Saturday, December 28, 2013

Ever Hear of The Sterling Stone?

I hadn't, till I read this:

What E’er Thou Art, Act Well Thy Part

Over the door of a building that sits close to the Stirling Castle in southern Scotland, hangs a curious stone designed by John Allan, a 19th century architect known for his peculiar designs, as well as including inscriptions in his work.

At the top of this particular piece, Allan had carved a quote typically attributed to Shakespeare: “What e’er thou art, act well thy part.” Below the quotation sits a grid of nine squares, each bearing different symbols and shapes.

The design forms what is called a “magic square.” Each of the symbols represents a numerical value, and no matter which way you add the numbers up, they always total 18. If any of the numbers are moved or replaced with another, the tiles will no longer add up to 18, and the square will lose its “magic.” Each symbol has an irreplaceable part to play in contributing to the whole.

I have a replica of the Stirling stone sitting in my office. It reminds me that whatever part I have to play in my family, community, or work — whether it’s a big role or a seemingly minor one — it’s up to me to carry out my responsibilities the very best I can. The Stirling stone also reminds me that true happiness and fulfillment in life comes not from being recognized, but from being useful to the world around me.

For any group or culture to function as it was intended and reach its full potential, everyone must pull their own weight, from those doing the “grunt” work to those at the top of the pile. The idea that you should do your best – even in the small and obscure roles of life — isn’t a particularly sexy principle, but one much needed in our world. [...]
The rest of the article elaborates on that sentiment. A nice one to carry forward into the New Year.

I'd love to have a replica of one for my office. And a HUGE one for Congress!

What's ahead for 2014 tax season

Ask Claudia:

Claudia's Crystal Ball: Tax Filing Season 2014
Each December as many begin to enjoy of the giddiness of the holiday season, I take the time to predict what the coming tax filing season will hold in store for tax advisors and their clients. These are my predictions for filing season 2014:

2014 filing season will not be as bad as 2013. Congress waited until the first week of January 2013 to tell us what the rules were for 2012. For 2013 there will be no retro-active changes, and the biennial list of expiring tax benefits will simply expire and be addressed mid-2014. For many, delayed tax forms meant filing season 2013 didn’t start until the first of March. IRS expects to be ready by the end of January 2014.

Higher income taxpayers with primarily investment income will be blindsided by additional taxes, and wonder why their tax advisors didn’t prepare them for the additional money they owe.

Higher income taxpayers with primarily earned income (in excess of $200,000 for singles and $250,000 for marrieds) will be blindsided by higher taxes this year, and wonder why their tax advisors didn’t prepare them for the additional money they owe.

The Supreme Court’s Windsor decision on the Defense of Marriage Act (DOMA) will create a need for time-consuming discussions with same-sex couple clients who recently married and find they owe additional taxes.

DOMA creates a need for time-consuming discussions with same-sex couple clients who want to discuss whether they should get married and how to avoid the higher taxes they will face. [...]
And that's just half her list. Follow the link to read the other five predictions.


The Affordable Care Act. IS it? What IS it?

It's an honest question. Nancy Pelosi said we'd have to pass the Act, to find out what was in it. Now we find out:

Deep Inside The Hot Mess Called Obamacare: It's Time For Honesty.
“Oh what a tangled web we weave when first we practice to deceive,” wrote Walter Scott in Marmion. It begins to appear that the Obama White House, right up to the president, cut class the day that Marmion was being taught. The ensuing breakdown in America’s health insurance system, and the political backlash, shows what happens when integrity is drained from politics.


“[P]oliticians made a series of short-term fixes that all but guaranteed long-term problems.” Politicians, elected officials, and career civil servants are guided by different incentives than businesses. And follow them. And then are, or act, incredulous when this time officious meddling yet again degrades the quality of goods and services in whose markets they have intervened.

Who would have guessed that tampering with the free market will end, as it always seems to, in tears. Who would have guessed? Not Pyongyang. Not Nation For Change. And, apparently, not freshman Senator turned president Barack Obama. As Abraham Lincoln noted, you can fool all of the people some of the time….

Under the rapidly unraveling deceit what’s really going on?

Is Obamacare really stealth capitalism? Or is it really stealth socialism?

