Who Has The Strongest Income Inequality Case?
Why MyRA Really Won’t Help Much

Money bowlI know there is probably a lot to talk about when it comes to last night’s State Of The Union Address but how many people will be fooled by this MyRA thing?

I don’t think many people will debate the fact that people who are north of 65-years-old and have retired must be one of the most disadvantaged groups over the last few years when it comes to income.

Why?

Back in the old days you could count on a nice 5% or more return on money left in a good old fashioned bank Certificate of Deposit. And that money was 100% safe because of our friends at the FDIC.

roth-ira-11So… If you were retired and had a million dollars money in the bank you could be assured of a nice $50,000 a year income. And don’t let the prospect of squirreling away that million dollar nest egg scare you. Assuming you have forty-five working years you only needed to save about $6,000 a year. That assumes a 5% return on your saved money and that you started 45 years ago in 1969.

The story now and going forward is much bleaker for anyone who doesn’t plan on staying employed and dropping dead at their job when they’re ninety-seven.

Problem number one: Now you can only get 1% interest on those super-safe bank certificate of deposits so you would need closer to $5 million to generate that same $50,000 a year income. Thus instead of saving $6,000 a year you would need to save over $31,000 a year. Big difference and all because of these low interest rates.

Why are the interest rates so low and virtually starving people who need to live off their savings?  Thank your friends in D.C. for that. These artificially low interest rates have been a boom to the economy basically on the backs of retirees. Making them some of the most unequal when it comes to income inequality.

Cost-of-LivingProblem number two: Let’s say your crystal ball told you back in 1969 that you would only earn 1% income on your retirement nest egg. Then you would need to save much more money to actually retire some day. But the only way to save more would be, unlike IRAs and other retirement accounts, with money that has already been taxed at least once. This reduces the amount you can put away and every year you would have the awesome wind resistance of paying taxes on any earnings. A good part of your earnings every year over that forty-five years would go straight to the IRS.

The big question is… Why doesn’t Uncle Sam let us save as much money as we want in our retirement accounts? Right now ROTH IRAs are limited to a maximum annual contribution of $5,500 or 6,500 if you are over 50. Not nearly enough.

And this MyRA thing seems like just a distraction. The amounts I have heard are still too small to make a real difference for future retirees.

IRA coinsLet people save as much money as they want for retirement. And let that money grow tax free. That is unless there is some kind of guarantee that when a working person retires at a reasonable age like 65 there will be enough Social Security money to reasonably house, feed, and clothe a person.

But no one in D.C. would dare make that guarantee. And even now they are cheating Social Security recipients with a wacky inflation/cost of living index while they come up with plans to cut benefits for future retirees.

The big message here is that you better save as much cash as you can because when you get to your Golden Years you will probably be largely on your own.

And this MyRA will probably not generate enough money to pay the rent you will need to pay to live in your kid’s basement.

State Of The Union Preview… Will Mr. Obama Pound Income Inequality or Propose Real Solutions?

SOU3I await tomorrow’s State of the Union Address with much anticipation. This is the chance for President Obama to lay out his vision for the next year. We are on the way out of wars in the Middle East, the Affordable Care program seems to be stabilizing, and economy is acting like it wants to improve.

Tuesday night’s speech should be very hopeful and positive.

At this point the President is at a crossroads of sorts. Sure his approval ratings are near all time lows and in general the American people do not hold our D.C. politicians in high regard right now but this could be Mr. Obama’s chance to re-energize the country.

SOU1So he can do two things Tuesday night… He can whine about Income-Inequality or find ways to solve the problem by proposing some real actionable strategies, tactics, and programs to start getting more people back to work.

By whining I mean he could decide to place the blame on others and not take personal responsibility. By solving the problem I mean propose things that everyone can rally around. People who have been out of work don’t want another hand out from an Uncle Sam who has to borrow from the Chinese and other false friends to pay for that hand out.

I think the unemployed would rather be working and the working poor would rather move up the income ladder. With US Corporations and Investors sitting on a record amount of cash I think a hint more business friendly policies could be a catalyst for an unprecedented economic renaissance.

