safe" investments and devalued the dollar. when i was very young getting 7-8% on a 3 year CD wasn't unheard of. Those very safe and solid returning investments WERE available to said people.....but they relied on all the things you mention to their demise. any financial planner worth a shit will have you out of stocks with the majority of your portfolio as you "near retirement" so the market dumping shouldn't affect you.

[Scott Campbell]

But my understanding is that the limits on the Roth IRA are actually scheduled to change in the next year (to your benefit, right?). Don't be surprised if Obama would go after that as well.

I was going to try and explain it, but opted for the cut and paste:



Roth IRA changes for 2010 - higher income limits to convert from a tradition to a Roth IRA
On May 17, 2006, President Bush signed a new tax bill into law that makes a number of changes to tax law - this included changes affecting who can participate in a Roth IRA.

With the new law more people can participate in a Roth IRA. A Roth IRA, unlike a traditional IRA, doesn't provide tax deduction when you invest your money, but your original deposits and the earnings on them are not taxed when you withdraw money in retirement.

Until this new tax law change - not everyone could participate in a Roth IRA — currently individuals with incomes of more than $110,000 and couples with more than $160,000 aren't allowed to put money into a Roth IRA, and households with income of more than $100,000 are not able to convert a traditional IRA into a Roth IRA.

With the new law that goes into affect in 2010 - people with incomes of more than $100,000 to convert a traditional IRA into a Roth IRA. People will have to pay taxes on the conversion, if you convert in 2010, you can split the taxes into two payments to be paid in 2011 and 2012. If you convert after 2010, you will have to pay the taxes in one year.

However - the income threshold for people who are starting a new Roth IRA doesn't change.

[Scott Campbell]

Here's why its a big deal. Those who have left jobs and rolled 401K savings into self directed IRAs will be allowed to convert them to Roths. And there is no ceiling on the income level of potential participants. And there's no limit on the amount you can convert. That constitutes a lot of people, with a lot of big accounts.

I'll convert as much as I can stomach. It triggers a massive tax bill that you can split over 2 years. As I understand it anyway.

[mraynrand]

But my understanding is that the limits on the Roth IRA are actually scheduled to change in the next year (to your benefit, right?). Don't be surprised if Obama would go after that as well.

I was going to try and explain it, but opted for the cut and paste:



Roth IRA changes for 2010 - higher income limits to convert from a tradition to a Roth IRA
On May 17, 2006, President Bush signed a new tax bill into law that makes a number of changes to tax law - this included changes affecting who can participate in a Roth IRA.

With the new law more people can participate in a Roth IRA. A Roth IRA, unlike a traditional IRA, doesn't provide tax deduction when you invest your money, but your original deposits and the earnings on them are not taxed when you withdraw money in retirement.

Until this new tax law change - not everyone could participate in a Roth IRA — currently individuals with incomes of more than $110,000 and couples with more than $160,000 aren't allowed to put money into a Roth IRA, and households with income of more than $100,000 are not able to convert a traditional IRA into a Roth IRA.

With the new law that goes into affect in 2010 - people with incomes of more than $100,000 to convert a traditional IRA into a Roth IRA. People will have to pay taxes on the conversion, if you convert in 2010, you can split the taxes into two payments to be paid in 2011 and 2012. If you convert after 2010, you will have to pay the taxes in one year.

However - the income threshold for people who are starting a new Roth IRA doesn't change.

That's pretty much what I read. I just couldn't remember it. Do you worry that they'll change the rules and eventually tax Roth IRAs as you withdraw?

[Scott Campbell]

Everything coming out of an IRA is taxed at Ordinary Income rates, so either way you look at it, they are going up.

Not from a Roth IRA.

Yet. You think a pot of money as large as Roth IRA's are becoming won't be of interest to politicians....

I understand the interest. But promises have been made, and tax bills have been paid based on those promises. And the government wants us saving for our retirements. That's why they created the plans.

[Scott Campbell]

Do you worry that they'll change the rules and eventually tax Roth IRAs as you withdraw?

No.

I think the worst thing that could happen is that they set an expiration date, and from that point on you'd pay taxes on future earnings. And I think even that is unlikely. It'd be nearly as bad as the government defaulting on a Treasury bond - given the way the program was set up and promoted.

A far more likely scenario would be to eliminate future contributions. Then they wouldn't be damaging those who have already participated, and essentially pre-paid their taxes for life. So you better get in while you can.

[Maxie the Taxi]

Who said anything about trusting politicians or taxing more? I was just commenting on your comment about stupid people whose retirement plan consists of investing their life savings in a single-wide.

You got my dander up, sorry. I thought you were making the "there-but-for-the-grace-of-God-go-I" argument. I hate that argument.