The New Capitalism

The U. S. Government ones 70 percent of General Motors, Now it is putting up $3 billion of taxpayer money in its “cash for clunkers” program to stimulate buying new cars. This is capitalism?

How to retire comfortably

Start to save early in life

Save some money each payday and when you have enough saved for a rainy day, invest the rest. Investing even a small amount of money early in life will compound into a large amount latter. This is because the magic of compound interest (where interest is paid on the interest previously paid, as well as investment contributions) has a powerful effect on the growth of your portfolio.

A portfolio is a collection of cash, stocks and bonds.

Cash is the money you saved for a rainy day, which inevitably comes to everyone. It is usually held in savings accounts, money market accounts, checking accounts, etc. Cash is anything liquid, meaning you can spend it immediately if necessary.

Stocks are certificates issued by businesses in return for cash, which they use to grow their business. Stock holders own part of the business in proportion to the number of stock certificates they own. Dividends are also paid to the holders of stock certificates to compensate them for investing in the business.

Bonds are certificates issued by businesses or governments that wish to borrow money (cash) to fund capital projects. Interest is paid quarterly to holders of the bond certificates (lenders) for the use of their money. At the end of a specified time the borrowed money is repaid to the lender.

Inflation is a process that erodes the future value of cash, stocks and bonds.
(More to follow)

Timothy Geithner is a crook

Timothy Geithner is a crook, or he is the dumbest guy in finance. Timothy Geithner failed to pay four years of FICA taxes. When the IRS audited two years of his returns, he finally paid them. He did not have the brains to realize that the IRS can go back as many years as it wants and audit returns when it suspects fraud. So he got caught again.

If this guy is appointed Treasury Secretary, as it appears he will be, he will be in charge of your money and my money and the IRS. Do you want a crook in charge of your money? Do you want a dummy in charge of your money? What about the poor IRS agents who audited his tax returns? I guess they will have to join the ranks of 11.1 million now unemployed.

New Jersey Pensions

In New Jersey, Rockaway Township’s 47 year-old Police Chief Walter Kimble will receive $267K in a final check when he retires after 25 years on October 1, 2008. He is being compensated for unused sick, personal, holiday and vacation time accrued during his career. The people of Morris County are up in arms over such a large cash payout being offered to yet another retiring public employee.
He will also receive an $80,880 annual pension. According to the Social Security actuarial tables, a 47 year-old male should live to 78, another 31 years. The expected cost of his $80,880 annual pension will be $2,507,528 over time, if he lives that long.
Police officers in New Jersey pay 8.5% of their salary into the pension system. State and local governments contribute the rest. Assuming Chief Kimble’s starting salary in 1983 was $26,000 and his pay raises were 6.75% annually (which would bring him to his final $125,000 salary) his total contribution to the pension system was $135,382. That amount invested at 7.5% over twenty-five years yields $289,645 as his contribution. Funding an $80,800 pension for 31 years requires an initial investment of $1,110,000 invested at 7.5%. Subtracting Chief Kimble’s $289,645 invested contribution from that yields $820,353 as the taxpayers’ contribution. However, for eight years, starting with Governor Whitman’s administration, the State of New Jersey did not contribute their share to the pension system, assuming that a rising stock market would bail the system out. It did not. So, it looks like the taxpayers are on the hook today for somewhere between $820,353 and $1,110,000 for Rockaway Township’s retiring 47 year-old Police Chief Walter Kimble. What a country.