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GMAC Retirement Plan

admin — Thu, 30 Dec 2010 17:13:48 +0000

The GMAC Retirement plan is the most commonly seen of retirement plans – the normal pension system. The GMAC retirement plan is also called a ‘defined benefit plan’. According to the terms of a defined benefit plan, when the employee reaches a specific age, he or she can retire and rest assured that whatever retirement benefits had been agreed upon will be paid every month after that.

The calculation of these benefits is usually based on a predetermined formula that usually uses the number of years the employee was a part of the company and in what all positions, and the position in which he or she retired – basically, the salary information. Once the person reaches the retirement age, he or she will be entitled to the benefits for as long as they live.

Benefits such as these, under the GMAC retirement plan, are usually called ‘accrued benefits’. Under the GMAC retirement plan, individual employees do not hold individual accounts. Another thing to keep in mind is that under such the GMAC retirement plan, the alternate payee is not given one sum at one time, as a lump sum. According to the terms of this plan, the alternate payee will be paid the benefit monthly, during the lifetime of either the alternate payee or the participant.

There are two approaches, generally, for a plan like the GMAC retirement plan. The first is the Shared Interest Approach. The main features of this approach are that the alternate payee never receives any sort of benefits until and unless the participant, that is, the employee, actually retires. Second, once the employee has chosen such an annuity with an ex-wife or ex-husband, is the employee marries again, the spouse could be left with no benefits.

The second approach in the GMAC retirement plan is the Separate Interest Approach. In this approach, the alternate payee can choose to start receiving the benefits he or she is entitled to as soon as the employee reaches the earliest possible retirement age. Basically, even in the unfortunate event of the employee’s death, there will be no difference to the benefits that the alternate payee already receives. The biggest advantage, of course, of this approach is that the alternate payee is not made to wait till retirement to receive any benefits. Second, unlike the other approach, the employee will not have to choose anything at any point that might affect his or her wife or husband in case the employee chooses to marry again.

Robbing Peter to Pay Paul – Early Withdrawals From IRAs

admin — Sun, 26 Dec 2010 06:47:38 +0000

I have received e-mail after e-mail asking about penalties for early withdrawals from IRAs or other retirement plans. When the economy is good and account values are high, I never hear it which tells me not only are things tight for the average retiree, they are tight for everybody. In some cases families spent their way into a short fall. Some others may have lost their jobs. Whatever the case, you should know the rules and penalties before you tap your retirement savings.

Penalties for Early Withdrawals of IRAs or Qualified Retirement Plans

Given the difficult times, some taxpayers may be tempted to apply for early withdrawals of funds from retirement plans to alleviate financial hardship. In addition to taxing the withdrawals, the IRS also assesses a 10% penalty on such taxable withdrawals, making this an expensive source of funding. Additionally, if the withdrawal is coming from a SIMPLE Plan, and the taxpayer first started contributing to the plan within two years, the early withdrawal penalty is 25%.

There are exceptions to the early withdrawal penalty rules that a taxpayer may wish to consider. For some early withdrawals from retirement plans, these may include using the funds for a rollover (either a direct rollover or within 60 days of having received the funds), paying for health insurance premiums if unemployed, paying for education expenses for either the taxpayer or a dependent, paying for medical expenses in excess of 7.5% of adjusted gross income, purchasing a home (if the taxpayer did not own a home within two years and limited as to how much of the distribution qualifies to avoid the penalty), if permanently or totally disabled or if the IRS has levied the taxpayer’s retirement account to pay off tax debt.

