Here is a great article from Nilus Mattive from Money and Markets that sets out the current and long-term problems with Social Security. We Geezers will probably be OK, but a generational war could be brewing. I shared this article with my two sons (age 25 and 30) They both said: (A) They don’t think they will even see social security, and (B) They have no desire to pay for it. With baby-boomers retiring at the rate of 14,000 per day and soon to increase to over 20,000 per day, this could become a critical issue over the next 5 to 10 years.

Social Security Situation Worsening; What to Do ?
by Nilus Mattive  

 We got lots of disturbing news from Washington last week. But the latest updates on Social Security and Medicare really got my blood boiling.

It is now estimated that both programs’ trust funds will run out sooner than previously expected. In the case of Medicare, the date is 2017 rather than 2019. For Social Security, it’s 2037 rather than the previous estimate of 2041.

Both programs are suffering because of the recession. The simple explanation is that fewer jobs mean less money getting paid into the systems. That creates a bigger drain on the programs’ current resources.

But it merely highlights the larger issue, one that has been there since the very beginning of Social Security.

The Problems with Pay-As-You-Go …

It’s interesting – and very instructive – to look at the history of the U.S. Social Security system.

The program’s first payment reportedly went to Ernest Ackerman. He retired a day after the program began, and contributed a whopping nickel. His lump sum payout? Seventeen cents. Not a bad return for good ol’, Ernie!

Ernest Ackerman put in one nickel to Social Security, retired a day later, and got back a $0.17 lump sum payment. Need I say more?

Meanwhile, the first person to receive a monthly payment from Social Security was Ida May Fuller. During the late 1930s, she contributed $24.75 into the system. Her initial monthly check was $22.54, so by her second check, she had more than recouped her entire investment!

And get this: She lived to be 100 years old, collecting $22,888.92 out of the system over her lifetime!

Sure, it’s an extreme example. But it demonstrates the real problem with Social Security … the problem that has existed since day one … and the problem that is only worsening as more and more people live to Ida-May-Fuller-like ages …

Social Security’s pay-as-you-go structure means a never-ending game of catch up.

When Social Security was first instituted in 1935, it covered about half of the population. Many teachers, nurses, librarians, and other workers were excluded from coverage. What’s more, the average life expectancy was about 60.

Today, Social Security covers virtually everyone. The average American is living to age 76.

And to accommodate this widening gap of money coming in and money going out, the initial 1937 payroll tax rate of 2 percent (split between employer and employee) has already risen to a combined 15.3 percent (including Medicare taxes).

Yet, I’m sure it will absolutely have to go much higher if the system is to survive!

Reason: Based on the newest projection, Social Security will begin collecting less money than it pays out in 2016.

Odds are also extremely good that the current cap on the amount of a salary that is subject to Social Security taxes ($106,800 in 2009) will have to be raised or completely eliminated.

And all of this begs additional questions …

Will Social Security Benefits Be Reduced? Or At Least Taxed?

Should You Start Taking Payments As Soon As Possible?

I believe Washington’s preferred solution will be getting more money into the system. But I would not completely rule out some tinkering on the payout side, either.

Taxing benefits at the Federal level has been one idea bandied about. That would be a slightly less obvious way of reducing future recipients’ payments.

Continuing to bump up the age at which benefits begin is another, and by the time I retire, I’m sure the age will have increased substantially.

But I would say that if you are near – or already in – retirement, you shouldn’t worry too much about your payments.

In fact, despite Social Security’s problems, I still suggest you consider delaying your benefits as long as possible. Sounds counter intuitive, I know.

After all, the conventional wisdom is to just start collecting as soon as you can. This is both because of the aforementioned problems – i.e. “catch as catch can” – and because it is commonly believed that the system is designed to work out the same no matter when you begin collecting.

But let me explain my logic here …

I think near-term Social Security recipients have little to worry about. Everyone else? I shudder to think …

First, it would be political suicide for anyone in Washington to mess with near-term benefits. Instead, the preference will remain – as it always has – kicking the buck further on down the line. Can it continue this way forever? No. But for longer than it probably should.

Second, there are also logistical problems with changing soon-to-be-retirees’ benefits. After all, the government uses formulas to calculate benefits at age 60 and 62 for each recipient. They are unlikely to retool the entire process overnight.

Third, it’s true that the system is designed to pay out the same in total benefits no matter when you start collecting. But the calculations are obviously based on averages and you are anything but average!

It’s important to look at your individual situation before you just accept the conventional wisdom. Sure, if you need the money to live on then just take it. But if you can delay taking your benefits, it might be worth your while, especially if you have “longevity genes” in your family.

