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The Readers Write Back
Got a question or comment? Letters from readers...
Hattisburg Mom writes:
Dear Sirs:
I have been following your discourse on the Social Security. But all you seem to focus on is the retirement end of the program. There is more to it, isn't there? I mean, when I got my recent statement in the mail, I was quite impressed by what I would be making at retirement, but was even more impressed by what I would be paid should I become disabled.
Sincerely,
Concerned Mom in Hattisburg
The BCD writes back:
Hattisburg Mom:
I was at a small gathering this past weekend, and the topic of Bush/Gore came up. The political race for president has not quite formed a solid base yet, and the BCD doesn't really fancy itself a political forum, but one thing that was agreed on, Social Security as an issue will get the people to the polls.
Bush has been applauded by the conservatives for having the mettle to even approach the subject. Gore was given only credit for retaliating and doing so only to protect the voter who doesn't reside in the top tier group of wage earners. The very group that because of their current status and wealth probably will not need the benefits offered by the federal insurance program...but will take them anyway if they qualify.
By 1933, twenty four states had adopted some sort of program for seniors in the form of a state funded pension. If you will remember, this was directly after the Great Depression and there were a large amount of seniors left with nothing. Franklin D Roosevelt had created a plan for New York when he was governor. Roosevelt had built a safety net of sorts and told the committee that was working on a National plan that it was necessary to develop a test to determine need, or as he put it, "means". When the Social Security Act of 1935 was passed by the federal government, no test was included. It was, even without FDR's means test, still as program for the poor and the lowly and not a retirement system for all. benefits would begin at 65 if you made it that far. In 1935, the average individual made it to 61. If we moved that figure forward to the current life expectancy, we would be unable to draw a single dime until we were around 79 or eighty. In 1937, you still had to show "need" at the state level to receive benefits.
But it is a complete social plan that does more than just provide benefits in the form of retirement income. It is sort of poverty insurance for the worker providing a death benefit for survivors including children, a disability benefit should you be unable to return to work, and a retirement benefit that was to be supplemental to other forms of retirement payouts such as pensions or investments.
Our candidates need to be a little more cautious when they consider these additional issues about social security. The ability of this federal plan to keep folks like you and me out of the poorhouse has worked successfully for 65 years. Tinkering with it could through the most important part of this plan out of whack. This is a much more complicated issue than the simplicity of allowing people to invest on their own.
I hope this was helpful. And thanks for reading the BlueCollarDollar.
Good luck,
Paul Petillo 8ball wrote:
Can you explain the differences in retirement plans? I am completely confused at this point.
Thank you for responding.
8ball
The BCD writes back:
Dear 8ball:
There are basically eight different plans available to those who want to invest in their future. 401(k)...eligibility usually after one year of employment, with $10,500 as the typical limit (although that is due to rise soon) and the contribution takes place prior to taxes. 403(b)...a plan offered to employees of non-profit organizations such as schools with contributions of 20% or $10,500, which ever is less, and this is also a pretax plan. Keogh...this is best for self employed, or small business employees allowing you to contribute 15% of net (not gross) or $30,000 whichever is less and is also pretax income. SEP-IRA...is another self employed plan with contributions of 15% of net income or $25,500 whichever is less. This is also a pretax plan. Simple IRA...available for self-employed or small business folks who can contribute up to $6,000 with employer matching funds amounting to 3% of income. Also pretax contributions. Deductible IRA...is for those not covered by a pension or those earning below certain levels (single, $32,000/married,$52,000) with contributions currently at $2,000 soon to be raised to $5,000 and this is also considered pretax contributions. Roth IRA...if you make less than $95,000 as a single, or $150,000 as a couple, you may contribute $2,000, soon to go $5,000 but this plan has contribution that are made from taxed income (which means that withdrawals at retirement are not taxed) NonDeductible IRA...is for anyone who earns anything with $2,000 maximum contributions soon to be raised to $5,000. This is also in the form of previously taxed income. For more information, you might want to check out our Mutual Funds
Good Luck,
Paul Petillo
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