patrick.net

Person Says:

>> Why didn’t voters earlier assume that Congress
>> was willing to “loot anything that moves”?

> Well, back then, for that generation of savers,
> it wasn’t apparent that the Social Security system
> would be bankrupt and only be able to thrive through
> massive tax increases.

Anyone that has ever looked at the growth of the ratio between people getting Social Security (who have been living longer every year) compared to the people paying in to Social Security knows that the system is just a slow moving Ponzi scheme.

The year after Social Security was enacted in 1935 Republican presidential nominee Alf Landon questioned its solvency and told Americans that the way the system was structured it would fail in the long run.

After FDR won in what may have been the most lopsided presidential victory in US history most Republicans (along with the Dems.) decided never to mention the solvency of Social Security ever again…

Person:

I am curious what you would call massive tax increases to fix social security. See the table on the top right of the following link Options to Restore Solvency - Table 1

http://www.factcheck.org/article309.html

An increase in payroll taxes by 2% would fix problems in social security for 75 years. Not exactly a massive tax increase

Gavin

Haiku for the McDebtor:

BLACK HOLE HOUSING

That McEdifice
is a McOrifice. Fool!
It will suck you dry...

I checked out Cyberhome, it actually gives HIGHER valuation than zillow in the west side of Bay Area. My home is "worth" $170K more on CH, can I ask for a check for that extra $170K please?

All these free valuation sites are just entertainment sites, both zillow and CH are showing values of homes in 2006 higher than 2005, which we all know is not the case for most homes in most neighborhoods in the Bay Area. I have no idea what their algorithm is, but that algorithm is certainly NOT working in a down market.

If you want to "fix" SS, simply raise the taxable earning ceiling. It used to be around $84k and now it's a little over $92k. Simply have all wages/income subject to SS taxes and the problem goes away forever.

It will never happen, but it's a easy fix and those paying the most can afford it......

If someone has an AGI of $1M, they pay a bucket load of taxes; especially if they work for their own Corp.

OT- Education Related:

This is a pretty interesting article that relates to the conversation in the last thread about how -some- HS kids are over prepared for college, and how college application has become dramatically more competitive.

I'm not sure if I would've gotten into the same sub-Ivy League that I did under the "new rules"

http://www.nytimes.com/2007/01/07/education/edlife/07prepared.html?ei=5070&em=&en=14bd9acbda0244eb&ex=1168405200&pagewanted=all

Scary stuff

Dr. Watt’s students are anything but lazy. He has had to turn students away from this course — last year, only students earning a 5 or a 6 on a 1-to-6 grade scale in Physics 380 could enroll; this year, only those with a 6 got in. He also turns away applicants for his “post-A.P.” course on quantum mechanics and relativity, limited to 16. What’s more, students take the quantum mechanics in spring of their senior year, when it’s too late to impress admissions officers. “They don’t need to burnish their transcripts,” says Dr. Watt, a Harvard Ph.D. in physics who says the course is what a physics major would take sophomore or junior year. “They are just voracious.”

This is High School. What the heck?

Doug H. Says:

> If you want to “fix” SS, simply raise the taxable
> earning ceiling. It used to be around $84k and
> now it’s a little over $92k. Simply have all wages
> /income subject to SS taxes and the problem
> goes away forever.
> It will never happen, but it’s a easy fix and those
> paying the most can afford it……

Many people (including myself) think that this may happen very soon. The problem is that despite living in a little world where even assistants make over $90K in the rest of the country over 95% of Americans make less than $90K.
http://www.suntimes.com/news/novak/201590,CST-EDT-novak08.article

This will not be a “fix” of the problem, but it will push it back a little bit so many people in office today will not have to deal with the big fight that is coming when we have to tell people like myself that I’ll never see a penny of Social Security after paying the max contribution for most of my working life…

Overstuffing the high school curriculum is overrated. The most observable effect is to creates a bunch of know-it-alls and know-it-all burnouts.

First, you should max out 401k, if you can afford it. That’s free money b/c it’s about the only thing you can deduct. Once that’s maxed, figure out your tax strategy to invest another chunk (529s, Roths, etc.)
I am going to disagree slightly here. Especially if you are young, I would say get your employee match for your 401k, then max your Roth IRA, and then max out the rest of your 401k.

FAB,
For the curious onlooker.... Are your parents cashing out any of their rental homes during this boom cycle? Do they move into them and take the $500k deduction or do they just sell?
Also, since you are the closest thing we have to a Robert Kiyosaki, what do your think about the small investor owning a 4 unit building as part of their retirement (long term, not some flip-o-matic)? Of course, someone wouldn't invest until GRMs and other metrics are a bit more favorable.

Actually, for higher income bracket folks, Roth IRA (and Roth 401K where available) and 401K is a bit of a wash. Roth IRA is marginally better because a $4,000 cap is worth a bit more (since you're putting in post tax dollars rather than pre-tax dollars) and if you believe we're in an extremely tax favorable environment right now and expect dramatic rises in tax rates in the future. The lack of forced withdrawl in Roth is a nice bonus.

For a certain demographic - 40+ high income people without huge savings, 401K actually works out to be a much better tax deal.

