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Ralph

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August 07, 2010 – Comments (2)

The title is just a more polite way of saying how this rumor about more housing bail outs make me feel.

I got that link from Mauldin, and I was reading his piece because I follow pension stuff.  3 trillion of underfunding for state and local pensions is impressive in the degree of the underfunding.

Interesting notes:

First, understand that in most states the law will not allow for adjustment of pensions. Taxpayers are completely on the hook. That money WILL be found at the expense of either higher taxes or reduced services (such as health care, roads, or police).

 This is going to end in tears for many states and municipalities. I mean real tears. Pension funding in some states will be required by law to consume 25-30% or more of tax revenues. That is going to mean much higher taxes or reduced services. I would seriously consider checking how your state and locality are funded. You might not want to retire to a place that is on a collision course with serious pain. Just a thought.

Hmmm, something I never thought about, check out government budgets and commitments in retirement planning...

Actually, indirectly I have.  Some people have indicated that I am nuts for having moved so far north, but the population is small here and the resources are huge relatively speaking so I honest believe I am living in a place with the ability to best protect against declining government budgets.  I was looking at the numbers in comparison to BC, where I was living before, and my memory is that there are about 100 times the natural resources per person by comparison.  And the main resources are oil and gas, which is huge when you consider peak oil.

The other thing that I have mentioned before is totally live with-in your means in housing.  Having more home then you need just means that you are going to be squeezed much harder to cover those tax short-falls.

Additionally, I have decided against putting further money into a retirement savings plan.  I have no idea how tax laws compare between Canada and the US, but it seems to me that I would be getting less tax savings by putting money in now then the potential tax rate when I need to take the money out and the tax shelter on capital gains it allows until the money can be removed seems challenging to make up with my beliefs about market strength.  And I have enough in my retirement savings that if I come to believe the gains are there to get, well, I have enough to invest with there.

Additionally, my grandfather in a much more favorable tax environment found he was paying higher taxes on retirement money because of his pensions.  My grandfather had grossly excessive pensions via the taxpayer, and I will never have his problem, but his experience has made me think ahead to what I think the tax environment might look like, and I just don't see how taxes can stay down.

Oh, and double Ralph to anyone complaining about their tax burden because their retirement income puts them into a highest tax bracket.  It is a problem the rest of us would feel blessed to have.

2 Comments – Post Your Own

#1) On August 07, 2010 at 8:28 PM, Option1307 (29.76) wrote:

If that Reuters article turns out to be true, I will completely freak out. That would be the ultimate political miscalculation IMO. I know it would appease a lot of people, but I honestly think the vast majority of Americans would be severely pissed off and let the administration know about it via Nov. elections.

We shall see;)

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#2) On August 09, 2010 at 5:40 PM, Melaschasm (53.44) wrote:

I doubt the rumors are true, but I am changing my behavoir because of them.

Rather than paying down my low interest underwater mortgage, I am going to wait for Obama to announce his 'August Surprise'. 

In the unlikely event that this is true, I will be getting a huge check from the government just in time to donate 10% to Obama's political foes, in addition to my normal charitable giving.  To make sure my point is made, I will tell the people getting this donationt that it was made out of Obamabucks.

lol

 

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