Wisdom

Posted on 30th May 2017 by Trevor Reynolds in Blog |Finance in Focus

Starting early is so important especially in Financial planning.  So I wanted to share a story of one family who have done just that.

Their first child was born and the parents took out a modest savings account putting away $250 a month — today (18 years later) the account is worth over just over $100,000 achieving a only 6.2% return.   Their daughter now has a great start and will have little or no university debt (depending where she goes)

At the same time they also did this for themselves as one of the many things they added over time, houses, shares and their business, always remembering to pay themselves first as their income grew.

So now that their daughter is 18 they sat down and explained the magic of compound interest and together decided to take out another savings plan jointly with their daughter. She would contribute 25% and the parents would contribute 75% to ensure that she would be financially fit and would soon see the benefit and magic of compound interest.  Together they will contribute a $1,000 a month.  What could this become in 25 years when the daughter would be only 43 years old?

At a modest 6.2% it will be about $720,000.  If it achieved 10% it would become just about $1,300,000.

Remember this is just a $1,000 a month for 25 years, a total contribution of $300,000.  Started when their daughter was 18 and now that she is turning 44 she has options — you as a parent have the benefit of wisdom and this is a wonderful gift to pass on to your children. (This also fits under the gift tax allowance here in Japan.)

Talk to Banner and we can help make this happen.

Ebisu fund

Posted on 1st February 2017 by Trevor Reynolds in Blog |Finance in Focus

A new investment option is a fund run by ourselves at the Banner Group. The Banner Asset Management Ebisu Income fund domiciled in the Isle of Man.  We have worked hard over the last 6+ years to achieve this.

Banner Ebisu Income Fund

BAM started the Ebisu Fund in 2010, initially as a bridge lending fund; over time this has developed into an alternative income fund. The fund is doing very well and has earned an average return to investors of 13.78% p.a. since inception.

BAM is not a hedge fund and is not investing for speculative property appreciation – we are lending our funds to property developers.  The loans are structured to cover the build costs and we manage this process from the first $ to the last.  All the developments are usually 75% (or higher) pre sold with 10% deposits normally taken on the units sold.  Loans are usually for a term of 18 to 24 months. Once the building is complete, settlements are made, the loans are repaid. The Banner Ebisu fund is usually invested in 12-15 projects at any one time.

All the loans are 100% asset backed with full recourse personal guarantees so they are fully dischargeable in the event of default.

Banner Wholesale Fixed Interest Income Fund

The BAM Wholesale Fund began in 2011. The Wholesale fund took a unique approach to lending in Australia, where we would only look at first mortgage loans and sub-schemes established for each individual loan eliminating any co-mingling of funds from other sub-schemes. Each investor choses his or her investment.   BAM has managed over AU$ 1 billion in loans since inception.

One of the major reasons BAM is able to lend at attractive rates is because the banks have reduced their exposure to commercial lending due to capital adequacy ratios, as mortgage debt is not considered “liquid” for these purposes.  The inability of Australian banks to source sufficient capital from abroad has also meant that they have considerably less money to lend across Australia, as one third of the country’s mortgage debt was financed by wholesale funds from overseas.  Banks have, therefore, adopted very stringent, almost unworkable, lending guidelines so as to reduce their commercial mortgage debt and meet these capital restrictions. The banks’ withdrawal from commercial property lending activities presents significant opportunities for BAM.

Now that BAM is of sufficient size and liquidity we have fully opened our fund offerings to retail investors. Our initial two offerings have investment minimums beginning from AUS$500,000 and AU$ 5 million respectively.

The Banner Asset Management Ebisu Income Fund, domiciled in the Isle of Man, us now be available for a minimum investment of AUS$25,000, putting money to work in the same tried and tested investment process.  At the retail level we anticipate returns in the 10-12% range. We believe these returns will continue for the next few years at least. With–from our point of view–a high degree of confidence in the integrity and security of the fund process.

