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I am shocked that nobody is screaming for government to get out of the routine affairs of entrepreneurial ambitions!
If I want to start up a company and I have done my homework to show me what the costs of my business will be in order for me to make a profit, who the heck is government to tell me what I have to pay my potential employees?
Let me make sure that I understand what these "do-good'ers" want.
I am to assume all of the following risks:
1. Spend my personal savings money, borrowed financing and/or investor capital on the feasibility, marketing, and, if required, environmental impact studies necessary to obtain all the permits and licenses in order to receive approval to conduct my desired business.
2. I am to provide all the capital investment from my out-of-pocket bank accounts, borrowed financing and/or investor capital needed to purchase/lease workspace, cover the costs of all the necessary overhead items such as utilities, general liability insurance, furniture and fixtures, consumable office supplies, employee health plans, sick leave, holidays and vacation time.
3. Provide the operating money borrowed from myself, financing institutions and/or investor capital sufficient to cover the cash flow requirements of paying all the month-to-month operations expenses and payroll for all employees during start-up and until sufficient service or product sales are streaming in on a continuing basis to pay such expenses.
4. Pay for all the governmental employer required salary taxes, sales taxes, inventory taxes, and company earnings taxes.
5. Pay myself back for the money I took out of my savings account (with interest), designed to pay for my living expenses when I am no longer able to work, to pay back the borrowed money principal with interest, and/or to pay dividends to the investors.
Please notice that the employees do not share in these employer expenses. Also, notice that these governmental bodies do not share in these risks. As the owner/employer, I take all of the risks. Who is going to protect me as the owner/employer?
1. Has that government body conducted a market assessment analysis to see what the impact of its required labor wage value will do to the potential success of my company?
2. Is the government body willing to guarantee to cover the difference in fluctuating consumer sales demand so that I can recover the following?
a. My out-of-pocket loans from my saving account;
b. Borrowed money repayments;
c. To ensure that any investors receive a reasonable return on their investment;
d. It would also ensure that I receive a reasonable profit for taking all the risks of employing people who might otherwise be unemployed and surviving off public funds.
3. Will these government bodies share with me, as the employer, in the costs of government required health benefits provided to employees?
As an employer, I make an offer to pay somebody so much money to provide a service or, make or a product. A person reads my offer and can decide to accept it or not. If that person accepts a position in my company, the conclusion is that there is a willing "seller" and a willing "buyer." Enough said at this point. That is the nature of doing business in a capitalistic society. If nobody wants to accept my wage offer then I will have to recalculate my numbers to determine whether the intended business is viable or not as a private enterprise.
If government bodies want to ensure that all employees receive a "livable income" then they should look to themselves, providing the difference in pay from what an employer is willing to pay to whatever the government bodies determine is a "livable income." However, this would just be another form of Social Security! Is that what we all really want to create?
Leave private enterprise alone. Stop trying to regulate things where government has no right to interfere.
In other words, the work place must run under the doctrine of "Laissez- faire." If not, government will eventually squelch innovation and move our economy to a socialistic state, stagnating and forcing all the ambitious and hard working to carry the lazy on their backs, all for the same pay. Economic collapse, therefore, is inevitable!
Olney lives in Napa.
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Recent declines in the stock market serve as a timely reminder to utilize bank accounts as part of a personal savings strategy to ensure steady and secure growth for that important nest egg. While this may not sound like the most fun use for your hard-earned dollars, a survey by Ally Bank last year found compelling evidence linking the amount of money people have in savings to how happy they feel.
We like to call these people purposeful savers because they understand the importance of setting aside a portion of their income for their overall financial health and well-being. Think of it as the flip side of retail therapy, minus the aftershock once the cumulative cost becomes apparent when balancing the monthly budget.
The good news is anyone can be a purposeful saver. Regardless of whether you start off slowly with small amounts or develop an aggressive savings strategy, everyone has an equal opportunity to grow their savings steadily and securely with competitive interest rates, compound interest and FDIC insurance.
Following are some key benefits to savings accounts and tips for choosing the right account for you:
The Federal Deposit Insurance Corp. insures money in savings accounts, checking accounts, certificates of deposit (CDs) and money market deposit accounts up to $250,000 per depositor, per insured bank or institution. Your funds couldnt be safer: the FDIC says no depositor has lost a penny of FDIC-insured funds since it was established in 1933.
Secure, steady growth
Its hard to beat the security and stability of a savings deposit account. Youll never lose money, and with competitive rates and compound interest - which provides interest on the total account balance not just what you have deposited - your funds are sure to grow. And many banks now compound interest daily, which helps your savings grow even faster.
Savings or CDs?
In general, CDs offer better interest rates for a set term. If you are fairly certain you wont need the money for six months or more, you may want to consider a high yield CD, which offers a better interest rate for committing to leaving your money in a bank for a longer term.
Some banks offer flexibility in CDs through no penalty CDs, or bump up CDs, which allow consumers to take advantage of a higher rate if the institutions rates rise during the CDs term. If you want the benefits of a longer term, high yield CD, but arent sure if youll need to access the money in the short term, try a CD ladder.
