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& Posted by Jolie Biernacki on May 11, 2008

Retiring on Only Social Security

Looking back it wasn’t all that long ago that we didn’t have this thing called retirement. At the beginning of the 19th century if you were the breadwinner for your family you worked until no longer able. This was either because you became too old or ill. Or you died. At this point you and/or those depending on you moved in with other family members for support or you lived in poverty. At this time there were also places called poor farms where people went who could no longer support themselves. This was the way of life until about 80 or 90 years ago. During the Great Depression, Social Security was created. It paid the primary worker a retirement benefit when they reached the age of 65. At first the benefit was just a lump sum payment and then in 1940 recipients started getting monthly benefit checks. Social Security was never meant to take the place of someone’s paycheck. Instead, it was meant to supplement whatever they had salted away so they could spend their final years in relative comfort.In time, though, many retirees came to look at Social Security as their main and, most of the time, only source of income. Looking back, this probably wasn’t a bad way to look at Social Security since at that time the quality of life for many people at the age of 65 was very low. Now life at retirement is quite a different story. The quality of life has gotten much better and for most people the quality of life at retirement far better than their working life. Retirement is now when you can do all the things you couldn’t do while you were working. That quality life comes with a price, and it’s not cheap. You’ll have to decide how you will pay for it. Let’s look at an average 65 year old planning to retire now and fund his retirement only with his monthly Social Security benefit check. Our person has a current annual salary of $40,000.00 and will be retiring in December when he reaches 65 1/2 years old. Using the at the Social Security Administration web site, we can quickly calculate a rough estimate of our retiree’s monthly benefit. After calculating, our person will get $1101.00 per month. That doesn’t sound bad, but keep in mind with his salary, he was probably taking home 3 or 4 times that amount per month just before retiring. Now let’s take a look at the expenses our retiree will probably have. Let’s assume that he has paid off the mortgage on his house and that he has no outstanding credit card debt.

Car payment…………………250.00

Power/Gas Utility………….100.00

Telephone………………………40.00

Insurance(home/auto) …150.00

Cable/water…………………….50.00

Food/Groceries…………….300.00

Gasoline…………………………50.00

These are fictitious wages and expenses. Plug in your own figures to see how you might fair on just Social Security. The total of these monthly expenses comes to $940.00 leaving our retiree with just $161.00 for anything else they might want to do during the month. But before this can be counted on as extra cash for the month, our retiree needs to consider health insurance. While employed, he most likely had hospitalization and other medical benefits through his employer. Now that he is retired, he will need to sign up for Medicare and supplements depending on the coverage he wants. This coverage could run up to $200.00 per month or more.You can see how hard it would be for Social Security alone to sustain someone through his or her retirement. With the expenses I have listed, including Medicare, a retiree could not survive on just Social Security. The expenses listed could be trimmed and by being very frugal, someone could get by but retirement is your time to enjoy life. The expenses listed do not include any vacations, trips to visit children and grandchildren, or any frills outside of day to day living. It is very important to start planning and saving for your retirement as soon as possible. If you read this and think you still have plenty of time for retirement planning you might want to consider the cost of things when you plan to retire. Nobody can predict the future but we can look at the past to get an idea of what the future may hold. Looking back 35 years, a gallon of gasoline was less than 30 cents and you could buy a brand new Cadillac for $5400.00. That same gallon of gasoline is right around $3.00 today and a new Cadillac starts at over $32,000.00.(From About.com)

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Posted by Chris Yonker on May 11, 2008

Financial Panic in 2008

What financial panic you might say? Hasn’t the recent Fed actions, lead by Helicopter Ben Bernanke, poured enough taxpayer money, pardon me, that is printing press generated US dollars, into the hands of his Wall Street buddies, to ware off any potential panic?

Nope, afraid not. While the government line may be coordinated with the talking heads on MBNC and elsewhere, as to that a crisis and panic has been adverted and that we no longer need to worry, I fear that the truth is that the financial meltdown has barely gotten started as the problems of over leveraging and the necessary deleveraging are still very much with us.

While the troubles with the subprime mortgage lending market has received most of the press on the debt deleveraging issue, and the actions of the Fed in arranging the bailout of Bear Stearns has smoothed out the turmoil in financial waters, the huge ticking time bomb of the huge derivative market has not even been addressed.

