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Do you notice that people rarely discuss taxes in terms of amounts? Social Security is a little different since most will receive the same amount. But no one openly states their earned income or their tax rate publically, as not to appear boastful, or not to be shamed. But under George W Bush's plan, most will receive $100 extra income in 2003, and that amount increases 10 fold in the higher income brackets with dividend right-offs. Larry Ellison of Oracle Inc., for example will gain $55 Million in dividend rebates in 2003. It also increases 10 fold if you make $40,000 and have more than five children.
We should openly discuss our taxes with family and friends. Sometimes there will be feelings of resentment towards someone making twice your salary. But the point is, we all need to understand how this Federal Government works with those dollars you and I donate.
I pay 54 percent of my income to the federal, state, and sales tax system (don't forget sales tax!) Not to be shy, but I pay $37,440.00 of my salary to the government of the United States through taxation (which includes Social Security.) On the average my annual living expenses compare proportionalty, so I am still without savings. If I lose my job, or require emergency cash, I'm out of luck.
What I want is accountability for my $37K spent on the Feds. When I retire, it is questionable the government will cover me. At present day rates, my Social Security payment would be about $1,200 per month -- in 40 years.
Socialist states like Germany, France, Italy, Sweden, and a host of others take care of citizens after retirement. Their Social Security is truly what it means. The United States says it cares for you after retirement, but that is debatable. After all, what does "care for" mean? It is not a difference between democracy and socialism we blame, but the differences between individual governments. The United States is better than most at hiding what they do with our money, especially with $450,000,000,000.00 in military spending.
Do you plan to retire at age 60, or 65? If you live in France, you may, and the government will provide you with 88 percent of your salary for as long as you can lift a glass of Bordeaux . Don't think about packing your bags and moving to France just yet. You must be a citizen for retirement benefits, and unless you are born in France, citizenship is difficult if not impossible to achieve. Marriage does not grant you citizenship.
In the United States, Social Security benefits are simple to calculate. If the current Social Security system remains in place for the next 40 years, your benefits will amount to a maximum of $1,460.00 per month. Or whatever is an equivalent adjustment for inflation. Simply put, by today's standards if your house payment is $1,000 per month, you have a $460.00 per month remaining; $107 per week, or $15 per day to cover food, transportation, and living expenses.
Key to financial security in the United States is your own savings plan. Without a pension, or 401K, or family wealth -- you will likely starve in your final years. The option of course is to work until you are 85 or 90.
Assume you earn roughly $70K per year. At that rate, plus cost of living increases, retiring at age 70 translates to today's equivalent of $1,250 per month from Social Security. A small 401K, mine has dropped by 50 percent since September 2001, will add to the monthly allowance, however, it is impossible to stash away the maximum allowed funds on $70K per year, since taxes and the cost of living itself take 97 percent. Nonetheless, stocking away two percent for the next 30 years should give you an additional (today's equivalent) of $1,700.00.
It is possible you might receive family money by that stage of life, but it is not something you should count upon. By today's standards, you would receive approximately $3,000.00 per month for the next 30 years, or until you reach 100. Economically, it is preferred only a few make it that far or the system breaks. Social Security after all wants you to die before taking your share, that is how it works. (Ready to die? Be sure to plan for a $25,000 funeral expense.)
| My current expenses are a good example. I'll be living in my 200-square-foot Manhattan apartment at age 70, because I can not afford to move: | |
| Rent | $1,250.00 |
| Health Care/Insurance | $575.00 |
| Utilities* (Phone, Elec, Gas) | $312.00 |
| Food | $417.00 |
| Misc (Clothes, Taxi, etc.)** | $350.00 |
| Total Monthly Expenses | $2804.00 |
| (Monthly Savings) | $96.00 |
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* Notice -- I do not have a car, nor do I have cable service.
** Eats out, travel | |