JobTrainingWhat kind of help could Obama propose. How about some better training programs? Lets get people the skills they need for all those jobs that are unfilled in the marketplace right now. How about some basic job skills training to help people new to the work world to acquire the basic skills and attitudes needed to get on that first rung of the employment ladder?  And… how about giving those first time job seekers a chance in the market place by letting employers decide the wage rate that works the best?

That’s right… Simple economics dictates that if the minimum wage goes up employers will need to cut workers and/or demand a deeper skill set from the people they do hire. This will virtual close off the job market to new entrants. Can’t climb the ladder if you can’t jump on the first rung.

Right now this country needs a leader…

John_F_Kennedy_NASA_SpaceI think of President Obama as the CEO of the country. He has the position to make things happen. To inspire us all no matter what political leanings we have. The way President Kennedy inspired the entire nation with his space race goals.

If you were the shareholder of a company and after that all important annual meeting you felt your CEO did not have a clear actionable plan for the coming year and the stuff to rally the entire team how would you feel?

I hope we don’t feel that way after tomorrow night’s speech.

 

 

 

Could This Be a Possible Solution To Income Inequality?

MinimumWageWordCloudOn a recent visit to a friend’s house I noticed a woman running around his place dusting, scrubbing, vacuuming and generally making his place look five star hotel room clean. I always thought he was just a fastidious “Felix Unger” type of guy who quietly and obsessively cleaned his place when we weren’t looking.

I quizzed him further on his cleaning person and realized this could be one part of the solution to the Income Inequality and Minimum Wage Debate.
First of all… My Friend’s cleaning lady was not some young shapely woman clad in a tight black and white uniform. And she most certainly was not a character out of Dowton Abby. She was a middle-aged jeans and sweatshirt wearing busy-bee focused on making fast work of cleaning every corner of the house. She did a great job and was done in two hours. That might not seem

like a lot of time to clean a four bedroom/five bath home but she is a professional with all the right tools and no distractions.

Wecandoit

So how much does this cleaning woman make and what does it have to do with Income Inequality and the minimum wage?  Stay with me on this math. I guarantee you will see a payoff.

My friend’s cleaning lady makes $100 for each visit. She spends plus or minus two hours working at a very fast pace.

Okay so let’s look at the numbers here….

Now lets look at some of the other practicalities… Taxes!Basically she is making $50/hour. Well above any minimum wage. Some might say that just dividing her cleaning fee by the number of hours worked may not be accurate. So then lets say she only does this one cleaning job that day. Then divide her $100 fee by eight hours. That comes out to $12.50/hour.  Well above the minimum wage in most states and localities I know of.

Pictures-of--The-Cleaning-LadyWhen my friend paid his cleaning woman he handed here a crisp new $100 bill. The transaction was between him and her. Uncle Sam and our wonderful representatives in D.C. did not seem to be part of this transaction in any way except that they printed the currency used. I am assuming that this hard working woman probably is not keeping records at a level satisfactory to the Internal Revenue Service or her State/City/Local Taxing authorities so they are not going to get their “fair share” of her hard work that day. This means that her $100 is equivalent to somewhere around $125 earned in a regular W2 reporting job.

That brings her hourly up to $60/hour or in my worst case where she only does this one job a day she is earning $15/hour.

Minimum-Wage1If that $15/hour number sounds familiar it is the dream number hourly fast-food workers have been fighting for. While they dream, demonstrate, and complain this cleaning woman has found her solution on her own. And she is her own boss. She sets her own hours.

But could her real bottom line look like?  This next part may not make a few college graduates living in their parent’s basement too happy.

If this Cleaning Lady is even 10% as good a business person as she is at cleaning houses she probably has three cleaning gigs a day for five days of the week for a weekly tax free equivalent take of  $1,800 or around $93,000 a year. And my friend tells me she did not go to college so she doesn’t have and crushing debt to pay off.

The-Cleaning-Lady-Now the what ifs to think about….

