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Old 01-31-2004, 05:15 PM   #1
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Hey everybody! My macro economics teachers has taught our class one of the most important thing i could learn. The biggest debate for my generation when we get out of college, is what to do with social security. First implemented in the late 40'* after the war by roosevelt, it was said by FDR himself, it was a bad idea. We all know about the baby boom, and everything.

In social security all the money that comes in, just goes to other govt organizations, etc, and when there'* only enough left for the IOUs that the SS administration has, they'll have to stop. Right now everyone pays about 6.25% on social security from every dollar they make.

Most of you may know, but the younger people here wont. in 98 the Government set up Roth IRA retirement funds. You put up to the limit (3000 no, 5000 by 200 a year into this account. They have earned an 11-12% return every year thru investing by the govt. It'* completely Tax free, free to you, and easy to do. @ 10% yearly return, your money doubles ever 7 years about.

I challenge you all to do this. Go to www.ssa.gov , find the calculator that tells you what your benefit will be. for 90% of you it'll be about 1700-2200 a month.

Go to any Roth IRA calculator online, and plug in $3000 year (this years max) a 10% return (average is 11-12%) and then figure it out. I put in the $3000 a year, not even accounting for 5000 after 2008, and i got $2,372,368. I don't know about you, but i could live off the 10% interest from that @ 230,000 a year.

1700/mo or 230,000 a year? You can't run money into the gov't and expect a good return, govt overhead sucks it all out. I'd suggest to anyone, start doing Roth IRAs, or normal IRAs even. Normal ones are taxable i think, but most companies will match you dollar for dollar.

There are two arguments with Social security though. Some people say we're taking away money from those who will live off of it. A one time deposit into a Roth IRA will net you about a million dollars by 65. Should we make people more responsible for their money? Or shuld we all keep doing it. I think making an option to do your 6.2% go to Roth OR social secuity. Bush touched the issue, and got chased away, but he touched it atleast. I don't agree with bush a lot, but he started it atleast.
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Old 01-31-2004, 05:22 PM   #2
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I've heard a bit about these Roth IRA'a last semester. We had a CPA come in and talk about all that. I didn't remember most though. But I know I like saving my money. Hopefully I won't go too crazy on Bonnes in my lifetime so I'll have something when I retire.
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Old 01-31-2004, 05:55 PM   #3
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In Canada we have a great self directed retirement savings plan. Its called RRSP, Registered Retirement Savings Plan.

Basically you are permitted to save 13% of your gross annual income, or $22 000 a year. The incentive is tax return. At the end of the taxation year, you claim your RRSP and the government gives you 30% on your contribution. At the end of it all you can put yourself on a Retirement payment plan. Then they tax you like its salary...and theres the rub.

But it eases the Pension plan and in all honesty, i contribute to CPP, but won't see a damn dime.

Great post Jason. Market watching and economics is a pastime of mine. My shares in Nortel bought the Aurora...go figure had I wait 6 months, I could have bought 6 Auroras...
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Old 02-01-2004, 08:23 PM   #4
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Quote:
Originally Posted by Jim W
Basically you are permitted to save 13% of your gross annual income, or $22 000 a year. The incentive is tax return. At the end of the taxation year, you claim your RRSP and the government gives you 30% on your contribution. At the end of it all you can put yourself on a Retirement payment plan. Then they tax you like its salary...and theres the rub.

Jim,

That'* not quite how it works...close though. You may contribute up 18% of your earned income up to a maximum of $14,500 for 2003 and $15,500 for 2004. Contributions serve to lower your taxable income therefore your rebate, if any, will depend on your tax rate and has the most impact on the highest marginal tax rate that kicks in at income of about $60,000.

When you withdraw the money it will be tax as income. By then, assumably, you would have lower income levels and needs. At the age of 69, at the latest, you must covert any RRSPs into a RRIF (Registerred Retire Income Fund), or similar depending on where you live. In a RRIF you must withdraw money every year starting at around 7.38% and rising until age 90, thereafter you must withdraw at least 20% per year until the account is depleted.

RRSPs and Roth IRAs and the like are great vehicles for retirement planning. You defer taxation while investing in a tax sheltered plan...it'* hard to go wrong.

Be careful though when making return calculations based on the past. After all, you don't drive forward while looking in the rearview mirror to figure out which way to go next!!

Cheers...and happy savings
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Old 02-02-2004, 12:19 AM   #5
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I got the principal right anyway....$24 600 in an RSP at 24 isn't to bad
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Old 02-02-2004, 12:34 AM   #6
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I got 20% of my anual gross going into a 401k as of this year. I also get company match to a certain point. So far I have $16,051.31 in my 401k. Not too bad for 26 years old. I just started to really contribute anything within the last 18 months. A "best case scenario" put me at around $7,000,000 at the peak of the account. Gotta love that!
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Old 02-02-2004, 12:52 AM   #7
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savings? whats that...
29, and my wife and I own our house appraised value of 200,000cdn. I want to build a very large house, and garage, and work shop with a 12ft celling on an acredge, and the wife wants to move into the wealthy area of town and have me margage payments, and only have a little winnie backyard I'm starting to think either way my retirement fund will be my parents inheritence(if they dont blow it all) and there house just outside of the canadain rockies.
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Old 02-07-2004, 05:14 PM   #8
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SWEET!

We just had our first offsite all company meeting (since the merger a couple years ago) and they had a little surprise for us. They announced that they were going to add some extra money to our retirement funds since we did so well as a company last year.

I just went online and checked it out. I had an extra $1700+ deposited in my 401K from the company. Now I got just shy of $20,000 in my 401K and it'* growing decently now. Not a bad start for 26 years old if you ask me.
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