GOLD; the bull run has started again

Posted on 2nd September 2016 by Trevor Reynolds in Blog |Finance in Focus

Over the past 45 years, there have been 7 bull cycles and 7 bear cycles with varying duration and percentage gains.

 

GOLD 45 years

 

Life Wrappers and Japanese Taxes

Posted on 8th June 2016 by Trevor Reynolds in Blog |Finance in Focus |Uncategorized

Investments structured as life insurance products help minimise damage when you leave Japan, and indeed while you are here, as they can be reported but aren’t taxable unless you take money out at a profit (this means all unrealised capital gains are shielded from taxes). The new Japan exit tax is applied to financial assets valued JPY100m and more, and a life insurance product currently doesn’t fall into the financial asset category. The exit tax will apply to foreigners from 2020.

Also, the obligation to report overseas assets if their aggregate value was JPY50m or more by the calendar year end is already in force for all Japan tax residents. With legislation like FATCA and the OECD’s Common Reporting Standard (CRS) in place, more and more of our financial data gets automatically exchanged, so the authorities in Japan, who will join the CRS in September 2018, will become aware of assets held wherever they are held, if they aren’t aware already. So again if they are held in an insurance wrapper they can be easily reported but aren’t taxable unless you take a profit out (this means all capital gains are shielded from taxes). At which point one can plan to take things out when one is in the best tax friendly jurisdiction possible to mitigate as much tax or all if possible.

If you are interested in taking a closer look at life insurance products, their benefits, cost, etc., do let me know and we will send you information.

03 5724 5100  info@bannerjapan.com

Maximizing Your Social Security Benefits

Posted on 2nd June 2016 by Trevor Reynolds in Blog |Finance in Focus

Maximizing Your Social Security Benefits

By Dr. Larry Kotlikoff

Social Security benefits are a big deal, income wise, for most retirees. For 20 percent, it’s the only deal. For 30 percent it’s the main deal. And for another 20 percent, it’s the second biggest deal. So it’s passing strange, to use a Mark Twain expression, that most households, be they poor, middle class, or rich leave tens to hundreds of thousands of dollars in Social Security benefits on the table.

You can be the smartest person in the world and make the dumbest Social Security mistakes. My friend, Glenn Loury, a brilliant economist at Brown University, is an example. Glenn is a widower. His magical wife, Linda, tragically passed at 58 after a distinguished economics career at Tufts.

Glenn and I had dinner one night a few months shy of his 65th birthday. Somehow we got onto his Social Security plans. Glenn knew next to nothing about widower benefits. When I mentioned them, he dismissed the idea saying he had earned too much compared to Linda.

Glenn was wrong. Within two minutes I made him $120,000. The strategy was simple. Glenn, who was still working, would collect his widower benefit starting at his full retirement age, 66 (when Social Security’s stops applying their their earnings test that taxes the benefits of those still working).

Given Linda’s salary, Glenn’s widower benefit would, I figured, total more than $30,000 a year for four years. Meanwhile Glenn would let his own retirement benefit grow by 8 percent per year through age 70. Since Glenn had been planning on taking his own benefit at 70, the $120,000 was found money. Needless to say, Glenn paid for dinner.

How I Became a Social Security Expert

I learned about Social Security by necessity. I’m an economist at Boston University, but I have a personal financial planning software company, whose website is www.economicsecurityplanning.com. Our goal is to find safe ways to sustain and raise people’s spending power. And there are many such ways, particularly taking Uncle Sam’s best benefit and tax deals.

One of our programs, www.maximizemysocialsecurity.com, sells for just $40. But it considers each of your potentially millions of benefit-claiming strategies, finding precisely the one that will maximize your household’s lifetime benefits. Creating this program required learning Social Security’s rules, which I did at great cost to my sanity.

