Posted on Thursday, 25th October 2012 by Dennis Damp
Print This PostRetirees are getting hit from all directions with hidden taxes, reduced purchasing power, increased healthcare, gas, food, and necessity costs. The size of our annuities, savings accounts and investments are shrinking due to a dramatically increased money supply when we truly need them to maintain our standard of living.
Retirees often depend on interest from Certificates of Deposit (CD), savings accounts, and investment income to supplement their annuities. Because our government spends far more than it brings in, they now borrow 33 cents of every dollar it spends, our interest income has just about vanished. Have you noticed this lately?
We as a nation borrow over 4 billion dollars a day and owe over 4 trillion dollars in interest on that debt. This borrowing and the Federal Reserve’s penchant for printing money creates a hidden tax on all of us. This is why when you go to the bank to renew your CDs they only offer much less than 1% for a 1 year CD. Even long term CDs are paying insignificant returns these days. The 3 to 5% that we should be receiving is a hidden tax.
The government eliminates our CD and savings income by artificially maintaining low interest rates. Through interest rate manipulation government borrows long term at very low rates which decreases the interest payments they must pay to China and anyone else who buys our Treasury Bills, Notes and Bonds. This is what some call “redistribution of wealth” and believe me it isn’t what some say it is. The claim is that anyone making under $250,000 a year will not pay more taxes is false. EVERYONE who has a savings account, CDs or money market account suffers from wealth redistribution. We are all funding our nation’s debt.
A site visitor asked how increasing the money supply affects our savings. Size does matter! I can best relate this to a company that announces a 2 for 1 stock split. Typically, a company splits it stock because the price has increased to a point where the purchase of the stock is prohibitive for many if not most investors. What this means is that a company with say 1,000,000 shares outstanding that is selling for $100 a share decides to split 2 for one and issues each stockholder of record 1 additional share of stock. Now the company has 2,000,000 shares outstanding and because the value of the company is the same the share price decreases half to $50 per share. This happens frequently in the investment world.
In my opinion here is the difference from what the Federal Reserve is doing compared to when a company issues a stock split. When the Federal Reserve dumps more money into our economy our GDP remains constant. Nothing has changed to increase production or employment. They simply print more money to buy more bonds or mortgage backed securities from government. This effectively dilutes our currency so it is worth less. When the Federal Reserve prints more money they don’t say; hey Joe you have $25,000 in CDs so we are going to give you $25,000 more because we are effectively splitting (diluting) the currency. No, they give it to government instead, a transfer from you to Uncle Sam. It’s as simple as that. So, when someone says you aren’t paying more taxes because you make under $250,000 you will know what is really happening. The same goes for healthcare, we all will be paying higher taxes under the new Health Care Affordability Act according to the US Supreme Court and the current administration presented their case and said it was a tax, a tax on everyone! A tax is defined by Webster as “a charge usually of money imposed by authority on persons or property for public purposes.”
Since retiring I go grocery shopping with my wife and anyone who shops sees just how costs over the past 4 years are out-of-control. We first stop for gas and pay double what we did to fill up four years ago. At the store companies attempt to hide the increasing costs by decreasing the container size or unit count for many products. Just look at the size of what use to be a gallon of ice cream or a large container of coffee. They shrink the size to keep prices lower yet the cost per item is still increasing because the cost to produce, package, and transport the goods to market have skyrocketed.
The statistics are mind numbing when you look at where we are now compared to four years ago. Middle class income has dropped by $4,000, gas prices have doubled, home values decreased 11%, federal debt has increased 51% to over 16 trillion dollars, unemployment health care costs have increased 23%, more Americans are in poverty, we still have 12 million unemployed, and there was a 46% increase in food stamp recipients!
We offer a number of ways to save in retirement on our site. Today more than ever we need to have our house in order to withstand whatever is coming our way.
Recent Forum Host Articles:
- Retirement Application Changes, Pay Freeze & COLA Update, and FERS Employee’s Contribution Increases by Dennis Damp
- Major Retirement Planning Mistakes by Paul Riser
- A Transatlantic Cruise by Nancy Holston
- What Will You Do in Retirement? by Dennis Damp
- Phased Retirement & Movies Then & Now by Dennis Damp
- Best Dates to Retire 2012 and 2013 by Dennis Damp
Request a Retirement Benefits Summary & Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections. This service is not affiliated with www.federalretirement.net.
Learn more about your benefits, employment, and financial planning issues on our site and visit our Blog frequently at https://fedretire.net to read all forum articles.
Visit our other informative sites
- Federal Government Jobs & Career Center
- FREE Federal Employee’s Retirement Planning Guide
- Federal Employee’s Career Development & IDP Center
- Post Office Jobs & Career Center
- Job Search – All Sectors
- Environmental Health & Safety Jobs Center
- Nuclear Jobs & Careers – High Paying Jobs
- Stolen Car Plates & Recovery Guide
- Take Charge of Your Federal Career
- The Book of U.S. Government Jobs
Distribute these FREE tools to others that are planning their retirement
- 2013 Excel Leave Chart (target 2013 retirement dates and determine exact leave balances for each date)
- 2012 Excel Leave Chart (target 2012 retirement dates and determine exact leave balances for each date)
- How to be Emotionally and Physically Prepared When You Retire
- How to be Financially Prepared When You Retire
- Master Retiree Contact List (Important contact numbers and information)
- Survivor’s Guide
- Estate Planning Guide (An 11 part series that will help readers prepare for retirement, understand basic estate planning techniques, and compile their personal “Survivor’s Guide” binder.)
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 article is not intended nor should it be considered investment advice. Our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.
Last 5 posts by Dennis Damp
- 2025 FEHB & PSHB Healthcare Plan Selection Guide - November 8th, 2024
- Medicare Advantage Plan Primer – What You Need to Know - November 2nd, 2024
- Consider Lower Cost FEHB Plans When Signing up for Medicare - October 25th, 2024
- 2025 COLAs and the Medicare & You Handbook - October 11th, 2024
- Fixed Income – Yields Decrease as Feds Reduce Rates - October 4th, 2024
- 2025 Health Care Premiums, Hold on to Your Hat! - September 27th, 2024
- 2025 FEHB & Medicare Plans – Changes on the Way - September 6th, 2024
- Enhancing Your Retirement Experience - One Day at a Time - August 23rd, 2024
- 2025 Federal Employee’s Leave Record Now Available - August 8th, 2024
- Too Much too Soon & Cable TV Subscription Costs - July 26th, 2024
- The Art of Downsizing – Why, Where, & When? - July 12th, 2024
- 2025 COLA Estimates & Retirement Processing Update - June 28th, 2024
Posted in ANNUITIES / ELIGIBILITY, ESTATE PLANNING, FINANCE / TIP, RETIREMENT CONCERNS, SOCIAL SECURITY / MEDICARE, SURVIVOR INFORMATION | Comments (0)
Print This Post