Substantially Equal Periodic Payments

One important exception to the penalty rules on early withdrawals include substantially equal periodic payments (also called SEPP or 72t, named for the tax code that permits the exception). In order to qualify for the exception, the period must be for a minimum of five years or until the taxpayer is 59

Retirement Planning – IRA and 401K Retirement Plans

admin — Sun, 26 Dec 2010 00:28:17 +0000

When it comes to basic retirement planning individual retirement accounts (IRA) or 401k retirement plans play an extremely important role. When utilized correctly, you can amass a very large retirement sum with some proper planning. The earlier you start contributing to an IRA or 401k plan, the better. The key to achieving your retirement needs takes time. Market performance plays some role, but we know from past performance that the longer the time horizon, the more that can be achieved.

If you have a 401k retirement plan available to you at your place of work, it is important that you start to contributions, as soon as possible. Many employers offer a 401k match. This means that for every dollar you contribute up to a certain limit, your employer matches, your contributions, dollar for dollar. This puts you at a tremendous advantage when planning for your retirement, as every dollar you contribute your gaining 100% return, right off the bat. Where else can you get those kind of returns? And this is before any market growth. Over time, you have the additional benefit of the market working in your favor. As you and your employer dollar cost average into your 401k account.

Now, if you’re one of the unlucky individuals that don’t have access to a 401(k) plan, contributing to an IRA account is an absolute must. You don’t have the benefit of somebody adding 100% return to your account immediately, making retirement planning, even more important for you. When it comes to choosing an IRA. You have two typical choices, a traditional IRA, or a Roth IRA. Traditional IRA’s allow you to contribute pretax dollars into a retirement account. This allows you to write off any retirement contributions against your tax return. The funds within the IRA account, then grow tax-deferred until withdrawn and retirement. You do, however, have to wait till you’re age 59 1/2 before withdrawing without penalty. Mandatory withdrawals are required at age 70 1/2; this is called required minimum distribution, or RMD. RMD is required, so that the government is able to tax your pretax contributions. A Roth IRA, on the other hand, is a completely tax-free way to save for retirement. However, Roth IRA contributions have to be made with after-tax dollars. Depending on the amount of income you make, you may qualify for the Roth IRA. Determining which is most suitable for you, can be determined by your tax bracket and retirement.

Over the last few years, the Congress has passed laws, which enacted the Roth 401k. The Roth 401k works much like the Roth IRA, in that contributions are made with after-tax dollars and withdrawals are tax-free. Unfortunately, not all employers offer this new plan. Additionally, many employees are so attached to the tax write off that comes from traditional IRA or 401(k) contributions, that the traditional instruments are the more common choice. Choosing between the two is not an open and shut case, the traditional IRA might be great for some, but others may prefer the Roth IRA or 401k. The important thing here is to choose one or the other, do something, as getting started is the most important step. The earlier, we get started, the more we can put away for retirement. Just getting started at age 21, as opposed to getting started at age 31, can mean the difference of substantial amounts of money. In fact, the individual that starts at age 21 has such a large time advantage over the procrastinating 31-year-old that he can stop investing entirely when he reaches age 31, and still outpace the 31-year-old. It’s important to understand that everybody’s different, we all have different goals, and we all have different needs. Retirement planning is all about addressing our individual goals, and our individual needs.

Withdrawal Rules Under 401K Retirement Plans

admin — Sat, 25 Dec 2010 05:23:14 +0000

Delaying Your 401K Withdrawal

Ideally one should not withdraw their 401K retirement money until it matures, there arises some situations when you need the money most, more so due to the lack of any other option. This makes it important for the contributor to know the 401K withdrawal rules, which are mentioned below.

- Withdrawing before you attain the age of 59 1/2 years entails taxation of the distribution amount in addition to 10 percent penalty tax. Further, the IRA also mentions some exceptions to this rule. The beneficiary receives the retirement amount in time of untimely death; if you become disables.

- You are eligible for retirement benefits if you terminate employment voluntarily on reaching 55 years old. Similarly, amount can be withdrawn for medical expenses or for ‘qualified domestic relations order’.

- 401K withdrawal rules imply losing further investment opportunities because of untimely withdrawal. Even if you withdraw a small amount, there is less chance to replenish the figure as there is a limit on annual contribution mentioned in 401K contribution rules.