The size of this market is estimated at $45 trillion. It is really impossible for the human mind to conceive as to how big a number that is but let me tell you it is huge. Since this market was created largely by the same financial engineers who created the means to package and to transform junk quality residential mortgages into AAA rated securities, we can assume that the same care was taken in creating and packaging many of these often plain weird financial instruments.

The scary thing is this. If only a 10% markdown in value of this $45 trillion pile of potential toxic waste occurs that is a $4.5 trillion write down somewhere out in front of us. Even the Fed would have trouble dealing with a write down of anywhere near that magnitude. Should it occur surely a few major financial institutions would fail.

The fact is that the world has never faced such an over leveraged situation as we have today. Smart guys at major financial institutions who ready should have know better thought that since real estate markets can only go up there was no reason for their financial models to assess the risks of markets falling.

They then packaged and sold trillions of dollars of derivative financial instructions to investors all over the world based upon a flawed model of risk assessment. Some of these guys were greedy and stupid enough (yes, smart people often do stupid things) to keep a few billion dollars of these toxic sure to fail mortgages made to people who didn’t have the ability to repay on their firms own books.

And being extremely greedy they bet the farm that their make believe pricing models were fail proof and leveraged their bad investments at up to 40 x 1. At this high ratio only a 2.5% decline in a portfolio’s value completely wipes out the institutions equity base.

That is why there is such a high probability of a true panic at some stage of this financial disaster up to now slow motion financial train wreck. As the under lying values of the loan portfolios continue to fall as housing value further decline and homeowners stop paying on their underwater mortgages at some point panic will set in as equity disappears in a flash.

The banks and brokerage firms at some point will not be able to attract fresh investment capital to shore up their balance sheets because the new capital they previously raised disappeared so fast.

For all of the above reasons and more there is a high potential for an uncontrolled financial panic in 2008. Perhaps a bit of gold hidden away in a safe hard to find place makes a lot of sense. That and a supply of food and water and a far away place to retire to for awhile.

Gerald Green

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Posted by Chris Yonker on May 11, 2008

Foreclosure Selling Tactics

Once a home reaches pre-foreclosure or foreclosure status it is in the best interest of the lender, and the homeowner to ensure that the property sells quickly, and the balance accrued on the property is promptly taken care of with the profit gained in the sale of the home to the highest bidder. The lending company is given what it is owed, and the remainder to the homeowner. Often, the homeowner gets very little – and thus, reason why a homeowner should not let the home to go into foreclosure.

The key to a successful pre-foreclosure or foreclosure sale is to sell quickly. This will increase the profits made while decreasing the interest and other charges that are being accrued by the lender. Here are some techniques to promote the quick sale of the home:

Home Staging has been referred to as the secret weapon real estate. Research has shown that staged homes are on the market for an average of thirteen days, compared to the average of thirty-one days for homes that have not been staged. During the process of staging the home there are five aspects that should be considered. A diagnostic report should be completed of the home entailing what needs to be changed, renovated, etc. to make the home more attractive to potential buyers. Second, the home should be removed of all clutter, and personal effects. Third, colors in the home should be muted, and neutral. When a buyer walks into the home they should be able to see their life within the walls, not the present residents. Fourth, the home should be clean – and move in ready with new paint, trim and details. Lastly, the home should have curb appeal. A new door, or fresh coat of paint on the door, a manicured lawn and some plants can go a long way in bringing potential buyers into the home.

Staged homes have been shown to sell more than six-percent over the listing price, compared to homes that have not been staged. Staging can cost as little as two-hundred dollars and the profits yielded are well worth the investment.

Pricing is crucial. Once a home reaches foreclosure the lending company is more than likely taking a loss on the property. Asking too high above the balance that is owed on the home, which will go to the homeowner – may deter buyers because it is public record once a home reaches foreclosure. Pricing too little could arouse suspicion in some buyers.

Who is the balance of the mortgage owed to? It is important to consolidate the mortgages with one lender, rather than have two lenders that are owed money because this makes the process more complex.

Prepare the buyers to exit the property and ensure that all paperwork is in order. This way, the new owners are able to move in. A key selling point within the sale is going to be the low price. Entice buyers further with fast closing times, and quick possession dates.

Using these tips should ensure a quick sale – which will not only benefit the seller, but the lender as well.

JOHNATHAN HEUSMAN

Personal Finance Software - Resource Site - Free Financial Software

Retiring on Only Social Security

Financial Panic in 2008

Foreclosure Selling Tactics