Or is it really something far older and more pitiful? The one thing all seem to agree upon is that it, whatever it is, is stealthy. Is Obamacare simply a badly designed system tangled in a web of lies woven to mask the hubris and the incompetence of those who are, as former U.S. Treasurer Ivy Baker Priest once wittily described herself, “often wrong, but never in doubt”?

In this case progressives have given the American people the hot mess called Obamacare. Who — other than the Republicans, libertarians, conservatives, supply siders, and Tea Partiers vilified by the mainstream media — as well as most columnists — could have guessed that the Affordable Care Act might actually serve to make health care less available and less affordable?

At a certain point spin becomes deception. The promotion of Obamacare crossed that line.

The American people do not appreciate being hoodwinked.

Stealth capitalism? Stealth socialism?

Nobody knows which.

But we mere voters know stealth. And don’t like it. [...]
A shit brick, by any other name...

It's such a mess, I have to wonder if it was ever intended to work, or if it was intended to merely destroy the healthcare system we had, so the government could then try to fix the problem they created by shoving a single payer system down our throats, which is what so many of them wanted right from the start?

I don't think every element of the Affordable Care Act is bad. But as a whole, it is a mess. Republicans should have taken the initiative for healthcare reform when they had the chance. They didn't, so the Democrats did, they did it all THEIR way, and now we have The Shit Brick.

We are just a few days away from January 1st, and I still don't know if we will have insurance by then. Our group policy was cancelled. We were steered toward the state health exchange. We made a choice from there. Half of it went through, half was botched up, and we're still trying to sort it out.

Meanwhile, our old insurance policy was suddenly resurrected for another year and offered to us, with only six days to decide, but by then we'd already committed to the new plan, yet headlines are NOW screaming that the State Exchange is on the verge of running out of money, and our registration with the new plan seems in limbo at the moment.

And what will it do to our taxes? The cost of our previous health insurance was a deduction. The new plan comes with tax credits. Deductions are subtracted from what you owe. Credits are subtracted from what you pay. So our income tax is going to go up as well. So then, how much will we actually save? I guess it's the Nancy Pelosi method: "You have to pay more taxes before you can see how much you will get back".

I want to be optimistic and believe it will all come right in the end. And perhaps it will. But this sure is not encouraging. And it is NOT the way to do business.

Wednesday, December 25, 2013

Jesus was born in Bethlehem because of ....Taxes?

Yup. Looks like it:

The Christmas tax story
With Mary so close to delivering her child, why did she and Joseph risk traveling to Bethlehem? Taxes.

A census was ordered to determine the taxes due from the residents of the Roman Empire. Each person had to return to his home town to meet the decree's requirements.

So Joseph and Mary headed out from Nazareth in Galilee to Judea, specifically to the city of David known as Bethlehem, an estimated three-day trip, because Joseph was of the house and family of David.

And the rest is Biblical history. [...]
Follow the link for the scripture references and various embedded links.

Gosh. Taxes. They're everywhere.

Merry Christmas!

Monday, December 23, 2013

Not all Eggnogs are Created Equal

How it's done, can make all the difference. I heard this on the radio today:

Don't Knock The Nog Until You've Tried This One
We ran an unofficial office poll at NPR last week, via email: "Where do you weigh in on eggnog? Love it? Hate it?"

Those who hate it really hate it. They used words like "detest," "loathe" and "ick." They also used font sizes well above 14 point and broke out the red type to emphasize their distaste.

But the haters were in the minority. By about 2 to 1, NPR is an eggnog drinkin' kind of place, but — and this was emphasized by many — only if it's eggnog done right. That means: not too sweet, not too thick and just the perfect amount of booze.

Fortunately, we might be able to satisfy the lovers and convert some of the haters with Maria del Mar Sacasa's recipe for this seasonal concoction.

See, the author of Winter Cocktails was once an eggnog hater, too. Her first encounter with eggnog at a holiday party had her covertly pouring her drink into a potted plant. There was plenty not to like. "How it tasted," she recalls, "how awful the texture!"

Years later, while researching the drink for her book, she realized she might have been put off by eggnog done badly.

"I ran out to the supermarket and I bought a few of the eggnogs and I tried everything from the really cheap versions in the cartons to the higher end ones, and unfortunately they were exactly what I did not want in my eggnog," del Mar Sacasa says.