Savings and Money Market Accounts are also a good bet. They are relatively immune to dramatic interest fluctuations, and offer greater flexibility for savers who might need to access their cash.
Convenience and accessibility
It is fairly easy to open an account at an online bank, and they frequently offer great rates since there are no branches to maintain. Most bank accounts are now electronically accessible and allow customers to deposit, withdraw or transfer money online or via a mobile app. A good strategy is to set it and forget it, by using direct deposit or recurring transfers to automate your savings.
Consumers we surveyed say the effect savings has on happiness continues to grow as savings accumulate, so the sooner you get started, the better off youll be financially, and perhaps emotionally as well.
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Highlights from August's report
Disposable personal income
Real disposable personal income (or DPI) increased 0.3% in August compared to a 0.1% increase in July. Real DPI measures personal income that's available to spend, net of any personal taxes payable, and adjusted for changes in price levels. Higher private-sector wages and salaries, particularly in the services industries, caused the August increase.
Real personal consumption expenditure (or PCE) rose 0.5% in August to ~$10.9 trillion. Real PCE measures consumer spending, net of inflation. Higher motor vehicle and parts sales mostly drove the August increase. Back-to-school shopping probably also drove higher consumption. Real PCE declined by 0.1% in July.
Motor vehicle sales rose strongly in August, by 9.9% month-over-month, to 17.5 million units. Car sales are a key gauge of discretionary consumer spending and a sign of economic confidence.
Car sales, however, declined in September to 16.4 million units, according to Autodata. The impact of back-to-school shopping is also likely to fade in September's figures. Yet, with the labor market recovering, and Halloween, Thanksgiving, and Christmas upon us, consumer sector companies may see sales rise.
The personal savings rate, or nominal DPI less personal outlays, fell to 5.4% in August from 5.6% in July. Changes in the savings rate have implications for consumption and investment. If the savings rate decreases, individuals are spending more relative to incomes. This increases current consumption. On the flip side, an increased savings rate boosts the supply of personal wealth held in the form of various asset classes such as stocks (SPY), bonds (TLT), real estate, and cash, among others.
In the next article, you'll read about the all-important inflation measure, the change in the PCE price index.
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-- Posted Thursday, 23 October 2014 | | Disqus
By Andrey Dashkov
Unlike Jack Nicholsons character in A Few Good Men, we trust that you can handle the truth. No matter your age, securing a comfortable retirement is a huge concern. Folks want the whole truth about their financial outlook, but straight answers are hard to come by.
Both sides of the mainstream media habitually present opinion-tainted partial facts. Case in point: the unemployment numbers announced earlier this month. One side is cheering because unemployment dropped to a six-year low, while the other side is calling it pure fraud.
I found author and libertarian-about-town Wayne Roots remarks in a recent article for The Blaze particularly telling:
The middle class isnt getting richer, its getting poorer
The only people being hired are your grandparents. 230,000 of the new jobs went to those in the 55-to-69-year-old age group. In the prime working age group of 24 to 54 years old, 10,000 jobs were lost
It means grandma and grandpa are desperate and willing to take grandsons low wage job to survive until Social Security kicks in. The US workforce is now the oldest in history. And if grandpa has to work (out of desperation) until the day he dies, there will never be any decent jobs for the grandkids.
Heres the part Root gets wrong: Baby boomers are not working until Social Security kicks in. Theyre working well past that point, because they feel they must. Smart boomers know they cant afford to wait until robust interest rates return; theyre taking action to protect themselves now, lest their circumstances become truly dire.Youre 65Now What?
The Employee Benefit Research Institute surveys workers each year concerning their retirement confidence. Despite an uptrend, the latest report shows that 82% of workers feel less than very confident about having enough money to retire comfortably.
With that statistic in mind, we looked at three different 40-year retirement scenarios. Note that the numbers and charts in this overview are meant to illustrate several scenarios, not provide individual guidance. Every persons situation differs in terms of taxes, time horizons, and other parameters, and we encourage you to work with a financial planner to manage your savings.
The data exclude other sources of retirement income you may have, such as Social Security or a pension. All of the amounts, including annuity incomes, are pre-tax.
- Scenario 1. At age 65, you decide to retire with $500,000 in personal savings. You anticipate your expenses will rise approximately 3% annually. Thus, with each subsequent year, you will need to withdraw 3% more than the previous year. You estimate that your savings will grow by 5% annually. You are planning for a 40-year retirement, meaning your savings must last until age 105.
How much money can you withdraw each year, using those assumptions?
- Scenario 2. At age 65 you have the same $500,000 in personal savings that you did in Scenario 1; however, you take $100,000 from your account and buy an annuity. Our go-to source for annuity information, Stan The Annuity Man, says that currently, this annuity would pay $527 for the rest of your life. You use the remaining $400,000 as principal for the next 40 years in the same fashion as in the first case: assuming the same 5% rate of return and an annual 3% withdrawal increase.