What if the government used the tax system as an incentive for people to do more of these kind of cash-for-work type of jobs? What if there were some type of internet service to match people with jobs to do with those willing and able to do them? Something like TripAdvisor with ratings and recommendations.

And… Do you think the possibility of making $93,000 a year might get an unemployed college graduate out of the parental dungeon?

What about possible unintended consequences?

I’m sure there could be many unintended consequences but the first that comes to my mind is that as hordes of fast-food workers discover the joys of working fewer hours for much higher pay the supply of fast-food workers will drop. And as that supply drops those wages will need to increase on their own. Everyone could win here.

Quick your minimum wage job and get one of these?

Quit your minimum wage job and get one of these?

Oh by the way… If you think that $93,000/year number is a high… When this cleaning lady drove away she was in a bright shiny new red Corvette. When I commented to my friend he said, “Oh did she drive the Corvette today? She has a black Range Rover and a Ford Pickup, too.”

 

What’s really going on with Income Inequality anyway?
It may take a year to find out.

incomeeq1-21-2014aThis whole subject of Income Inequality has been stewing for a while. It seems like most of the noise is cooked up just to get attention. The problem is that people may be getting all fired up based on news papers trying to create headlines that sell more papers.

Inocmeeq1-21-2014b

Or maybe what’s really happening is more sinister than anyone could ever imagine. Sort of like that NSA phone hacking thing really being worse than anything you would see in a bad Hollywood movie thriller.

Well… Now that I have cracked the formula for the perfect omelet 2014 seems like a great year to dive in and see what I can uncover on the Income Inequality subject.

Death-of-the-Middle-ClassEspecially as things get louder and sides start to form based on what could be inaccurate facts. But don’t worry I will still keep working on the Perfect Low Glycemic Bran Muffin formula. No use derailing that effort. You can actually eat muffins while money is largely not edible.

DTAbbyAlso… I have been watching Dowton Abby lately (just started watching season one on Amazon Prime – Thank you Jeff Bezos)  so it looks like this Income Inequality is not really something new. The residents the Abby all look pretty capable so as the season unfolds I hope to learn more about why they seem to need over twenty people to take care of the family of five. And that does not count the grounds keepers, barn help, and the IT guy who keeps their WiFi running.

Does Mr. Obama know who this NSA Really is?
ANSWER: Scary!

obamansa2The big news today was that President Obama has formally addressed the NSA’s (National Security Agency) recent cell phone record faux pas. The New York Times had some pretty good coverage of the entire back pedaling event.

My congratulations go out to our President for openly dealing with this unsavory and embarrassing issue.

NSA1But… We he would probably not even talk about this if it was not for the recent revelations that the NSA was listening in on European government leader cell phone calls. Basically if the NSA would not have been caught they would still be doing the same thing they have been doing many years. All in the name of national security of course.

So now it’s all out in the open and there will be new guidelines?

I really don’t think anything will be any different except that the NSA will be more diligent at plugging leaks so they don’t get caught again. No one likes it but their job is and always has been to listen in on all voice and data traffic.

WiresNSAMany months back a Wired Magazine article talked about a new NSA facility located out in the Utah Desert desert with the sole purpose of capturing and analyzing all forms of communications.

So I guess to make a few extra bucks now the NSA is going stop using the Utah facility to listen in on us and rent it out to Netflix so they can stream movies even faster?  I don’t think so.

Presidents come and go. Senators come and go. Congressman come and go. Supreme court Judges come and go. But… There will always be an NSA and they will always be listening to anything they can get their hands on.

New NetFlix Movie Streaming facility?

New NetFlix Movie Streaming facility?

Bottom line… Assume everything you say or write over your phone or on the internet is going through the NSA’s computers. If you don’t have anything to hide, no worries. Use the wrong words that the NSA computers are targeting and anything can happen. I won’t include any example sensitive words here for fear that these snoops will start going through my stuff.

The time to start worrying is if/when all that information and listening capability falls into the wring hands.  But how do you define “wrong”?