That is to say, artificially flavored, flat tasting, too sweet and too thick (these are similar complaints that cropped up in NPR's unofficial office poll).

So del Mar Sacasa set out to make her own eggnog.

"I tested a lot of recipes I found in books and in magazines and online and I did come across a few that had an interesting twist, which was adding egg whites whipped into soft peaks into the mixture," del Mar Sacasa says. "And this gave it this really beautiful airy, fluffy quality, similar to cappuccino."

After playing with milk-to-booze ratios and spice combinations, del Mar Sacasa believes she has the perfect recipe for basic eggnog. "This tastes like melted ice cream. It does. I promise." [...]
It goes on to offer two recipies. Follow the link to find them.


Can the IRS create powers for itself?

Powers based on the "Horse Act of 1884"? So far, the judge says "no":

IRS Beats A Dead Horse, Argues For Regulations At Appeals Court
Does the Internal Revenue Service have the right to regulate tax preparers?


The crux of the plaintiffs’ argument is this: Congress never gave the IRS the authority to license tax preparers, and the IRS can’t give itself that power.

U.S. District Court Judge James E. Boasberg agreed. In January 2013, he issued an opinion that would bar the IRS from regulating tax preparers, days before the new tax season officially opened for business. You can read the opinion here (downloads as a pdf).

The IRS appealed that decision and here we are, eight months later, back in court.

Oral arguments in the case were colorful, often punctuated by queries from the judges and occasionally, a joke or two. During arguments, the judges appeared skeptical of the IRS’ reliance on an 1884 statute, the “Enabling Act of 1884,” also referred to as the “Horse Act of 1884″ as sufficient authority to regulate tax preparers. The statute was the result of a post-Civil War concern about the abuse of the claim process for the value of dead horses and lost property during the war. To stem the tide of abuse, Congress granted the Secretary of the Treasury the authority to regulate the admission of agents representing claimants before the Treasury Department (the rise of the modern day Enrolled Agents), and to penalize those who failed to comply with the regulations. The Treasury published guidance for those agents – and that guidance is what eventually evolved into Circular 230. If that name rings a bell, you might have seen “Circular 230 language” at the bottom of attorney and tax professional emails.

The IRS argues that the law still allows for regulation of tax preparers. The statute predates the modern income Tax Code which was codified in 1913. Much has changed since – including Congress’ apparent reluctance to pass any laws granting the IRS specific authority to regulate preparers.

The amount of time that passed from the 1884 case and now didn’t go without notice in front of the panel. Consider this brief exchange between Justice Department Tax Division lawyer Gilbert Rothenberg and the panel:

Panel: That’s how many years?
Rothenberg: That’s about a century.
Judge: And then after a century, Treasury suddenly decides these words empower us to do this…?

Another exchange revolved around two simple conjunctions: “and” and “or.” Under the law, there are four criteria to be considered an agent. The statute uses the word “and” to connect the four but, as argued by Rothenberger, the IRS believes that “and” could also mean “or.” The panel didn’t seem convinced.


Shortly after the amicus brief in support of the plaintiffs was filed, I called up one of the parties, Joe Kristan, to ask him about his participation. Kristan is a CPA and authors the informative and entertaining Tax Update Blog. He doesn’t have an actual dog in this fight: CPAs are exempt from most of the regulations. So why, I asked, was he involved? He offered a laundry list of reasons: it’s bad law, bad policy and bad for the consumer.

In addition to the arguments cited by the plaintiffs that the IRS doesn’t have the authority to regulate tax preparers – and Congress has never stepped in to give them that power – Kristan has concerns about handing over even more power to the agency. Using an analogy from my profession, Kristan compared the law to giving the prosecutors the right to regulate defense attorneys.

During our call, we both agreed that there are bad tax preparers out there but Kristan used that fact to seize upon one of the main criticisms of the IRS scheme: there are ways of dealing with bad acts and these regulations won’t keep the bad preparers honest. It doesn’t, for example, deal with the issue of fraud in the industry. And, he says, those who can manipulate the system will now have the equivalent of a “seal of approval” from IRS, giving consumers a false sense of security.

