Wednesday, August 15, 2012

Your Being Duped, 5 Things To PonderAlright, I'm pretty tired and keeping this short for now.

1) If you are employed and pay a portion or all of your health insurance pre-tax, your being duped. Sure, it sounds good when your told you can pay for the health insurance with pre tax dollars and have extra income from the tax savings on your pay check. The extra money from paying pre tax in your check isn't squat. But the real kicker is that you are stomping on your own social security toes. "no I'm not!" you say, yes you are I say. Why? Because for every dollar you use to pay for the insurance pre tax is dollars less to your social security record which uses the top 35 earned wages years to determine how much you get at retirement. The pretax money is looked on as money you never earned so although you did earn more but payed out pre tax, social security does not count it as earned income and this reflects on your W2 forms at the end of the year.
And you can't write the health insurance off on taxes because it was paid with pre tax dollars. Whammo!!!

2)Wanna know how I found this out? Remember those Social security statement mailers we all used to get (SS has cut that out by the way until you reach 60) I checked back on mine some time back to discover this. I compared it to what I knew I was earning and what the W2 showed after the pre tax insurance against my SS mailers. During the years in question I was paying right at $1000 a month for family health insurance and guess what, that $12,000 a year is not reflected on those SS statements so It shows I made $12,000 less a year. When it comes to retirement benefits based on yearly income I got snowed.
You only get credits for after tax taxable income and not pre tax.

Think the 401K is safe? Yea, and the Titanic was unsinkable too.

3) I'll be talking about 401K's again soon and how that is a disaster. It's a battle I've been fighting for years with people who buy into the company match "It's free money" claim.  Oh by the way, companies add that matched contribution you get as part of compensation to your income and are able to write off the tax for it as if it was payed directly to you. (Feel that knife point in your ribs any? Feel duped yet?)

4) People have forgotten about the NASDAQ crash of 2000 and the higher funds that tumbled to pieces and turned to dust. Just like the mortgage crash who had men like Peter Schiff and Nouriel Roubini ringing the warning bell towers to deaf ears and blind men, even Robert Shiller, a respected individual in his own right, could not get anyone to listen. Men like these are usually laughed at, scorned and made out to be kooks when they go against the silver tongued devils. These men had pointed out the future pending disaster for years to men who wouldn't listen to them but would listen to the Bernie Madoffs of the world.

5) The people at companies pushing the 401K at you don't understand it any more than they understand the Tax code. They are geared at giving you the fluff spiel but can't begin to give you straight answers to any questions that are speculative. You believe the company is doing this in your best interest, not at all, it is they who get the huge tax breaks for every person they get to sign up. When you retire you are paying tax at a higher level than when you invested and... your paying the tax on the money the company "gave" you.

(Robert Shiller is author of :  Irrational Exuberance, 1st edition 2001 and 2nd editions 2005. In his first edition he speaks of the stock-market bubble and in the second edition he warns of the real-estate market.)

1 comment:

Trobairitz said...

Food for thought Wooley.

I still have a good twenty or more years before retirement so it is good to learn things now. Luckily we haven't been talked into 401k accounts.