- Withdrawal rules also states that one must withdraw in some situations like job loss or divorce.

It is because of the strict 401K withdrawal rules, one must consult professionals beforehand to understand the implications of tax deductions and future investment. Experts suggest taking loan against 401K if need be. Then one needs to repay within 5 years and further the time period shortens if you leave your current employment.

Further, it is not necessary to withdraw the retirement amount immediately after maturity. Annually you are required to withdraw the Required Minimum Distributions (otherwise, 50% penalty is charged according to the difference between the amount at disposal for distribution and the amount withdrawn) and delay the final withdrawal till the following year after reaching 701/2 years old. There are further 401K withdrawal rules, which a professional can make you understand intricately.

401(A) Plans – Money Purchase Plan Definition

admin — Mon, 20 Dec 2010 18:19:38 +0000

A 401(a) investment plan is sometimes also known as a Money Purchase Plan. It is a kind of saving plan which allows you to make savings for your retirement years. These plans are usually offered by your employers and contributions to the fund can be made by employer, yourself or sometimes both. The contributions to the fund can be voluntary or are sometimes mandatory. As per rules, the employer may decide if these contributions are required to be made on post tax basis or pre tax basis.

These contributions will be on the pre tax basis if employer has picked up the provision. You can however make your own additional contributions. If you decide to contribute then it will be on post tax basis. The Voluntary contributions are capped at 25% of salary. Your employer could contribute by variety of methods. They could have a dollar preset amount or may go in for a percentage or even match the contributions made by you by a certain percentage.

There are immense benefits when you participate in 401(a) plan proposed by your company. If you decide to make contribution, you will then reduce your income tax liability and also build your retirement savings. You can rollover any of the savings you may be having in another 401 plan of some other company offered to you. You can rollover these funds into an IRA, 457 plan or 403(b) plan if you change our job. Any pre tax contributions are not considered for income taxes until you withdraw from the account. All the earnings in this account will add on deferred tax basis. If 457 plan is offered by your employer, you can participate in that plan also while still making contributions to the 401(a).

If ICMA-RC administers your 401(a) plan then you can have some extra benefits and you may face no restrictions if you decide to reallocate your investments. Here you have no restrictions of any minimum investments and your designated beneficiary will get the entire amount in case of your death.

You must always remain aware of the restrictions your employer could have. Some may have compulsory contributions. With plan 401(a), you are at once vested with contributions and earnings. Just you must be aware of limits of contribution each year. You will have to bear penalties if you fail to adhere to withdrawal and contribution rules.

Annuity Shelter Strategies – Get a Crystal Clear Understanding of Its Basic Concept

admin — Sun, 19 Dec 2010 12:16:35 +0000

Annuities, and the related annuity shelter strategies, are the call of modern life and lifestyle. They come with mixed bag of pros and cons depending upon the preferences, needs and requirements of the people. It offers some wonderful investment and saving options in certain situations. It would be wrong to generalize the comprehensiveness of various annuity plans as they are diverse and miscellaneous in their relevance.

Just as the every human situation is diverse, so is their demand for an investment plan for themselves. Since it may not be everyone’s cup of tea to understand all nuances of annuities, we have brought in here few well-researched and well-represented annuity shelter strategies. Hopefully they would provide insight for many who do not know much about annuities -