But what about those education requirements and the competency exams? Kristan shrugs off the notion that some testing keeps taxpayers safe, saying that the test is a “literacy test, not a competency test.” He does believe that tax professionals should keep their credentials up and their skills sharp but feels that should be voluntary. The real problem with tax compliance issues, he says, simply won’t be resolved through more regulation. [...]
I believe the appeal by the IRS is still pending. But if it should fail (and IMO, that seems likely), congress is poised to give the increase in powers to the IRS: House bill would give IRS authority to regulate tax pros.

This link about the Horse Act of 1884 is interesting. It explains how it eventually lead to the creation of the designation of "Enrolled Agent".

Also see:

IRS' 'dead horse' tax preparer regulation argument doesn't appear to move federal appeals court

Fatima´s "journey through life"

I had read this story somewhere, as an example of how a person's collective work experience could ultimately lead them to something very fulfilling. I think it was told as part of an article about people re-inventing careers for themselves late in life, building on their accumulated experience. I don't have the original source to link to, but I did find the story on-line:

I want to introduce you to the story, a parable that tells the events about the "journey through life" of a young woman in the Middle East.

This parable, the Sufi Story "Fatima, the spinner and the tent", is characteristic for the "journey through life", of many people as well as my "journey through life", an odyssey apparently unwanted.

Fatima´s "journey through life":

Once in a city in the Farthest West there lived a girl called Fatima. She was the daughter of a prosperous spinner. One day her father said to her: “Come, daughter, we are going on a journey, for I have business in the islands of the Middle Sea. Perhaps you may find some handsome youth in a good situation whom you could take as husband.“

They set off and travelled from island to island, the father doing his trading while Fatima dreamt of the husband who might soon be hers. One day, however, they were on the way to Crete when a storm blew up, and the ship was wrecked. Fatima, only half-conscious, was cast up on the seashore near Alexandria.
Her father was dead, and she was utterly destitute. She could only remember dimly her life until then, for her experience of the shipwreck, and her exposure in the sea, had utterly exhausted her.

While she was wandering on the sands, a family of cloth-makers found her. Although they were poor, they took her into their humble home and taught her their craft. Thus it was that she made a second life for herself, and within a year or two she was happy and reconciled to her lot.

But one day, when she was on the seashore for some reason, a band of slave-traders landed and carried her, along with other captives, away with them. Although she bitterly lamented her lot, Fatima found no sympathy from the slavers, who took her to Istanbul and sold her as a slave. Her world had collapsed for the second time.

Now it chanced that there were few buyers at the market. One of them was a man who was looking for slaves to work in his wood yard, where he made masts for ships. When he saw the dejection of the unfortunate Fatima, he decided to buy her, thinking that in this way, at least, he might be able to give her a slightly better life than if she were bought by someone else.

He took Fatima to his home, intending to make her a serving-maid for his wife. When he arrived at the house, however, he found that he had lost all his money in a cargo which had been captured by pirates. He could not afford workers, so he, Fatima and his wife were left alone to work at the heavy labour of making masts. Fatima, grateful to her employer for rescuing her, worked so hard and so well that he gave her her freedom, and she became his trusted helper. Thus it was that she became comparatively happy in her third career.

One day he said to her: “Fatima, I want you to go with a cargo of ships' masts to Java, as my agent, and be sure that you will turn a profit.” She set off, but when the ship was off the coast of China a typhoon wrecked it, and Fatima found herself again cast up on the seashore of a strange land.

Once again she wept bitterly, for she felt that nothing in her life was working in accordance with expectation. Whenever things seemed to be going well, something came and destroyed all her hopes. “Why is it”, she cried out, for the third time, “that whenever I try to do something it comes to grief? Why should so many unfortunate things happen to me?” But there was no answer.

So she picked herself up from the sand, and started to walk inland. Now it so happened that nobody in China had heard of Fatima, or knew anything about her troubles. But there was a legend that a certain stranger, a woman, would one day arrive there, and that she would be able to make a tent for the Emperor. And, since there was as yet nobody in China who could make tents, everyone looked upon the fulfilment of this prediction with the liveliest anticipation. In order to make sure that this stranger, when she arrived, would not be missed, successive Emperors of China had followed the custom of sending heralds, once a year, to all the towns and villages of the land, asking for any foreign woman to be produced at Court.