Social Security has 2,728 rules in its Handbook covering retirement benefits, spousal benefits, child benefits, disabled child benefits, widow(er) benefits, child-in-care spousal benefits, mother (father) benefits, divorced spousal benefits, divorced widow(er) benefits, divorced mother (father) benefits, disability benefits, and parent benefits.

The system’s Programming Operating Manual System has hundreds of thousands of rules about those 2,728 rules. The number of potential benefits, legitimate months for initiating collection of the various benefits, ways in which one spouse’s benefit collection decisions can affect the other’s, and all the rules within rules limiting what you can receive and when you can receive it makes Social Security far more complicated than even the federal income tax. This is why www.maximizemysocialsecurity.com needs to consider so many cases.

Becoming a Social Security Columnist

As a “reward” for learning all the mind-boggling details, Paul Solman, my friend and long-standing economics correspondent at PBS NewsHour, asked me to write a weekly column for the PBS NewsHour’s website answering Social Security questions. Three and half years later, the column is still one of the site’s top draws.

Given the huge thirst for Social Security answers, Paul and I, together with www.money.com columnist, Phil Moeller, decided to write a book describing the best strategies for collecting Social Security. The book, Get What’s Yours – the Secrets to Maxing Out Your Social Security was released in February 2015 and instantly became a #1 NY Times Best Seller.

Unfortunately, the book’s success had untoward consequences. The White House, we learned, didn’t like the idea of our telling people how to get what they paid for. In November, as part of the 2015 Budget Bill, they teamed up with Congress to change Social Security’s rules, taking away certain claiming options for many younger households.

From one day to the next, my company’s software and my co-authored Best Seller were out of date. This was no fun, to put it mildly. But my company’s exceptional engineers fixed our software within two weeks, and my co-authors and I immediately started rewriting our book. Our marvelous publisher, Simon & Schuster, also went into crash mode. They just released Get What’s Yours – the Revised Secrets to Maxing Out Your Social Security.

Three General Rules to Maximizing Your Lifetime Benefits

Our book became a best seller in part because Paul’s is an exceptionally funny writer and because Phil and I pulled no punches in describing Social Security as a bureaucrat’s daydream and a user’s nightmare. But the main draw was distilling Social Security’s gobbledygook into English and providing four central strategies for getting what’s yours.

Rule 1 – Be patient where patience pays.

Take a high-earning 60 year-old couple. Under the new law, they both make too much and are both too young for either to collect spousal benefits from the other. If the lower of the two earners dies first, the survivor can, however, collect a widow(er) benefit. But the immediate issue for this healthy couple is when to take retirement benefits.

If they take their retirement benefits as early as possible – at 62, they’ll receive $1.30 million in lifetime benefits (present valued as of their current age 60). If they wait till 70, the figure is $1.65 million. That’s an extra $350,000! It too represents found money. If the couple takes their benefits at 62 and finds $350,000 hidden in their attic they’d be in the same boat (ignoring federal income taxes). Had the law not changed, the $350,000 in found money would be $410,000. But $350,000 is still a massive bonanza.

Why does patience pay so much? The answer is that Social Security pays much higher benefits if you wait to collect them. For example, retirement benefits starting at 70 are 76 percent higher than those starting at age 62. This is above and beyond the annual adjustment for inflation. And these benefits continue for as long as you live.

Most people view Social Security as an asset, like any other. But it’s actually insurance – insurance against the worst thing that, financially speaking, can happen to you in retirement – you keep living! Dying early and not collecting your benefits entails no financial risk. You are, well, dead. But you’re also in heaven, where everything is free and there are no regrets. In particular, you aren’t sitting around kicking yourself for having not taken Social Security before you died.

No, the real financial danger in retirement is not dying. It’s living — living to the ripe old age of, say, 100. It’s a danger because you have to keep paying for yourself, day after day, month after month, year after year. If the money runs out, things can get mighty unpleasant as anyone who has tasted cat food can attest.

Much of our book’s success involved implanting the following simple thought in our readers’ brains — You can’t count on dying on time. Nor can you analyze Social Security on a breakeven, i.e., play-the-odds basis.