- Scenario 3. Instead of retiring at age 65, you work for five extra years and buy a 100,000 annuity at age 70. We will assume you did not add to your savings during that time (though it did earn interest). Many boomers use extra working years to eliminate any lingering debt, so they can retire 100% debt-free. (However, note that we encourage a different approach: using extra working years to save as much as possible, including maximizing catch-up contributions to your 401(k) or IRA.)
If your nest egg grew at a 5% compound rate, it will total $638,141 when you are age 70. So, excluding the $100,000 spent on an annuity, you have $538,141 to draw from. As with Scenarios 1 and 2, well assume the withdrawals last for 40 years here, stretching the retirement period until age 110. Buying the annuity at age 70 instead of age 65 raises your monthly annuity payout to $582 per month.
Now, lets take a closer look at each of these cases.Scenario 1: He Who Takes It All Is Not the Winner
For your nest egg to last 40 years, in year one, you can withdraw $17,747, or $1,479 per month, from your $500,000 nest egg. Each year you take out 3% more to keep up with rising expenses.
Follow the yellow line representing your nest egg in the chart above. As you can see, after 40 years your $500,000 is gone.
What happens if you stay within your monthly allowance and live past age 105? Heres hoping you have generous grandchildren. If not, you might be at the mercy of a Social Security system that may or may not be around in its current form.
Theres good reason the Bureau of Labor Statistics projects that workforce participation for people age 75 and over will rise to 10.5% by 2022, up from 7.6% in 2012. For the 65-74 age group, it projects that the rate will jump to 31.9%, up from 26.8% in 2012 and 20.4% in 2002. Better health and a sustained desire to work may be one reason more seniors are working longer, but another is fear.
61% of older Americans fear outliving their money more than they fear death. This is a fear we hope no one encounters as they near the end of the line. Other than the late George Burns, I doubt many centenarians are holding down a job.
Running out of money and having Social Security as your final safety net is a legitimate concern. Every politician, regardless of party, acknowledges the US government cannot make good on all of its promises. No one knows what the future will bring.
With that in mind, lets move on to Scenario 2.Scenario 2: Spreading Out Risk
Insurance companies have a range of annuities that will pay you for the rest of your life, which our team covered in detail in Annuities De-Mystified. In essence, holding an annuity as part of your overall retirement plan is one way to reduce the risk of running out of money. Since going back to work at 105 is both unappealing and impractical, lets look at how Scenario 2the same $500,000 nest egg with $100,000 used to purchase an annuity at age 65plays out.
Your annuity will provide monthly payouts of $527. Using the same 40-year time frame, your monthly income from the remaining $400,000 will be approximately $1,183 per month in first year, or a total of $1,710.
You start out with a bit more money; however, the annuity payment will remain constant, with no adjustment for inflation. At the end of 40 years, your nest egg will be gone, but you will still receive the annuity payments.
There is no way to know how long you will live. Today, a man who reaches age 65 can expect, on average, to live to age 84.3; a woman, 86.6. One in ten 65-year-olds, however, can expect to live past age 95. Medical advancements are pushing those numbers up, making life after age 105 seem not too far fetched. An annuity is just one way to hedge against running out of money too soon.
One big disadvantage of an annuity is that it doesnt offer real inflation protection. Even annuities with inflation riders usually yield marginal results.
If you receive Social Security, you can hope the annual inflation adjustments make up some of the difference, but its unlikely to be enough to maintain your current lifestyle. That brings us to Scenario 3.Scenario 3: Delayed Gratification
Congratulations! You made it to age 70. The $500,000 in savings you had at age 65 has grown to $638,141 (at an annual rate of 5%). You buy an annuity for $100,000 that will pay you $582 every month until death and draw down the remaining $538,141 over the next 40 yearsagain assuming 5% growth rate and 3% annual withdrawal increase.
The lump sum of $538,141 will provide approximately $1,592 per month during the first year. Add the annuity payouts and your total monthly income comes to $2,174, before taxes.
In the first year, your total income, including withdrawals and annuity income, will be $26,085 compared to $17,747 in Scenario 1 and $20,516 in Scenario 2.
And although your savings will still run out after 40 years, you will be 110. By working an additional 5 years and deferring the start date you get an additional five years before you have to rely on the annuity only.The Takeaways
This is all a reminder that the best way to enjoy retirement is to build a portfolio that can generate enough capital gains and dividend income to satisfy your spending needs, while leaving the principal intact as long as possible. If you want to end up in the 18% of people who are very confident about having enough money to retire, you may want to keep working after age 65, if possible, and invest part of your savings in an annuity to ensure you have at least some income if you outlive the rest of your nest egg.
To determine if an annuity is right for your retirement portfolio, read your free copy of our special report, Annuities De-Mystified. It includes tips for uncovering hidden fees and a frank look at the risks associated with annuities. Plus, its the only such report we know of written by financial educators who do not sell annuities. Access your free copy of Annuities De-Mystified here.