There are basically four kinds of annuities – the fixed, the variable, the deferred and the immediate. The fixed annuity pays a designated interest rate for the specific time period. This type of annuities are invested for the prime reason of long term saving. In case of an immediate annuity plan, the insurance company starts paying the returns to be investor just as the plan is entered. A variable annuity has a varying profile where the investor is required to investment in various portfolios such as stocks, mutual funds etc. Those who want safety of their investments must never get into variable annuity plan since their portfolios fluctuate along with ups and downs of economic scenario of the financial market. One of the sound annuity shelter strategies is never to be rash in investment and always resort to the advice of a financial advisor. Keep the long term benefits in mind at the time of purchasing the suitable annuity plan. The idea is to keep the finances available after retirement or old age for financial security. Treat annuities as saving-vehicles and not as mutual funds. There are variety of annuity plans in the offing that offer various benefits for different age groups such as short-term bonuses, retirement benefits, educational benefits for children or grandchildren of annuitant, benefits for charity, benefits for higher education, and numerous retirement plans. One of the annuity shelter strategies is not to consider the interest yield the prime factor in mind. Some times a financial product has many lucrative offers along with the not-so-promising yield. Fixed annuities have the lowest risk level while the variable annuities have the maximum. Always prefer to take back your annuity payments and benefits stretched over period of time rather than in a lump sum manner. The lump sum receiving of annuity benefits may invite tax issues. One of the important annuity shelter strategies is to designate the heir, inheritor and beneficiary of the primary investor clearly at the time of signing the annuity agreement. Any lapse in designating the nominee may result in great confusion and discomfort at later stages in life.
With complete understanding of above mentioned annuity strategies, and many more, the investing and savings would become all the more interesting.

Retirement Plans – Why Bother If 2012 is the End?

admin — Wed, 15 Dec 2010 18:44:42 +0000

Can Obama save the world? That question is actually the title of the first chapter of Robert Kiyosaki’s book “Conspiracy Of The Rich”. As we scan the world today, many are in fact looking to Obama to save them as Kiyosaki mentions in that opening chapter. From corporate bail outs here in the US to starving people in Africa, more than ever folks have their hands out toward government.

The government here in the US is at the top of the donor list. The shinning example to the world! Yet, here we are in America, digging deeper and deeper into debt. What makes anyone think that this government can save them? If you wanted to know how to get out of debt, would you go get advice from someone who is currently going through bankruptcy?

Many folks look at social security as their retirement security. Again, if you look at what’s going on, does that seem like a solid plan? Many people also overestimate how much they will receive from social security, and wait too long to start the enrollment process.

With all the bad news of gloom and doom in the world, I wanted to share a message of hope here in this article which may help with your retirement planning. Still to give you that hope, we must first cover some gloom to illuminate the positive.

This fear of the world coming to an end has been heightened by the recent release of the film “2012″, based upon the Mayan calender date.

When it comes to scientific reasons for the planet’s destruction, scientist tend to argue both ways. Yet, when we look at the physical aspects of our world easily visible to the naked eye, it becomes clear there are Major problems, and man does not seem to be coming up with many satisfying answers.

For decades much of the world criticized our capitalistic society. Karl Marx wrote that it would one day eat itself up, and you would see the middle class disappear. That we would end up with a society of haves and have-nots. Sad to say, much of what he wrote about is happening now.

Yet, after years of criticism (and perhaps, rightly so) most of the world has followed the US model. A central bank that prints money, and a stock market for high finance. These have become two common features in societies worldwide regardless of what form of government rules.

And why not? What county wouldn’t want rich companies with the capital to grow and create jobs? In each nation that imitated our model, US corporations gladly entered to lead the way!

Now there seems to be this sentiment of “Too Bad, You Great Country” from around the world as many see America as a nation on the verge of collapse. Yet, they are following our capitalistic blueprint in some form or another! Most have just not been on that path as long as the US and the UK have. So, what will the result be for their markets and financial systems down the road?

Actually, the US banking system is just an offshoot of the European system. The monarch families of Europe years ago moved to take control of US banking, and more importantly, the money supply.

The European system is an offshoot of other failed systems of the past. Fiat money, backed by nothing has never stood the test of time, and history clearly shows that.

Some would argue that the US system is fine, and that after the bail out of the banks we are back on solid ground. Yet, how can something that is so fundamentally broken be permanently fixed with a patch? That is exactly what the infusion of phony money was – a patch or temporary answer to an age old problem.

