Posted on Tuesday, 3rd May 2011 by Dennis DampPrint This Post
We haven’t received COLAs because gas, utilities, food, health care premiums, tuition, and airfares haven’t increased for two years now; RIGHT? Are you paying less for much of anything these days! The inflation rate would equal 10% or higher if the Consumer Price Index (CPI) included food and fuel increases like it did in the 1980s!
What prompted me to research and write this article was stopping for gas at our vacation destination in early May and shelling out $80 to fill up a 20 gallon gas tank! I provided links to source material throughout for anyone interested in reading more detailed information about the various issues. With prices like this I can truly appreciate Nancy Holston’s April article titled Vacation Plans and Rising Gas Prices.
Most retirees are by necessity frugal and attempt to live within their means. Unfortunately, our government has lost sight of these principles. According to CBS News our government borrows on average 4 billion dollars a day, 167 Million dollars an hour to fund about half of everything they spend annually!
How long could anyone survive like this? Our government representatives in both parties continue to spend irresponsibly and borrow more as if there was no tomorrow and that the bills will never come due. Albert Einstein described insanity as “doing the same thing over and over again and expecting different results.” Whether it’s our education system that is failing our children or the financial insolvency that could wipe out not only retiree’s life savings but bankrupt our children’s future as well; we must change course.
I’m not an economics major. However, from my perspective our excessive debt and Quantitative Easing can and will lead to dramatic price increases and retirement savings losses. Aren’t we already seeing this even though the administration tells us inflation and the increasing money supply isn’t a problem?
Our 14 trillion dollar debt and increasing money supply, along with international unrest, are devaluing the dollar. Naturally oil, gold, silver, and everything else costs more because our dollar is worth less, currently 26.3% less than it was worth just 10 years ago. What this means to retirees like you and me is that all of our savings and our annuity, that isn’t keeping pace with true inflation, will only buy three quarters of what it could buy in 2001. To add insult to injury earnings on CDs and other investments are less than 1% in most cases today. Why would a bank pay to use our money when they are borrowing all they need direct from the Federal Reserve at near zero percent and then lending it to us, at much higher interest rates, for car loans and mortgages?
When the President says that we have no control over oil and gas prices I cringe thinking about our out-of-touch energy policy. This country has a 300 to 500 year supply of oil if we would only be allowed to drill for it. New discoveries in North Dakota, Montana, offshore, Alaska and elsewhere are there for the taking if this and previous administrations supported drilling and refinery expansion in the United States. This would also create hundreds of thousands of new jobs. We could easily become more energy independent while we fine tune and improve renewable energy technology to assume more of our energy needs down the road. This is a HUGE issue considering that a good portion of our national debt can be attributed to imported oil. The Alaska pipe line is running at half capacity because of exploration restrictions and yet we suffer double digit gas price increases almost weekly now. Some expect gas to climb to over $5.00 a gallon by summer and some European countries are paying $6 to $10 a gallon now. We simply can’t afford this? During our early May 2011 vacation trip we found gas as high as $4.15 a gallon on the east coast.
Our energy policy is also attributing significantly to escalating food prices. There are huge subsidies for ethanol production that turns corn into fuel at prohibitive costs. We are subsidizing ethanol production over the farmers needs to feed their live stock and corn is an international staple. Due to this initiative, food prices worldwide have escalated causing riots in many countries.
The inflationary impact on retirees is magnified especially when you consider the low savings rates available today and the hopefully temporary suspension of COLAs. Will our government wait until we are rationing gas or bankrupt before allowing companies to resume oil production and expand refinery capacity in this county? I support viable clean energy alternatives but first things first to get our country back on track. The only way this will change is if we make Washington stop the insanity with our votes, calls, and letters to our representatives.
- New HR & Divorce Forum – We receive a number of questions each month from federal employees and annuitants that are contemplating divorce and need guidance on how to protect their assets during the settlement. Ann Ozuna is hosting our new HR and Divorce Forum to answer questions you may have on this subject. Ann is a retired CSRS Personnel Management Specialist who founded Personnel Solutions Federal Benefits Counseling upon her own retirement from federal service in 1996. If this area is of interest read Ann’s first article titled How an Annuity & the TSP Are Divided in a Divorce and sign up to receive her monthly newsletter.
- TSP Withdrawal Tax Withholding – Arlena asked if you can use your TSP at retirement to purchase a home in full or will you get the 20% penalty if you are not age 59 1/2?
Answer: You can avoid the penalty if you wait until you retire at which time you can take a onetime lump sum payment. Paying off your mortgage makes a huge difference when you retire giving you considerably more cash flow to work with plus you save significant interest costs whenever you pay off a loan early. All withdrawals are subject to federal taxes because the money in your account wasn’t taxed when earned. A minimum of 20% is withheld from all withdrawals for federal tax purchases. Review page 4 of the TSP Tax brochure for specifics.If you are several years from retirement it makes sense to increase your monthly mortgage payment by an amount equal to the next month’s principal payment to buy down the loan if you have discretionary funds available. You can call the mortgage company to find out what your next month’s principal payment is or they often provide an amortization schedule that you can use. This way you will have less to pay off on your mortgage when you retire. By doing this you will become accustom to living on less; typically in retirement most have less income then when they were employed. This will get you accustomed to living on less before you retire.
Request a FREE Retirement Benefits Summary Analysis and receive a personal retirement analysis. A sample analysis is available for your review. This service is provided by independent agents that are not affiliated with www.federalretirement.net or Bookhaven Press LLC.
Visit our other informative sites
- http://federaljobs.net (Federal Career & Job Center)
- http://federalretirement.net (FREE Retirement Planning Guide)
- http://federalretirement.net/jobs.htm (Retiree Job Opportunities)
- http://fedretire.net (Retiree BLOG)
- http://fedcareer.info (Career Development Center)
- http://postalwork.net (Postal Career Center)
- http://searchfedjobs.com (Job Search – All Sectors)
- http://ehsjobs.org (Environmental Health & Safety Job Center)
- http://stolenplates.com (What to do if this happens to you)
- Educational Opportunities (Find educational opportunities in your area)
- Take Charge of Your Federal Career (A Career Planning Workbook)
- The Book of U.S. Government Jobs (How to Apply for Federal Jobs)
The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.
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