After all, the Social Security Administration will raise your future payments for every month that you delay. Annually, that will amount to an 8 percent increase (plus any cost-of-living adjustments).

So the longer you delay taking benefits, the bigger your monthly benefit.

The math differs for every person, but consider someone who’s age 66 and has the choice of collecting $2,000 a month for the next 12 months or an additional $160 every month starting a year from now (i.e. the 8 percent annual increase for delaying benefits).

The $24,000 upfront seems like the better option. Especially since it takes 12 ½ YEARS of payments to make up for that missed $24,000.

Yet according to government statistics, the average American at age 66 will live another 17 ½ years.

In other words, you stand a very good chance of collecting at least another five years worth of those extra $160-a-month payments. That comes out to another $9,600 in your pocket!

So yes, Social Security is riddled with problems. And yes, it may not be around – or paying out nearly what it will hand near-term retirees – by the time I’m collecting my checks.

We will also all face higher taxes in the near future if the system is to be “saved.”

But there are still plenty of things that you can do to get more of your money back out of the system. Don’t feel guilty about it. Don’t worry about it. Just educate yourself on all the options and possibilities and take advantage of every little advantage you can.

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This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

Learn how to make money with low-risk, low cost online businesses.

The Official Geezer Guide to Starting on Online Business, Skip McGrath

Don’t get caught in a Bear Market Rally. It may sound like good news when you hear that unemployment is falling more slowly that is was earlier -but falling is still falling. There is no end in sight to increasing unemployment and consider these other factors:

• Factory utilization fell to its lowest level since recording- keeping for this data series began in 1967.
• The ISM Index of business activity dropped for the seventh straight month.
• The S&P/Case-Shiller Index of home prices fell for the 25th straight month
• An additional 600,000 families lost their homes to foreclosure.
• The number of homeowners who fell 60 days behind on their mortgage payments grew to more than 5 million.
• The number of homeowners who owe more on their mortgages than their houses are worth grew to more than 8 million.

What does this mean?  Stock markets always rally after steep declines -but they often resume their decline once that exuberance runs out of steam.  No one knows how long this rally will last or how high it will go before correcting –but it will correct and when it does it will be bloody and fast.

If you have been back in the market for the past three months then good for you. Personally I missed most of the gain. I bailed out three weeks ago and went back into cash and treasury bills. A better move would have been to stay in the market but keep tight (<5%) stop loss orders in place.

A stop loss order is an instruction to your broker that if a stock falls below a certain price it triggers an automatic sell order.  The way to use these is to keep them moving.  For example if you purchase a stock for $20 today you would instruct your broker to sell it if it drops 5% (to $19) from that price.  A few weeks go by and the stock is now selling for $22.  At that point you would want to adjust your order and raise your stop to $20.90…and so on.  I like to update my stops every Friday after the close of the market.

If you use an electronic brokerage such as Schwab or eTrade, they offer trading platforms where you can set what is called a “trailing stop loss.”  You can set your stop using a fixed dollar amount or a percentage.  For example you could set a 5% trailing stop loss.  If your stock drops 5% from the previously highest closing price, then the system would automatically sell your stock.

Be careful setting your stop losses too close. the market is volatile and many stocks can drop 2 % or 3% pretty quickly only to rebound the next day.

So be careful and keep your powder dry.  If you lost 20%, 30% or 40% or more in your retirement funds there will be plenty of chances to get those losses back.  Do it slowly and carefully. If you make 1% or 2% a month that is excellent -but most importantly don’t lose any money.

Dropshipping product on eBay is a great way to make extra money, but  don’t get scammed by dropshipping programs that don’t work.

Times are tough and more and more people are turning to eBay and other online sites to supplement or replace their income. Unfortunately a lot of them get sucked into dropshipping scams.

Smart people are searching for something they can do online, in their own time, in their own
space, with no one peering over their shoulder

If you’ve ever thought about selling physical products online I may have an answer for you…
And it’s FREE – No Credit Card info required

You have all heard about dropshipping and you have also probably heard that many dropshipping deals are scams.  But the truth is, there is a right way and a wrong way to drop ship products profitably. Karen and I have been doing it for the past 5 years.  Today over 60% of our eBay sales are for dropshipped products. And all of them are profitable -even in this slow economy. But don’t fall for scams and worthless membership programs that just don’t work.

Click here to learn about dropshipping the right way.

