Could These Three New Year’s Resolutions
Fix Income Inequality Forever?

By this time most people have ran through their New Year’s resolutions and basically forgot all about them. Humans seem to be hardwired to forget resolutions within about two weeks. I think it could be  some kind of survival mechanism.

That’s okay for the typical lose weight, exercise more, drink less, and read more resolutions because in the grand scheme of things if you weigh a few more pounds, can’t run a four-minute mile, have a few beers on the weekend, and haven’t read Moby Dick it’s not really going to have a huge impact on your life.

Maybe that’s why these kind of resolutions usually evaporate in a week or so… No real urgency.

So now that you have these basically unkeepable resolutions out of the way how about a few real resolutions that could profoundly change your life for the good or for the bad if you don’t do them?

And of course, these better resolutions all have something to do with income inequality.

No matter where you are on the income ladder climbing a few more rungs up or keeping yourself from falling a few rungs down will make you feel less unequal. And that’s a good thing.

It should be no surprise that all three of these better resolutions have to do with education… That may seem odd but education is the only sure fire proven way to add value to yourself so you can move up the income ladder.  It’s definitely an antidote for income inequality.

Unfortunately waiting for someone else to boost you up the income ladder is probably not going to get you where you want to be any time soon. Especially if you are waiting for some government agency to come to your rescue… Not gonna happen. You need to do it yourself.

First resolution…

Do something in 2018 to learn as much as you can in an area that will get you to a higher paying job or a higher paying position in your current company.

This may sound like a tall order but with free options like Coursera ( ) where there are classes in a range of subjects from things like better math skills to improved selling and people skills. Other places to hunt for education opportunities could be a community college or even the Human Relations department at your company. When you get on HR’s radar as someone with a desire to move up the ladder you will be surprised what can happen.

This “get more education” resolution has a potential pitfall. And it’s a big one.

That leads us to the second resolution…

Don’t overspend on education.

This may seem like a no brainer but when you look at the huge amount of student debt outstanding your nose will start to bleed.  How much? Does $1.5 Trillion (that’s with a “T”) make you feel a little queasy?  That comes out to an average close to $30,000 per graduate. And if that number doesn’t worry you then consider it is just an average. Estimates show that almost 2.5 million people owe over $100,000 in college debt.  Make no mistake, with that much debt the rungs on your ladder to a better life will be firmly blocked.

This college debt or any money you spend or borrow for education should be thought of as an investment in your future. And like any investment you need to be reasonably sure that you will see a solid return on your investment. And this particular education investment can cost you a lot of money and time.

Sure… People might be telling you to follow your dream in college. But the way I think about it is that college is career training. Getting a job. If you want to pursue poetry, creative writing, psychology, history, or a foreign language don’t mortgage your future for something that at best will get you a job frothing cappuccinos. You can always pursue these dreams for free at your local library where stacks of books await you at no charge. Probably the same books used in a college course that could cost you up to $10,000.

So… Do the math and make sure a job awaits you and the end of your education adventure that can actually provide enough money pay back all of your education loans in not more than ten years.

And of course, this leads to resolution number three…

Don’t get suckered into paying for someone else’s education.

This may seem harsh but some parents (and even grandparents) have an attitude that it is required for them to pay for their children’s college education. Sort of like how Disney has everyone convinced that every parent has an obligation to bring their kids to Disney World.

Here’s the dilemma… When a parent diverts money to paying for college for a kid it comes from somewhere. Usually indirectly from retirement savings.  The parent is basically trading off future security so some kid can go off to a four-year party. And the bill for that education adventure can be as high as $250,000 when you include everything.

Now here’s some interesting math to show what this $250,000 really costs the parent… Assume the Parent is forty-five years old. That means that the $250,000 would have twenty years to grow in a retirement account if it was not spent on a kid’s college. At a conservative 7% interest per year that means the college adventure actually cost the Parent $967,421 of retirement savings.  And that is just for one kid.

That’s another income inequality aspect of this… Will an extra million dollars have any impact on your retirement?  I bet it will…

Bottom line is that a kid can take a loan out for college. The government and banks are standing in line ready to loan kids money for college. But when you get to the ripe old age of sixty-five no government agency or bank will be ready to loan you a million dollars so you can pay for food, housing, medical, and other expenses in your retirement.

So… If your kid is putting the pressure on you to pay for college simply ask them this question… “Since we will be taking this money out of our retirement savings we may be at risk of not having enough money for food, housing, and medical when we retire… Can we count on you to financially help us when we are retired?” If they ask how much… Figure the million dollars over 25 years or around $3,500 a month.

If they say sure they will send you the monthly checks… Then you have a great kid. Get your attorney to draw up the papers. But I will bet that most kids will laugh when you suggest they help you out in retirement. Mine did…

I hope these New Year’s resolutions will be easier for you to keep than the ones you already forgot about. Good luck…

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.


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.