Insurance companies can play the odds. They can pool over their thousands of clients’ death dates. You can’t pool. You have only one life to lose and you could lose it at your maximum, not your expected age of death. As with any insurance, when it comes to Social Security’s longevity insurance you need to consider the worst cast scenario and make sure to get catastrophic coverage. With Social Security, this means, in most cases, waiting till 70 to receive your highest possible retirement benefit.

Many rich investors poo poo treating Social Security as insurance. They are so well heeled they don’t worry about risk, including longevity risk. But if they are smart, they will also wait till 70 to take their retirement benefits unless there is an even better way to maximize their family’s collective benefits (see below). The reason is that even on a pure investment basis, waiting to collect higher retirement benefits is a no brainer. In deciding in the 1970s ago how much to reward patience, Social Security used actuarial tables that are now decades old. They also used a safe internal rate of return that was over 200 basis (2 percentage) points higher than you can now earn on 30-year TIPS (Treasury Inflation Protected Securities). These factors make patience a terrific arbitrage opportunity.

Rule 2 – Understand All Your Benefits

I listed above the 12 different types of benefits you can collect from Social Security. You may be focusing on only one or two of these benefits right now thinking the others aren’t relevant. But you never know what might happen. My 96 year-old mom is my financial dependent. Were I to croak, she could collect 82.5 percent of my full retirement benefit instead of her own lower benefit. I made a special point of telling my siblings this fact. They two are very well educated people (my brother is the Provost of Cornell and a leading scientist), but they had never heard of the parent benefit.

With Social Security there is a host of gotchas. (We list 40 bad news gotchas in one chapter in the new book and 60 good news secrets in another.)  Perhaps the worst gotcha is Use It Or Lose It.

Had Glenn not mentioned Social Security, he’d probably have lost $120,000.  Benefits that aren’t taken on time are gone. (That’s not 100 percent true. In some cases, you collect 6 months of benefits retroactively.) Another top economist, this one at Harvard, called me recently about what to do with Social Security. He hadn’t read the book or run the software. When I explain he’d called three years too late and had lost $35,000 in spousal benefits, he was none too happy.  Then there was a recent email from a 75 year old who was still waiting for Social Security to start sending him his retirement benefit, for which he had never applied.

Let me be clear. Social Security doesn’t know or very much care about you. They don’t know if you are alive or dead, if you are married, if you are divorced, if you are widowed, if your ex is deceased, if you have children, if your kids can collect benefits on your record, and the list goes on. You need to tell them, not ask them what you can collect and when you want to start collecting it.

Rule 3 – Time Your Collection of Benefits

One of Social Security’s worst gotchas is that you can’t take two benefits at once. If you are entitled to collect two benefits simultaneously they will give you either exactly or approximately the larger of the two. To collect two benefits, you need to take one first, while letting the other grow and then take the later benefit when it stops growing. This was the strategy I laid out for Glenn – take widower benefits at 66, hold off retirement benefits, letting them grown by 32 percent between 66 and 70, and then take retirement benefit.

In the case of married couples, the optimal timing of benefit collection often has to be coordinated between spouses. Take a hypothetical couple I ran through maximizemysocialsecurity.com to discover the best strategy. Let’s call the husband, age 64, Ted and the wife, age 60, Joan. Joan is the higher earner. Ted is thinking of taking his retirement benefit immediately and Joan is considering starting hers at 62. Can they do better? They certainly can.

Thanks to the grandfathering provisions of the new law, Ted can collect just a spousal benefit on Joan’s work record between 66 and 70 and take his own retirement benefit at 70. But for Ted to do this, Joan has to take her own retirement benefit at age 62. Yes, this is the opposite of being patient. But at 66, Joan can suspend her retirement benefit and restart it at a 32 percent higher value at 70. Joan will still reduce her own lifetime retirement benefits, but the couple’s combine lifetime benefits will end up $155,053 higher!