This information is from Chris Malta. Chris is the Founder and CEO of WorldwideBrands.com. He and his company have been in the business of teaching how to start selling physical products online. He teaches about dropshipping, wholesalers and a WHOLE lot more. And Chris has been a leader in fighting online scams for years.

Over the years Chris found that so many people were going about setting up their dropship relationships all wrong. Just last week he was just telling me how he hears from tired, frustrated  people who just need a break.

Some of the people he hears from have been caught by the guy in the middle, acting as a wholesaler,
trying to catch a quick buck from an unsuspecting person like you who just wants to make an honest living online.

“So, what can I do about it?” you ask?

YOU can decide not be one of those suckers who believes in the overnight millions in your bank account.
Deep down you know that everything worth anything takes time, so PLEASE don’t fall for it.

Even if you’ve not decided whether or not selling online is right for you, I strongly suggest that you take a look at what Chris is giving away.

Chris is GIVING you one of his educational products, Dropship Focus. A $97 valued product jam packed with dropship education for FREE.  Last year Chris sold hundreds of this product for $97. But now it is free to introduce you to his wholesale educational & information program with no strings attached.

That’s right, you won’t have to enter your credit card number, or even your PayPal address.

Times are tough, and we don’t want you to spend money that you don’t have.

That’s why it’s completely, 100% F.R.E.E.

Click Here to watch a short video. Then just enter your name and email to get access to the remainder of the product.

Skip McGrath
www.SkipMcGrath.com

If you sell on eBay or are thinking about it, you’ll LOVE “Big Bucks Flips”. Julia Wilkinson writes a popular eBay newsletter. One of the more popular features is the “flips” section where readers send in true stories of inexpensive items they’ve found at yard sales, estate sales, bankruptcy auctions etc.

In each of these stories the seller shares how they FLIPPED the item on eBay for huge profits. This is 81 pages of inspiration for anyone that sells on eBay.  I have known Julia a long time and she is the real deal. All of her books are excellent.

Click Here to read more about Julia’s Book

The price is very affordable – you can make it up on your first trade and like me, Julia gives a money-back guarantee on everything she sells.

These are troubling times, but it’s not the end of times. Most of us remember the 1970′s. Gas prices doubled and drivers waited in long lines. In 1973-74 the stock market fell 48%. A vice president (Agnew), and then the president (Nixon), resigned in disgrace, Helicopters were evacuating Americans from the roof of the embassy in Saigon 

Mostly I remember Jimmy Carter. He was a  one-term Georgia Governor and a former peanut farmer. Carter ran for election sounding like a conservative but governed from the far left.  Much like today, the Democrats captured 61 seats in the Senate and 2/3rds of the House. They raised taxes on the wealthy, tried to fix prices, and increased spending. They instituted a slew of show trials in the Senate and effectively shut down the CIA for years to come.  Global cooling was the big worry.  The pundits of the time said we would run out of oil by 1985 and would not be able to feed the world’s population by 1990.

In Carter’s last year in office, inflation hit 13%. That was the year we bought our first home.  We felt lucky to get an 11% VA Mortgage. In his last 436 days in office, 130 Americans were held hostage at the American Embassy in Iran. 

Oh yes, the Swine flu first surfaced in 1976.  The government mobilized to vaccinate 40 million Americans at a cost $500 million in today’s dollars. One person died from the flu and 30 people died from the vaccinations. 

So we have been here before and we will certainly see good days ahead.  But what is different this time, and what worries me, is the accelerating class warfare.  You can’t love the employee and hate the employer. You can’t hate the rich and create jobs.

We have a local –and painful example of this. I live in a small town of about 14,000.  Our local industry is fishing and boat building –specifically there are three companies in town who build super-yachts –the kind that sell for $25 million and up.  They are now on their last builds. No new orders are coming in. So when the current builds are finished, about 500 highly paid workers will be out of work.  Yes some may revel in the fact that the rich are less rich now –but those 500 workers won’t be among them.  I think Abe Lincoln said it best:

You cannot help the poor by destroying the rich.

You cannot strengthen the weak by weakening the strong.

 You cannot bring about prosperity by discouraging thrift.

 You cannot lift the wage earner up by pulling the wage payer down.

 You cannot further the brotherhood of man by inciting class hatred.

 You cannot build character and courage by taking away men’s initiative and independence.

 You cannot help men permanently by doing for them, what they could and should do for themselves–Abraham Lincoln

Learn Six Ways to Make Extra Money with an Online Business. These are simple, low-cost and low-risk businesses than anyone with even the most basic of computer skills can start right from home.
The Official Geezer Guide to Starting an Online Business by Skip McGrath