September 30, 2010

Workers in Europe Protest Austerity Measures - NYTimes.com

Workers in Europe Protest Austerity Measures - NYTimes.com: "Workers in Europe Protest Austerity Measures"

Click on link above to read article...

This is the result of a weak economy, too much government spending, and not enough taxes to fill the void. What's their solution? Well the Portuguese government proposes that they'll freeze pensions, increase the tax rate, and reduce their spending in order to get the deficit under control again.

How can we relate this to the United States?

Currently our economy is weak and government is spending frivolously in the form of bailouts, stimulus, Recovery Acts, and a so-called Jobs Bill. Not to mention Republicans and Democrats alike are screaming for tax cuts for everyone (it is an election year for them - so they're trying to save face.) So basically, like the Portuguese, the United States has high deficits and our tax revenues are low. So what reason do we have to believe that our government won't implement some of the same "austerity measures" being used in Portugal?

In the current administration or the next - expect higher taxes on everyone, less government spending (hopefully), another increase in the retirement age, and a reduction of retirement benefits. Listen closely how politicians choose their words carefully in these upcoming campaigns - and listen to how many campaign promises that will go unfulfilled.

How many hard-working individuals are not retiring in the United States? I would like to know the statistics of those who can retire vs. those who cannot. Interestingly enough, on every street corner there's a "financial advisor" or "Personal Banker" preaching the gospel of why we must plan now through saving and investing in order to retire comfortably. Invest in a 401K and all will be OK they say...Plan for your children's college by investing in a 529 Plan and all will be OK they say...Invest in Roth IRA and all will be ok they say. But what if these "advisors" are not telling me all I need to know?

Will a car salesman try to sell you on a car by telling you all that it cannot do? Or will they instead tell you how smart you are for selecting a certain model? Or how dependable this model will be? How good of an investment you're making.... you know, all of the warm & fuzzy stuff that blows your head up.

Why should we expect a financial salesman to do any different? Like a car salesman, they'll try to sell you on the benefits of a product without necessarily telling you all of the costs, uncertainty, and risks entangled within your retirement plan.

You might be thinking - well I need to buy a car every now and then so I can go to work....and I need to invest in some type of retirement plan so that I can retire. But I say - what if you owned the dealership? And you sold enough cars to other people - that you were able to use their money to purchase your car? What if you had multiple streams of income from your businesses or through entrepreneurial efforts, that paid you every month? Do you really need a 401K if you spend your life building multiple income streams - instead of saving for just one? If you managed to build a cash flow of $10K a month, do you really need social security - which will pay out approximately $1,500/month in today's dollars?

I seriously doubt it.

Just a thought...

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