Aside from the banking system, the corporate system itself is seriously flawed. If you doubt that, you MUST see the documentary film “The Corporation” by Mark Achbar and Jennifer Abbott.

In the film a corporation is compared to a psychopath. It would be hard to argue against the comparison. A psychopath is someone who cares little about the law, or individuals, and feels no remorse for their actions. They have no shame or guilt, and feel fully justified for the things they do. Does that not describe a corporation perfectly!

Corporations now have more power and money than most governments. Here in the US they have even been given all the rights and more of human citizens, yet have been released of nearly any consequence for their actions.

Corporations will do anything and everything to grow the bottom line. That’s what it is all about right! That is what we as investors want to see – Growth, GRowth, and more GROWTH! They have become like huge monsters that must be fed, and innocent bystanders are hurt in the process. They control nearly all of the mass media, and decide for themselves what is news and what is not (all based upon the profit involved).

The corporation reminds me of the Ferengi of Star Trek. The Ferengi would do anything for profit, and had little if any morality in the process.

Then we have the religious aspect of our global society. They have not been able to get along, and many wars have been fought because of religious differences. The UN has even discussed this problem on more than one occasion. From the Protestant and Catholic wars in Ireland, to the Muslim and Hindu battles in India, nearly every area of earth has been touched by this ugly menace.

So, when you look at all the problems man has, is it any wonder many are thinking the end of the world must be close at hand?

There is one other area that seems to escape attention when it comes to the demise of civilization, and that is the family unit. History clearly shows that when the family falls apart, so does the nation to which it belongs. Rightly so, because stable families are building blocks for stable societies.

Family values here in the US have been on the decline for many years. It used to be that many other countries were still holding to old fashion standards, but now most seem to be following the US lead in this area as well. Our senior citizens are treated as little more than a burden. This thinking is heightened by the way corporations view elderly workers.

At one time older folks were viewed as wise and valuable. Someone with answers to life’s problems. Now, we can’t seem to wait to get them out of our hair.

There is also much confusion as to what comprises a family. Our nation whose motto is “One Nation Under God” has quickly forgotten the values outlined in God’s word. Now if you suddenly are uninterested in this article, it may well be that you have become disgusted with anything bible related, and that is certainly understandable. Much evil has been done in the name of religion. BUT, does the fact that man has used the bible for his own advantage make what the book says invalid? When they use the bible as an excuse for bad, then they are distorting it’s message.

Now, even if you try to mention bible principles you are viewed as if there is something wrong with YOU! Forget bringing up Romans 1: 24-29, or Genesis the 19th chapter, you will be ran out of town. You might be deported for even mentioning these accounts. For a nation that claims to be “Under God” we sure seem to be quickly trying to put him into the retirement home!

So, what is the positive point? It is a simple scriptural point that many have forgotten. During his sermon on the mount, Jesus said at Mat 5:5 “Blessed are the meek, for they shall inherit the earth”. What were these meek ones to inherit? A nuclear ball of waste? NO. Jesus was quoting from the 37th Psalm which shows a great future for our planet! All evil will be gone, and if we are picked as a member of that new society, we won’t have to be worried with all the problems we now face.

So, how can that info help us now? Well aside from the fact that the good book reveals what type of citizen God is looking for in that world inherited by the “meek” (which we may decide to qualify for or ignore – it’s our choice), it can clear our minds and comfort us now too.

In God’s eyes, we are expected to care for our families now physically and financial now (1 Timothy 5:8).

Having this knowledge can keep us from spending our lives worrying that the sky may fall. We don’t have to add to the problem, (it should guide us to what type of investments we will accept in our portfolio) but we don’t have to be terrified of what might happen either.