When Fatima stumbled into a town by the Chinese seashore, it was one such occasion. The people spoke to her through an interpreter, and explained that she would have to go to see the Emperor. “Lady,” said the Emperor, when Fatima was brought before him, ”can you make a tent?'' “I think so,” said Fatima. She asked for rope, but there was none to be had. So, remembering her time as a spinner, she collected flax and made ropes. Then she asked for stout cloth, but the Chinese had none of the kind which she needed. So, drawing on her experience with the weavers of Alexandria, she made some stout tent cloth. Then she found that she needed tent-poles, but there were none in China. So Fatima, remembering how she had been trained by the wood-fashioner of Istanbul, cunningly made stout tent-poles.

When these were ready, she racked her brains for the memory of all the tents she had seen in her travels: and lo, a tent was made. When this wonder was revealed to the Emperor of China, he offered Fatima the fulfilment of any wish she cared to name. She chose to settle in China, where she married a handsome prince, and where she remained in happiness, surrounded by her children, until the end of her days.

It was through these adventures that Fatima realized that what had appeared to be an unpleasant experience at the time, turned out to be an essential part of the making of her ultimate happiness.
I love this story. Of course, when I look at my own collective work experience, it adds up to something like... Tax Return Preparer.

WTF? Where's MY wealthy Prince and adoring grandchildren? But I guess I can be grateful that I've never been shipwecked twice, destitute, or sold into slavery. Tax returns actually don't look so bad, all things considered. ;-)

Sunday, December 22, 2013

Did Communists take over South Africa?

Not so easy to answer. Yes and no? Perhaps more no than yes?

Jenkins: When Communists Took Over South Africa
[...] Two decades later Mandela's ANC has indeed become a party of revolutionaries turned business owners and financiers.

In their well-researched 2012 book "Who Rules South Africa?" the journalists Martin Plaut and Paul Holden found that three-quarters of cabinet members had outside business or financial interests as did 60% the regime's 400 members of parliament. They also report that, in 2011, South Africa's auditor-general found that in the impoverished Eastern Cape, ancestral home of Mandela and many other top ANC leaders, 74% of government contracts went to companies owned by state officials and their families.

At the moment, South Africa's likeliest next president is Cyril Ramaphosa, a former militant union leader and Mandela protégé who serves as ANC deputy president. According to Forbes, Mr. Ramaphosa is worth $625 million—three times Mitt Romney's wealth. [...]
If South Africa continues to have free elections, I wonder how long Ultra-rich ANC members will continue to get elected?

I'd posted exactly one year ago, about a split in the ANC being a possibility. This article explains some of the history and reasons why that may happen.

The State of Religion In America Today

It ain't what it used to be:

Religion in America’s states and counties, in 6 maps
[...] With what is arguably the most widely observed holiday of the nation’s most popular religion right around the corner, now seems as good a time as any to look at the state of religion in America’s states and counties. All six of the maps and data below—which depict religious popularity, diversity and adherents—come from the “2010 U.S. Religion Census: Religious Congregations & Membership Study,” an every-decade research effort sponsored by the Association of Statisticians of American Religious Bodies, which gathers statistics for religious groups or scholars interested in such. [...]
Fascinating maps, of interesting categories.

The Telegraph newspaper examines some of the data in detail:

Lots of atheists, more Muslims, fewer Christians and Jews: this is the new America
[...] Did you know there are – possibly – now more religious Muslims than religious Jews in Florida? I know, it seems incredible. Miami Beach has had 15 Jewish mayors, there are getting on for 200 synagogues in South Florida – and, of course, it was the hunting ground of the despicable Bernie Madoff.


There are still more Jews than Muslims in Florida, loosely defined; these figures measure Judaism as a religion. That said, even to compare the two 20 years ago would have seemed ridiculous. Florida has a small but vibrant, growing Muslim community, half of it from India, followed by Pakistanis – only 150,000 registered voters to date. As you'd expect, 80 per cent voted for Obama in the last two elections; but in other elections they're swing voters, and in Florida you ignore those at your peril. As for the Jewish community, the retirement communities are reflecting the national picture. [...]
Read the whole thing for more interesting facts, figures and maps. And guess what is the most popular non-Christian religion in the American West? No wonder I love living out here. I can feel it.

