You Can Work Till You’re 80 and Still Run Short

You Can Work Till You’re 80 and Still Run Short

by | Jun 8, 2011 | Archives

Even if Social Security makes good on benefits promises, and even if low-income workers keep working till they’re 80, about 38% of those low-income workers could go broke when they finally do retire.  

Researchers at the Employee Benefit Research Institute (EBRI), Washington, present that warning in a new analysis of data from EBRI’s Retirement Security Projection Model database.
The latest version of the database lets users study what will happen if householders defer retirement age past age 65.
The researchers consider whether individuals have a 50% chance of being able to meet basic retirement living expenses and uninsured health care costs.
Many workers – and some policymakers – are hoping workers can overcome gaps in public retirement programs and shortfalls in private savings by working past age 65.
One problem is that employers are not necessarily clamoring to hire and retain workers ages 65 and older, experts say.
Another challenge is that even workers who are able to work past age 65 may live long past age 65.
Workers in the top quartile of income have about a 76% shot at having adequate retirement income if they retire at age 65, and that percentage rises to 81% for top-quartile workers who keep working to age 69, EBRI researchers say.
Only 30% of workers in the lowest quartile have a 50% overall chance of having enough retirement resources. That percentage rises to 35% for workers who retire at 69, to 62% for workers who retire at age 80, and to 90% for workers who retire at age 84.
“What really makes a positive difference, we found, is if people who continue to work after 65 also continue to contribute to a defined contribution retirement plan,” Jack VanDerhei, a report co-author, says in a statement about the analysis.
Access to retirement plan benefits can dramatically increase the likelihood that an individual will be able to afford retirement, VanDerhei says.
By Allison Bell
Congress Proposes Marijuana Tax Legislation

Congress Proposes Marijuana Tax Legislation

by | Jun 7, 2011 | Archives

A coalition of Republican and Democratic lawmakers has introduced a trio of bills aimed at protecting access to medical marijuana under tax and banking laws, and changing the existing laws to reflect the medical efficacy of marijuana.


The bills were authored by Rep. Pete Stark, D-Calif., Barney Frank, D-Mass., and Jared Polis, D-Colo.

Stark’s bill, HR 1978, the Small Business Tax Equity Act, would allow medical marijuana dispensaries to take the full range of business expense deductions on their federal tax returns, just like every other legal business is permitted to do under the law. His bill is co-sponsored by Rep. Dana Rohrabacher, R-Calif., and Ron Paul, R-Texas, as well as Frank and Polis.
“Our Tax Code undercuts legal medical marijuana dispensaries by preventing them from taking all the deductions allowed for other small businesses,” Stark said in a statement Wednesday. “While unfair to these small business owners, the Tax Code also punishes the patients who rely on them for safe and reliable access to medical marijuana prescribed by a doctor. The Small Business Tax Equity Act would correct these shortcomings.”
The States’ Medical Marijuana Patient Protection Act, authored by Frank and co-sponsored by Stark, Polis and Rohrabacher, would make individuals and entities immune to federal prosecution when acting in compliance with state medical marijuana laws. It would also direct the administration to initiate the process of rescheduling marijuana under the Controlled Substances Act so that it is placed in a schedule other than Schedules I or II.
“The time has come for the federal government to stop preempting states’ medical marijuana laws,” Frank said. “For the federal government to come in and supersede state law is a real mistake for those in pain for whom nothing else seems to work. This bill would block the federal prosecution of those patients who reside in those states that allow medical marijuana.”
Polis’ Small Business Banking Improvement Act, which is cosponsored by Stark, Frank and Paul, would ensure that medical marijuana businesses that are state-certified have full access to banking services by amending the Bank Secrecy Act.
“When a small business, such as a medical marijuana dispensary, can’t access basic banking services they either have to become cash-only—and become targets of crime—or they’ll end up out-of-business,” said Polis. “In states that have legalized medical marijuana, and for businesses that have been state-approved, it is simply wrong for the federal government to intrude and threaten banks that are involved in legal transactions.”
Stark and Polis welcomed Congressman Paul’s support for their bills.
“It is time to get the federal government out of state criminal matters, so states can determine sensible drug policy for themselves,” said Paul. “It is quite obvious the federal war on drugs is a disaster. Respect for states’ rights means that different policies can be tried in different states and we can see which are the most successful. This legislation is a step in the right direction as it removes a major federal road block impeding businesses that states have determined should be allowed within their borders.”

Retiring? Five common mistakes

Retiring? Five common mistakes

by | Jun 6, 2011 | Archives

Five Common Mistakes Made When Preparing for Retirement
Retirement is rapidly approaching for many baby boomers. Some of them will make mistakes in preparing financially for that stage of life. Don’t let yourself fall into these common traps when setting up your nest egg.

1. Retiring With Too Much Debt: Financial planners generally recommend that individuals don’t retire until credit card, mortgage and other forms of debt are paid off. These monthly payments can quickly cut into savings. Increasingly, Americans are entering traditional retirement years with heavy debt.