When the current society does come to an end, it won’t be a sci-fi reason, or some Mayan calender plot that will make it happen. We can sure see the creator cleaning the earth up for a new carefree society, and the creator is about the only one who has the power to make that happen (But, he does promise that the earth will always be here Psalms 37: 9,11,29, 104:5; Proverbs 2: 20-22). At that point it won’t matter where our money is anyway.

The good book also tells us that no man knows when the end will come (Mark 13:32). So, in the mean time we had better plan for retirement. If we don’t need it, Great! But until that day comes, it is what our maker would want us to do.

The financial system we have in place now is too corrupt to be fixed in my opinion. The big boys who print the money are never going to give up that power, so we will just have to play the fiat game and be ready come what may.

If we look for Obama or any other hard-working man to solve all the problems for us, we will be disappointed. In the mean time “there is nothing better for man under the sun than to eat, and to drink, and to be merry, for his hard labor” (Ec. 8:15 -which basically means to work hard and be happy in your work) And YES, we need to prepare for our future, and plan for our retirement!

Retirement Plans in Jeopardy? Need to Supplement Your Retirement Income?

admin — Wed, 15 Dec 2010 15:16:45 +0000

Retirement Risks

If you’re one of the “Baby Boomers,” you’re probably giving serious thought to retiring, if you haven’t already retired – and if you have already retired, you may be wondering if you’re going to be able to afford to stay retired.

Today’s economic crisis complicates the situation considerably by increasing the following retirement related risks:

1. Average Life Expectancy Has Increased

People are living longer than their parents’ generation. For example, in 1970 a 60 year old white male had a life expectancy of an additional 16.2 years; however, by 2008 his life expectancy had grown to 20 years.

So how is the Boomer going to afford retirement during those bonus 3.8 years? There are only a few likely answers to that question:

Increase current savings Work longer Move in with children or other family members Get by with a lower standard of living
2. Health Care Costs Keep Rising

Predicting and planning for ways to cover one’s health care costs are some of the most difficult, largely because requirements are so individualistic with requirements varying substantially from one person to another. Long-term care needs are even more difficult to predict and arrange adequate funding.

Health care costs have grown at a rate greater than 5% (inflation adjusted) for the past 15 years – and that is higher than the growth in family income. Medicare costs are expected to rise at a comparable rate.

3. Government Actions May Impact Retirement Benefits & Benefit Programs

It is well known that the costs associated with the major social programs (e.g., Social Security, Medicare, and Medicaid) are growing faster than other parts of the economy, and some experts question their long-term viability because of the combined effects of increased longevity, size of the Boomer population, and rising health care costs in general.

Further, immediate questions regarding ongoing health insurance in retirement, and at what benefit levels, are rampant in today’s economy – and these questions are given even more fuel by the reorganizations occurring, especially among the auto industry.

There is currently a lot of discussion about a national health care program – but such conversations have been ongoing for decades, with few benefits to show for those efforts. Although President Obama will be leading such efforts this year, most people expect a lot of opposition from Congress (although maybe it will be a bit easier now that the Senate will soon be welcoming its 60th Democratic Senator).

Most people expect that seniors over age 55 will be protected from cuts in these social programs, but maintaining full coverage for them is a two-edged sword – doing so increases the likelihood of a new value-added tax, which would likely add to the tax burden for retirees.

4. Sometimes One’s Retirement Date is Dictated, and not a Free Choice

According to a 2004 Health and Retirement Survey (HRS), 37% are forced to retire. This can occur due to poor health or economic downturns, etc.

5. 401Ks Became 201Ks

Did your 401k and other retirement savings take a major hit with the stock market meltdown last year? Mine did. Many people saw their 401k and other stock market accounts take a 50% hit, which has led many comedians to rename them “201k”. For many people, their 401k was the bulk of their retirement savings, so this stock market meltdown has really damaged their retirement plans.