Older workers in the workforce

Here are some videos from the PBS website, part of a section called: New Adventures for Older Workers. They show many of the problems older workers face finding employment, and how some of them transcend those problems.

About half of unemployed middle aged and older workers are still unemployed two years later. If you are near retirement and an employer wants to hire you, there’s fixed costs to hiring you. They have to train you. They have to invest in you and if their investment is only going to be spread over a few years then that might not be the best investment for them compared to a worker where that investment might be spread over many more years.

— Julie Zissimopoulos
Economist, University of Southern California

This lady comes out of retirement, and finds work that she's never done before, that transforms her life:

Many older people, well past traditional retirement age, are still working:

More on late-blooming self-starters; "Encore" careers:

The advantages of a geriatric workforce. Here is a company where the median employee age is 74:

I think there’s a kind of sweet spot that’s emerging in life that’s a function of the longevity revolution. So when you’re 50 years old, you have the chance to have a whole new chapter and it’s an extraordinary opportunity for individuals to have another chance to do something important.
— Marc Freedman Founder,

It seems that some of the oldest folks, 65 and older, who had to come out of retirement and start working again, have had even more success. It's interesting to see the different approaches that different people of different ages take, and the varying degrees of success they enjoy.

Thursday, December 12, 2013

Famous Books that are Much Misunderstood

6 Books Everyone (Including Your English Teacher) Got Wrong
With most every classic novel comes some outlandish interpretations. Some people have wild fringe theories about Harry Potter as an allegory for young gay love and Lord of the Rings being about WWII and the atom bomb. But some of these laughably wrong interpretations stick. In fact, you were taught some of them in school ... [...]
I'd heard about some of these before. But he gives details, embedded links to his sources so you can follow it up yourself. I had NEVER heard his explanation about Lewis Carroll and Alice in Wonderland before, it really surprised me. And the others were interesting too, really made a lot of sense.

The Weird Ways TV Changed in just 7 Years

5 Ways Television Went Crazy Since I Quit Watching in 2003
Sometime in early 2003, I gave up television. It wasn't some conscious decision to try to become a more productive person or anything of the sort. I just found that the remote had become just an extra unused object on my computer desk that got in the way of my mouse, like job applications and intervention letters.

But eventually, you find that without it you miss out on a lot of social interactions, especially at work. Over seven years, I had a lot of moments that went like this:

"Did you see Family Guy last night?"

"No, I don't have TV. Do you play World of Warcraft?"

"No, I have sex."

So I decided to buy cable again, and let me tell you that after seven years without seeing a single episode of anything except by accident, I found myself feeling like a time traveler in a world where everything had gone just a bit insane.

It turns out that in the last seven years... [...]
His observations are spot-on. Nice to know I'm not the only one that thinks modern TV viewing fare has become... Bizarre and Freaky!


Interesting Links about Aging, Working, Retirement or not Retiring

An 8.3 Percent Return for Life, Guaranteed: Real or Imagined?
[...] In finance, the word "annuity" refers to a series of payments made to a person (called the "annuitant") for life or for a set number of periods. In this post we refer to a fixed, life annuity, a plain vanilla annuity that will guarantee a set income each month for the rest of your life, no matter how long you live or what dumb mistakes you make along the way. If this guarantee looks familiar, it should, since it is pretty much what we get from Social Security as well as from a traditional "defined benefit" pension -- if we are lucky enough to have one. Both are forms of life annuities because both pay until you die. [...]
I've been curious about annuities. This article has a large question and answer section, which explains a lot.

New Adventures for Older Workers
Has lots of facts, figures and links about the subject matter; retirement, coming out of retirement, working indefinitely, making it in rural areas, all sorts of things. Videos, with interviews of various people in various situations.

How Social Security Pays You to Work Forever
[...] How long do I intend to "work"? Hopefully, right up to my last day on earth. And, as if I didn't have enough good reasons to work, Social Security, it turns out, adds a significant incentive for doing so. The longer you work, the larger your Social Security benefits. This is due to Social Security's "Recomputation of Benefits" provision. Here's how it works -- for all of us older cowpokes who remain in the saddle indefinitely.