What is this thing you call an “employee match”?

Some companies match your contributions up to a certain percent -- say 6%

Let's say you make $100k - and you contribute $15k into your 401k.

Your company then contributes $6k.

On the other hand, let's say you make $100k - and you contribute $1k.

Your company then contributes $500.

Moral of the story: contribute at least the max your company matches. Free money!

dryfly,

Good stuff, after it's all said and done this HAS been a monumental waste of resources! I was reading a link (somewhere) that is already addressing decor that is falling out of fashion! So..... I guess we'll learn to live with that ultra hip pedestal sink, nah! We'll give it the "deep six" along with that bamboo flooring and pergraniteel!

Just incredible. A sink should last a good 20-30 years, no? We once kidded that the granite counter tops could be recycled to make tomb stones for FB's!

I must admit it's encouraging to even see folks debating the merits of various tax def. accounts again. Gosh that is SO refreshing! After oh....gee about 7 years of total RE dominance just hearing this stuff is music to my ears.

All this time the flippers have been guffawing the whole notion of "saving" or retirement accounts b/c they KNEW RE would be their ticket our of the work force!

I think it is highly unlikely that the US government would double tax Roth IRA savings. The US gov't has historically been very wary of retroactively taxing and Roth IRA is not a big enough pot of money to bend the precedents over - esp. since Roth is only available to relatively low income people.

I'm actually more wary of 401K tax risks.

However, this is just my personal opinion and not investment/savings advice.

I’d love to hear what others think about that strategy - sounds reasonable to me.

I'm all in 401k Regular.

I've thought about a Roth 401k (my company offers it) - but I'm not convinced that my tax rate will be higher in the future than now.

Of course, I'll probably be wrong as we'll need to pay for the Iraq War somehow.

On Roth vs trad IRA

But if your income is high now and expected to be lower in the future s.t. your tax rates decline, then a traditional IRA is the thing to do (avoid taxes now - worry about later, later).

Another wrinkle to the Roth vs. traditional IRA is whether or not you are itemizing or just taking the standard deductions. For now, my wife and I are childless, don't have a mortgage or business, so we must take the standard. Outside of a few tax-free govt. bonds and the occasional educational credit, we basically have no non-retirement itemized deductions to speak of. For us, the traditional IRA & 401k deductions are pretty much it.

Personally, I seriously doubt our effective income tax rate will go up during retirement. In fact, I pretty much expect it to fall, as it does for most retired seniors (living on fixed incomes & retirement accounts), so a traditional Roth makes the most sense in our situation for at least two reasons. If and when we buy a house and/or have children, this situation could change.

Zillow stubbornly lists my neighbor's house $200K above the last transaction, which happened about 5 months ago. Sometimes, I can even find it listing valuation $100-200K higher than transaction record just a month ago.

I have no idea why a house deserves to "appreciate" 10% or more of its value within 4 weeks of its most recent transaction in a DOWN market.

But cyberhome is even better, according to CH, your house "appreciates" even faster. Both service must be taking in advertising dollars and sponsorship money, you can well imagine where the revenue source of these guys is coming from.

Did anyone else see today's lead story in the WSJ? "Speculators Helped Fuel Florida's Housing Boom" (No, do you really think?)

"The frenzied run up prompted economists at banking concern National City Corp. and economic consulting firm Global Insight Inc. to label Naples "the most overvalued housing market" in the U.S. in the second quarter of 2005, a dubious honor it retains. Today, prices are dropping, the number of unsold houses on the market has swelled to more than twice the national average and investors are scrambling to unload their properties.

Such a crescendo of activity might have prompted some to pull back*. But plenty of investors, who continued to purchase homes to rent or flip, continued to buy or sell through the height of the boom..."

*-yes, the intelligent.

HARM,

You might be glossing over the fact that a great many FB's can't even afford to make ANY contributions at all! So now that their home appreciation has flat lined they're shackled to a PITI payment that precludes divesification of any kind.

We've crossed a critical juncture here. This could be where renters pull away and not even bother to look back! Can you imagine making a $4,000 + mo. payment to fill a black hole while your renting co-workers are socking away $100, $200, $500 a payday? Wow.

The summary is that over 1 in every 3 houses (38%) nationwide, their Zestimate is off by more than 10%. In the Bay area 1 in every 4 homes (24%) is off by more than 10%.

Despite this, many people cling to Zillow as if it were the end all be all of valuations.

What's funny is that Zillow has developed a rep.

Some feel that Zillow grossly overestimates.
Some feel that Zillow grossly underestimates.

Zillow can't win.

From WSJ forums:

http:/s.wsj.com/viewtopic.php?t=185&autoredirect=true&sid=f528b338399fe3c9459afdc3564ee429

The value of my home has skyrocketed, thanks to President Bush and his wonderful economic policies. The recent soft landing has only slowed the increase.

Tom Boucher

Uh... um...

I prefer looking at propertyshark. They have previous sale records and grant deed sales, so you can see when couples are flipping a property back and forth between each other (I am assuming for equity extraction, maybe there is another reason?). You can set up a free account and get an amazing amount of information on properties.