2. Lack of Insurance: Although most individuals over the age of 65 are eligible for Medicare, they will still have healthcare costs that are left uncovered by Medicare. Many items, including premiums, deductibles, coinsurance, eye glass coverage, hearing aids or long-term nursing home care for longer than 100 days, are typically not covered by Medicare. Guidance from a professional is recommended if the family has significant assets to protect.

3. Ignoring Inflation: Inflation will slowly erode an investor’s savings, no matter how carefully they saved. That said, there are steps that can be taken to avoid this. Social security, some annuities and pensions are adjusted for inflation annually. Treasury Inflation-Protected Securities are a government bond that promises a rate of return that exceeds inflation.

4. Relying Too Heavily on One Income Source: A certified financial planner may recommend having four to six sources of retirement income without counting on just one. By diversifying, retirees can avoid losing all their income if one source loses value. Guaranteed sources can include Social Security, pensions and annuity payments. Other common sources can be 401(k), IRA, CDs, personal investments, cash investments, rental properties and royalty income.

5. Not Protecting Savings: About five to ten years before retirement, individuals should start to focus on protecting their savings. People can reduce risk by shifting assets to more conservative investments, avoiding borrowing or taking early withdrawals and minimizing fees and taxes deducted from savings. More funds should be placed in low-cost investments and traditional and Roth retirement accounts. : Inflation will slowly erode an investor’s savings, no matter how carefully they saved. That said, there are steps that can be taken to avoid this. Social security, some annuities and pensions are adjusted for inflation annually. Treasury Inflation-Protected Securities are a government bond that promises a rate of return that exceeds inflation.

Government Contractors Owed $757 Million in Back Taxes

Government Contractors Owed $757 Million in Back Taxes

by | Jun 2, 2011 | Archives

More than $24 billion in stimulus funds went to contractors and grantees who owed the government hundreds of millions of dollars in tax debts, according to a new report from the Government Accountability Office.

The GAO identified 3,700 contractors and grantees who received stimulus funds, despite collectively owing the government $757 million in back taxes. The investigative report, which came at the request of Senators Tom Coburn, R-Okla., Carl Levin, D-Mich., Charles Grassley, R-Iowa, Max Baucus, D-Mont., and Orrin Hatch, R-Utah, will be released at a hearing Tuesday of the Senate Permanent Subcommittee on Investigations.
“For many years now, we’ve known that a small percentage of federal contractors and grantees who get paid with taxpayer dollars shirk their responsibility to pay their taxes,” Levin said in a statement.  “We’ve strengthened the levy program to recover more funds from them, and the executive branch has made it clear nonpayment of tax can be grounds for denying a specific contract or debarring a contractor from bidding on any contract. Now the executive branch should get on with it and actually debar the worst of the tax cheats from the contractor workforce.”
The report found that of the 63,000 contractors and grantees examined, 3,700 were found to owe $757 million in back taxes, but also received $24 billion in stimulus awards.  This represents 5.9 percent of all the awardees that the GAO analyzed. GAO investigators noted that the findings of the investigation likely understate the full extent of the problem. The subcommittee will examine possible solutions, including the need for legislation to prevent those with known significant tax debts from obtaining federal grants and contracts.
If all 80,000 awardees were examined and the same proportion held, 4,500 awardees owing $909 million would have received $29 billion in contracts. That would represent more than 10 percent of all stimulus money designated for contracts and grants ($275 billion).
The GAO study identified 15 cases of individual contractors or grantees involving “abusive or potentially criminal activity” and has referred those cases to the IRS for further investigation.  GAO indicated that those 15 cases represent only a small number of the cases that it could have referred.
Although a federal levy program is in place to catch tax cheats that get federal payments, many awardees escaped this review because money was disbursed at the state and local level or by a prime contractor.
Approximately 35 percent of all unpaid taxes were for old debts incurred prior to 2003, indicating that many of the awardees were known tax cheats, and not persons with new debts. The bulk of the tax debts were from unpaid corporate and payroll taxes.
The GAO uncovered several specific examples that were particularly egregious. One construction firm owed nearly $400,000 in back taxes, but received a contract worth more than $1 million. One engineering services firm had a $6 million delinquent tax debt and was called by the IRS an “extreme case of noncompliance.” It got a stimulus contract worth over $100,000.
One security firm owed $9 million and was repeatedly cited not only for being uncooperative with the IRS, but also had frequent labor violations. It received a stimulus contract worth more than $100,000.
One nonprofit organization owed more than $2 million from years of unpaid payroll taxes, while at the same time its CEO made numerous trips to a casino. This organization received more than $1 million in stimulus funds.
“Many companies pay their taxes, so there’s no reason for the government to deal with companies that don’t,” said Grassley. “The businesses that should be excluded first from government business are those that have tax debts outstanding over several years and haven’t done anything to try to pay off the debt. A substantial amount of the estimated unpaid federal taxes owed by stimulus program contractors are in this category. A government contract is something to be earned, not something to be taken for granted.”