Each year you work, you add to your earnings record, leading Social Security to automatically recalculate your benefits. If you are interested, here are the gory details.

In a nutshell, Social Security averages your highest 35 years of earnings to calculate your Average Indexed Monthly Earnings or AIME. Then it plugs your AIME into a formula that figures out your full retirement benefit, called your Primary Insurance Amount (PIA). What benefits you can get for yourself and your spouse (including your ex-spouse(s) and your children, if they are young enough or are disabled) is all pegged to your PIA.

From age 16 on, Social Security considers all your earnings, up to a ceiling that rises from year to year. It then indexes, based on historic wage growth, all earnings through the year you turn 60.

In other words, Social Security adjusts past earnings upward to account for the growth in the economy. But after age 60, you get credit for your earnings without any adjustment at all. So imagine that there's a sudden surge in inflation and wages after age 60 skyrocket. They're going to look spectacular compared to your wages of the past, even though they've been indexed. And here's the kicker. Social Security bases your benefits on your highest 35 years of earnings.

So now imagine that age 30 was the lowest of those 35 years and you made, say, $40,000, even after indexing. But now inflation takes off and you're suddenly making $200,000, even though $200,000 ain't what it used to be.

But for your Social Security benefits, this is a bonanza. You're suddenly being treated as if you were really earning a lot more, and thus deserving of much higher benefits. So, for every year that your post-60 earnings exceed the lowest of the previous 35 years, bingo! You'll raise your Social Security check (or checks, if your dependents are also collecting). [...]
He continues on, using himself and his earnings as an example. Wow.

Recommendation No. 1 for a Secure Retirement: "Age in Place"
[...] Owning an accessible home in which we can age in place is important to keeping our future core expenses down for many reasons. First, and most obvious, owning a home outright in retirement greatly reduces our need for income since we no longer have to pay the mortgage.

In the United States, paying as much as 40 percent of your income for housing has been considered normal. Many of us did this when we were young with growing families and growing incomes. Think of how much better we could have done if we had owned our homes, outright, through our adult lives. In many cases, by not making mortgage payments, our housing-related expenses could have been cut by 75 percent or more.

Contrary to what others may have told us, our standard of living in retirement is not based on what we make or what we spend. Rather, it is based on what we spend and the benefits we get from the things that we own outright such as housing, cars, appliances, furniture and clothing. Economists call the income that we get from owning our homes and other possessions outright, and not having to pay rent on them, "implicit income." Since we already own so much of what we use in retirement (home, car, furniture, appliances, clothes), the income that we will need to comfortably support ourselves in retirement may be far, far less than the income we earned while we were working and paying for all of these things. So much for fear-mongers who insist that we must have cash retirement income equal to 70 percent of our pre-retirement income! That is just not true.

A second major benefit of owning, outright, an age-in-place home is that it is a wonderful hedge against inflation. Some of our older readers will remember the double-digit inflation of the late 1970s and early 1980s, where costs (including the costs of renting a home) could double in six or seven years. If we own our retirement home outright, or have a fixed-rate mortgage, which I will deal with below, most of our housing costs are protected against inflation and the value of the home is also likely to increase. While there are other ways of protecting against inflation (see my last column on inflation-protected annuities), the cost of inflation-protection is high. Rather than pay for inflation protection, we can save money by reducing our core expenses that are subject to inflation. Much of this can be done by owning a paid-up, low-maintenance, energy-efficient age-in-place home.

Aside from the financial benefits of reducing cash flow needs and hedging against inflation, another huge saving from having an age-in-place home is likely to be the reduction or elimination of very expensive nursing home costs in the future. With an age-in-place home, an incapacitated spouse or single person may be able to live in a comfortable, familiar environment with some outside help for a long period of time at a fraction of the cost of a nursing home. Staying at home can also reduce the need for increasingly expensive long-term care insurance whose maximum daily benefits are often just $150 or so, a fraction of nursing home costs, leaving patients and their families to make up the huge difference. [...]
The article also goes into reverse mortgages and many other things. A good resource to read.

I'll probably be referring back to many of these links. Good stuff to know.

Wednesday, December 11, 2013

Financial Savvy Peaks at Age 53?