Humpty Dumpty Had It Wrong

But, the news is not all bad. You can fix a broken egg – a broken retirement “Nest Egg,” that is. You can work longer, semi-retire and take a part-time job, work from home, start your own business, etc. A study by Butrica, Smith and Steuerle (2006) indicated that working just one (1) extra year can increase annual retirement income by 9%, while working a total of five (5) extra years results in an extra 56% annual retirement income.

Credit’s Impact on Our Daily Lives #7 – Retirement Plans

admin — Sun, 05 Dec 2010 21:41:46 +0000

It may seem like a crazy thought to even talk about retirement plans during this economy. If you are in your twenties or even thirties, retirement is so far off that thinking about it is just a waste of time. But experts have actually proven that the earlier you start planning you are not only set up better for the future, but you are more financially stable in the present. What usually happens when you start planning is you set and stick to a budget more precisely that allows you to save money each month.

The more you save for your retirement, the less you spend on bills and other expenses which means you are able to save for things now and for in the future. This is all a great help and can make life so much easier, and you can also improve your finances in the future and the present, is by using credit repair to strengthen your score. Credit repair will fix your score so that you can save a lot of money on bills, especially borrowed money. When we borrow money like for home and car loans, credit cards and other things, our payments are based on how much we owe back and our scores. The better our scores are the less we have to pay back. That can be the difference of over $100,000 when you are buying a home.

Chances are your home will be a major part of your retirement plans and because of that you need to do what you can to save money. The more you can save the better situation you will be in down the road. If you can save even $100 a month on every thing you finance that can add up to thousands of dollars a year. Even by putting that money into a simple savings account it can grow to tens of thousands of dollars or even over one hundred thousands dollars by the time you are ready to retire.

A Summer of Discontent For the Nation’s Finances

admin — Sat, 04 Dec 2010 11:03:17 +0000

Judging from the way stocks have been moving up and down, and faced with a cautious if not confused market in the months ahead, there are plenty of reasons for concern. Most broad-based investment portfolios had a good first quarter run and gave back these gains by the end of the second quarter — the first down quarter in 15 months. After seven months, the market is up fractionally. So who’s taking the biggest hit?

This turbulence is particularly unsettling for New Seniors for several reasons. Those 65+ depend on their retirement plans to complement and supplement Social Security benefits. Negative growth means the principal is shrinking, because whatever flat sum is needed each month for living expenses is greater than the return on investment. So many of us are worried about running out of money before we run out of life. Not a comforting feeling for those who worked all our lives to have a retirement nest egg.

Many of us have a beef because government workers, whose retirement plans are protected from the same volatility, don’t share the uncertainties private sector retirees must endure. Public employees once made less money in exchange for job security and better benefit packages, including retirement plans. The tide has turned; now this sector makes more in raw salaries than comparable jobs in private business. With states and municipalities in financial trouble, taxpayers must pay the bill for underperforming public employee pension plans. Why? Because it’s in their contracts.

When the economy was good, these deals were negotiated by the unions representing various groups of government workers. At best, everyone thought the market would continue to grow and this clause would not be a problem. The worst case was that elected and appointed officials responsible for putting this plans together, mortgaged our tomorrows so they could look good at the time. Even if you live in a city or state where these outlandish concessions were not made, the federal government will be called upon to bail out those struggling, which means greater deficits, higher taxes or both.

Concurrently, manufacturing is sputtering and retail as well as home sales are off. The good news is people have started to save more, but this does not help an economy that is dependent on consumption to grow and prosper. Jobs won’t be created, other than for government employment, until individuals have confidence enough to start buying. Then businesses will start hiring. And taxes will start coming into the various governments. Taxes don’t need to be raised when people are working and businesses are growing; because this, in turn, generates more tax dollars.

Many politicians don’t want to hear this, because they tend to measure their job performance by how many bills are passed and the size of the budgets attached to the legislation. That’s why it’s important to elect people this November who understand that the spending spree must end and sound fiscal as well as social responsibility must prevail. Otherwise, New Seniors and those following us in the years to come will be faced with many summers of discontent.