Here’s another quick hypothetical example of how timing can matter. Jerry is 61 and just retired after a career as a middle manager. Jane is 45. She’s been a top-paid lawyer, but is retiring to look after their severely disabled son, Charley.  Their optimal strategy is for Jerry to take his retirement benefit at 62 at which point Charley can start collecting a disabled child benefit and Jane can receive a child-in-care spousal benefit. Thanks to the new law Jerry can’t suspend at full retirement age without cutting off Charley and Jane while his retirement benefit remains suspended. So he ends up stuck forever with his age-62 retirement benefit. At 70 Janes take her retirement benefit. At this point Charley starts collecting on Jane’s work record. When Jerry dies, Charley collects a child survivor benefit on Jerry’s record. Finally, when Jane die, Charley starts collecting as a survivor on Jane’s record. This multi-step strateg y can also produce a major gain in the family’s lifetime benefits.

Rule 4 – Tell, Don’t Ask Social Security What To Do

The staff at Social Security are overworked, underpaid, and undertrained. Most are well meaning. But a vast number are arrogant beyond belief. I’ve written about case after case where multiple Social Security staff have told the same person something that was 100 false while claiming they were 100 percent correct. In almost all of these cases, only my threat of writing up their mistake in my column led the staff or Social Security’s top brass to fix the problem. Indeed, I could write an entire book about the nature of Social Security’s “advice,” its failure to comprehend longevity risk, and why I would, were I elected President, fire the Social Security Commissioner on my first day in office.

My advice is read our book. It’s very inexpensive. Buy it from the local bookstore if possible or Amazon or Barnes and Nobles if necessary. Read it, then run the software. Then you’ll know exactly what to order not ask from Social Security.

Fixing Social Security for Real and for Good

My goal of becoming President is, actually, extremely serious as you can see at www.kotlikoff2016.com. Part of my platform, provided on that site, involves replacing the antiquated Social Security system with one that’s solvent and simple, indeed, one that requires not a single government bureaucrat to operate.  Social Security, by its Trustees’ own admission in their 2015 Trustees Report, is in the red to the tune of $26 trillion. That’s far larger than a year’s GDP! Stated differently, the system is 31 percent underfinanced. I.e., it needs a 31 percent immediate and permanent hike in its 12.4 percent FICA tax to pay all promised benefits through time.  Make no mistake. The $26 trillion is a massive bill we are dumping squarely in our children’s laps. It’s part of the far larger $199 trillion present value fiscal gap separating all future projected federal spendin g and all future projected federal taxes. The longer we wait to address our overall fiscal gap and Social Security’s in particular, the greater the economic damage to our children. This is why, It’s Our Children, not Vote for Me Because I’m Rich and Brilliant or Vote for Me Because My Name Ends in Clinton is my campaigns’ one and only sound bite.

Laurence Kotlikoff is a professor of economics at Boston University, a fellow of the American Academy of Arts and Sciences, co-developer of www.maximizemysocialsecurity.com, and co-author of Get What’s Yours – the Revised Secrets to Maxing Out Your Social Security.

Gold

Posted on 16th March 2016 by Trevor Reynolds in Blog |Finance in Focus

Gold hit its high in 2011 at a bit over $1900. The most recent low was $1,045 in 2015 and currently it stands at around $1,250.  Gold Shares have had an even wilder ride with the average gold stock down up to 70% – clearly not for the faint-hearted investor.

No one has a crystal ball and I certainly do not, but the low in gold is close – perhaps this recent rally driven by fear in Europe over the banking sector will not continue past $1,350 and we will see the lows tested one more time before we see the Gold bull market start up again.  We are witnessing the beginnings of the new gold bull market and clearly there is more upside now than downside. The previous two up-legs in gold gained 300% and 177%; the previous two up-legs in gold stocks (basis HUI) put on 1,300% and 325%.  Over the next while, for those who are patient, GOLD is a buy.