So say some:

Financial Savvy Peaks at Age 53: What to Do When You Get Stupid
[...] Lew Mandell: As we move through middle age, our ability to manage our finances tends to peak, on average, shortly after our 53rd birthday, and declines thereafter. By the time we hit 70, this rate of decline steepens precipitously. This is the opening theme of my new book "What to Do When I Get Stupid."

The relationship between age and financial capability is a function of two offsetting aspects of intelligence. As we get older, experience makes us better able to cope with a variety of familiar problems. This is called "crystallized intelligence." However, past the age of 20, the analytical ability we need to perform new tasks declines steadily. This is called "fluid intelligence." Since the intelligence we gain from experience increases more and more slowly after some three decades of adult experience, our steadily declining fluid intelligence ultimately offsets the gains from experience, causing most of the decline in our mental capacities including financial capability. (Check out Paul Solman's animated explanation of Harvard's economist David Laibson's graph demonstrating this relationship and see Making Sen$e's full segment below.)

At a certain point, declining "fluid intelligence," or our analytical ability, offsets gains in our experiential intelligence, putting our financial decision-making at risk.

Adding to this decline is the beginning of age-related neurological problems including dementia and other types of cognitive impairment. Overall cognitive impairment affects 21 percent of us in our 70s, increasing to 53 percent of those in our 80s and 76 percent of those over 90.

The ability to make investment decisions has been found to peak at about age 70, somewhat later than other types of financial decisions such as those that relate to the use of debt. This is probably due to the fact that many adults focus on their investments only later in life when they have both assets and the time to think about them. Experience with investments tends to come later, thus abilities peak later.

Unfortunately, studies have found that as people get older, their confidence in their abilities to make good investment and insurance choices actually increases as their measured ability decreases, leading to the likelihood of poor outcomes. [...]
The rest of the article talks about what you can do about this, as well as embedded links to other articles with retirement advice.

The Moonbase That Almost Was

Moonbase Apollo (1968)
[...] Not widely known is that in 1968, as it prepared its first piloted Apollo flight – Apollo 7, which flew in September 1968 – and its Fiscal Year 1970 submission to the Bureau of the Budget, NASA briefly considered an alternate approach to Apollo. Had it been pursued, it might have laid the technological foundation for a permanent moon base in 1980. After perhaps three Apollo exploration missions to different landing sites, NASA would have dispatched a series of Apollo missions to a single site.

In addition to intensively exploring the selected site, the astronauts would have performed engineering and life sciences experiments, assessed the lunar environment for radio and optical astronomy, and experimented with resource exploitation. The single site revisit missions would have played the role for a permanent lunar base that Gemini played for Apollo; that is, it would have enabled NASA to acquire operational skills needed for its next step forward in space.

The single site revisit concept – sometimes called the “lunar station” concept – got its start some time before 30 April 1968, when the NASA-appointed Lunar Exploration Working Group (LEWG) presented it to the Apollo Planning Steering Group. Lee Scherer, director of the Apollo Lunar Exploration Office at NASA Headquarters, asked mission planner Rodney Johnson on 7 May to chair a 10-man Single Site Working Sub-Group of the LEWG. He directed Johnson to present a progress report at the LEWG meeting scheduled for the third week of May. The Sub-Group held a two-day meeting on 12-13 May and presented results of its brief study at the 22 May LEWG meeting. It issued a revised final report on 4 June 1968.

The Sub-Group’s report began by declaring that a 12-man “International Lunar Scientific Observatory” in 1980 could become a new “Major Agency Goal” for NASA. The single site revisit missions, it continued, would pave the way by demonstrating the value of a permanent lunar base. The Sub-Group then examined four options for carrying out its single site revisit program, which it labeled 0, A, B, and C. All would employ spacecraft and standard Saturn V launch vehicles the space agency had already ordered for Apollo. [...]
The rest of the article is about the plans, with some neat diagrams of next-stage Lunar exploration vehicles similar to the originals, but more advanced. But alas, it was not to be. We got the Space Shuttle instead, which was interesting, but in many ways a divergent distraction from real space exploration. If Apollo had kept going... well, we'll never know, because it didn't.

And won't likely start again any time soon. Not by us, anyway. The Chinese like to think they will, but I wouldn't hold my breath waiting.