As far as Zillow having incorrect info on properties, I am assuming it is the info that is on file with the municipality. Zillow has my city place having one fewer bathroom than it actually has. I am assuming the other was added after 1908 an it was never recorded. Propertyshark has the exact same info on the place, so I assume they both sourced it from an inaccurate city record.

@DinOR,

Yes, we can debate the relative merits of 401k vs. Roth vs. trad IRA amongst ourselves all day long. But for the large majority of FBs, this is all moot because they are saving nothing. Actually, less than nothing, hence negative national savings rate.

eburbed,

So when the price of his house comes down it will be because Nancy Pelosi is Speaker of the House and her San Francisco values?

So when the price of his house comes down it will be because Nancy Pelosi is Speaker of the House and her San Francisco values?

It's because of those hispanic muslims gays.

HARM,

Yes, but the FBs are enjoying life. You wouldn't want to be in your 30s or 40s and be a solvent RENTER, would you? Better to be a McDebtor homeOwner than face the shame and embarrassment of having to admit that you do not participate in the American Dream. Remember, debt makes you rich.

eburbed,

Yes, they are troublesome.

But for the large majority of FBs, this is all moot because they are saving nothing. Actually, less than nothing, hence negative national savings rate.

One of my colleagues once countered with: "Isn't paying a mortgage considered savings?"

Um...

Yeah, uh when you buy into the "you should be borrowing all the money you can get your hands on and buying as much house as you possibly can" school of thought it does have a tendency to limit one's self.

Better to be a McDebtor homeOwner than face the shame and embarrassment of having to admit that you do not participate in the American Dream.

I might do it just to get my parents off my back. :(

"At least you'll own something after 30 years instead of paying rent forever!" - gah! stop it!

SFWoman,

Minor correction, please?

FB's "were" enjoying life.

It was funny b/c the wife and I went to the OR coast this Sunday to see the storms (pretty cool) and after lunch got a bunch of RE mags. The newest development (believe this or not) was for 1,100 to 1,700 sq. ft. cottages just outside of Depot Bay. They were priced "Starting at $184,500" on 7,000 sq. ft. lots. True, they don't have a "pee-a-boo" beach view but it looks like a real nice area and is only about 1/2 mile to the beach. Isn't this what living by the beach was supposed to be about? Simple?

DinOR,

That actually sounds cute. Although, I remember seeing beach houses near Cannon Beach for about $35,000 when I lived in Oregon (~1991).

1/2 mile might be beach front after a good temblor/tsunami.

Palo Alto Renter,

People hit the 35% income tax bracket pretty quickly, around $70K for singles. The upper limit for Roth IRA contribution is around $95K. So the "upper income bracket" issue can come up periodically.

I can attest to the damage done by the "urge to own." Many of my boyfriend's coworkers who "own" can't even afford to contribute up to his employer's rather measly match (I don't remember the exact amount - maybe $1,000 or $2,000 a year). Most of his coworkers complain when the company deposits their year end bonuses to 401K rather than give them the money.

@SP,

RE graphic: You're welcome :-) .

But judging from the quality of contribution here, a lot of bubblesitters are very concerned about their retirement accounts.

I recently set up my company Roth 401K account and had the Fidelity rep tell me that Roth 401K is so much better than traditional 401K because I don't have to pay tax at the end of it. I guess he forgot about time value of money for all the income taxes paid before the money went into Roth 401K.

I think this mentality might shed some light on people who think owning after 30 years of rent payment is always a good thing.

eburbed,

Tell your parents that if they want you to "own" that badly, they can pay the downpayment, transactional costs, and the difference between rent and your monthly PITI for an equivalent place. Otherwise, politely inform them that they have no controlling authority over money you've made.

Better to be a McDebtor homeOwner than face the shame and embarrassment of having to admit that you do not participate in the American Dream.

It never ceases to amaze me how large a chunk of the population really believes this, heart and soul without question. Really, I would love to see a Gallup do a national poll that asks the following questions:

1. Which crime would you rather admit to having committed to your family & friends?:
a. being a child molester
b. being an executive at Enron, Tyco or Adelphia
c. being a renter

2. Which would be a worse fate:
Being a life-long renter or getting beheaded by Al Queda on live T.V.?

3. After 9 straight years of a booming real estate market, why do you think it is that some people still don't "own"?
a. they hate America/freedom
b. too stupid/illiterate to sign name to neg-am loan docs
c. we've finally run out of land

I would be interested if anyone here has any knowledge about converting (if at all) retirement accounts (IRA, 401K, Roth) during emigrating to Canada or Australia. This is actually a very serious for me since I'd like to get out of this country one day, hopefully soon.

SFWoman,

They're also at a fairly good elevation on the east side of Hwy 101. I've lived in beach communities of and on for years and believe me, if you live within 1/2 mile you're going to see ALL the beach you can stand. Nice to get in from the wind a little too.

I just thought it was so funny that with all these high dollar monsters "rubber necking" for a glimpse of the waves that someone introduced a development that actually made some sense. Many of the beach towns are just dead Mon-Thur and only come to life during the weekends and summer months. Many of the high dollar homes in the Tsunami Zone look ancient when they're only a year or two old.