There are various ways to get things started just call 03 5724 5100

Gold_

Retirement

Posted on 8th February 2016 by Trevor Reynolds in Blog |Finance in Focus |Uncategorized

Planning for retirement has become more challenging than it was for prior generations. Nowadays, many people over the age of 65 are continuing to work or are forced to accept a lower income in order to retire. While retirement goals are still attainable, we must adjust our retirement savings plans and be strategic in our approach; knowledge, resources and commitment are all necessary in order to reach a comfortable retirement.
Recognize the trend of people living longer in retirement. People around the world are living longer due to improved standards of nutrition, medicine and public health. While this is a good thing for individuals, we must consider those extra years spent in retirement and if we have the resources to last us through.

Cope with the large gap in retirement savings. The reality is that many people are falling short on their retirement savings goals resulting in a large annual income gap for retirees. It is important for people to commit to larger annual savings targets and consider staying in the workforce beyond traditional retirement years.

Shift the focus from the size of your nest egg to the annual income needed to maintain a comfortable retirement over the years. Nobody knows how long they are going to live and people are constantly worrying about the overall size of their nest egg and whether it will last them through retirement. Since that can be hard to gage, an easier approach is to consider the annual income required for a comfortable retirement and focus on multiplying that year after year.

Contact us to discuss various income generating options and your review your retirement plans 03 5724 5100 or email info@bannerjapan.com

 

Japan Pension Basics

Posted on 20th October 2015 by Trevor Reynolds in Blog |Finance in Focus

Japan Pension and who has agreements where you can transfer credits for the basic state pension.

According to http://www.nenkin.go.jp/n/www/english/detail.jsp?id=34  the list of countries with such agreements with Japan are Germany, United Kingdom, Korea, United States, Belgium, France, Canada, Australia, Netherlands, Czech Republic, Spain, Ireland, Brazil, Switzerland.

The Japanese National Pension System, which is the Japanese equivalent of Social Security. In order to get money from that you need to have paid for at least 25 years (might get decreased to 20 for foreigners, but not yet). Also, the amount you get is whooping 65,541 yen per month for 40 years of contributions. Less for under 40 years …
References to numbers are from here:
http://www.nenkin.go.jp/n/www/share/pdf/existing/english/pdf/1.pdf

(1) Old-age Basic Pension

If you have paid the National Pension contributions for at least 25 years and satisfy the conditions, the following amount is paid when you become 65 years old. *1

★Benefit amount = Y786,500 (annual amount in Fiscal Year 2012 for those who have paid contributions for 40 years)  that is only 65,542 per month! 

When you go for the lump-sum payment, you are giving up any benefits, including credit under the agreement. Unless they make a mistake, they will simply delete you from their system after you refund request is processed.  This is based on the first bullet under “Important Notes” on page 5 of:

http://www.nenkin.go.jp/n/open_imgs/service/0000005247.pdf

So depending on the system you are ending up in the credit may be more than the money you get back but that is assuming the system you end up in survives.

From the Japan Pension service website:

http://www.nenkin.go.jp/n/www/english/detail.jsp?id=39

An article from the US Social Security Administration:
http://www.ssa.gov/policy/docs/ssb/v67n3/v67n3p89.html

 

Everyone needs a private personal savings plan. 

Montreux funds

Posted on 8th September 2015 by Trevor Reynolds in Blog |Finance in Focus

Now uncertainty permeates markets worldwide. All stock markets have fallen with China taking the lead.

Money is coming out of equity markets and looking for alternatives. The Montreux Healthcare Fund, which bears practically zero correlation to equities, has enjoyed a strong month with the preliminary figures showing +2% returns, driven by substantial earnings increases over August. The Montreux Commodity fund has also practically zero correlation to equities, has enjoyed a strong month with the preliminary figures showing +1% returns.

Both funds have experienced zero drawdown over the past 12 months while outperforming other major asset classes.

The Montreux Healthcare fund invests in Aged care and Special Needs care in the UK. The Care sector is a huge growth industry which is more recession resistant as it is funded mostly by government or the well-off. There is also the consolidation aspect as there are very few large providers and Montreux has over a few years become the 4th largest provider in the UK. The Industry had very good earnings to begin with; consolidation brings cost savings with economies of scale. This is a fund with great longer-term non-stock market dependent growth. The aging population and the increasing requirement for residential care provides a degree of predictability not afforded to other asset classes. Care sector dynamics are unlike any other form of investment – demonstrating that alternatives can not only provide un-correlated returns, but can also provide a high and sustainable level of income. The sector is being increasingly recognized as a credible diversifier and investment solution in the continued quest for truly alternative assets and income.

The Montreux Commodity Trading  fund is a Trade Finance fund. As such it does not trade in commodities but rather finances the gold-refining process and in essence takes a 2-5% commission for this role; this is how it earns returns. The fund is highly liquid and its cash is used to provide letters of credit between the producer, the refinery, and the ultimate end user. These trades are all contracted under predetermined terms that usually run for 6 months to 2 years. The fund makes money as long as there are trades happening; profitability does not depend on the price of the asset.

Both funds should generate consistent returns in excess of 10% per year with little volatility, and zero correlation to stock and bond market activity. The commodity trading fund made 21.95% in USD over the last 12 months and the Healthcare fund made 14.60% since the Isle of Man US$ version of this fund began in November 2014.  Please get in contact with us if you would like more information on these opportunities.

Congress Proposes Fraudulent New Law To “Fix” Social Security

Posted on 30th July 2015 by Trevor Reynolds in Blog |Finance in Focus

On January 31, 1940, the very first Social Security check ever delivered went to Ms. Ida May Fuller, a former legal secretary who had recently retired.

 

Ms. Fuller had spent just three years paying into the system, contributing a total of $24.75 to Social Security. Yet her first check was for nearly that entire amount. Quite a return on investment.

She went on to live past 100, collecting a total of $22,888.92, over 900 times the amount she contributed to the program. Her story is quite the metaphor.

 

If you’re not familiar, Social Security is comprised of two primary trust funds: Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI).

Essentially, all of the taxes paid in to Social Security end up in one of these two trust funds.

The trust funds then ‘manage’ the money to generate a rate of return, and then pay out distributions to program recipients.

Now, the funds are overseen by a Board of Trustees which is obliged to submit an annual report on the fiscal condition of the program. It ain’t pretty.

The Disability Insurance (DI) fund is particularly ugly. In fact, the trustees themselves wrote in the 2015 annual report that

“[T]he DI Trust Fund fails the Trustee’s short-range test of financial adequacy. . .”

 

and,

 

“The DI Trust Fund reserves are expected to deplete in the fourth quarter of 2016…”

In other words, one of the two Social Security trust funds is just months away from insolvency.

When people think about Social Security, they think that all the problems are decades away.

Wrong. This is next year.

The other trust fund, OAS, is projected to “become depleted and unable to pay scheduled benefits in full on a timely basis in 2034.”

Which means that if you’re 47 or younger, you can kiss Social Security goodbye.

Bear in mind, these aren’t my calculations. Nor are they any wild assertions. They’re direct quotes from the trustees themselves.

And, just who are these trustees? The Secretary of the Treasury of the United States of America. The Labor Secretary. The Secretary of Health and Human Services.

Some of the most senior officials in the US government sign their name to an official report stating that these funds are nearly insolvency– one of them even NEXT YEAR.

Not to worry, though. Congress is on the case.

Late last week, several dozen members of Congress introduced the “One Social Security Act”, HR 3150, to solve this problem.

And let me tell you, their solution is bold. Fearless. And brilliant.

HR 3150 attacks the looming insolvency of Disability Insurance by eliminating the fund altogether.

So instead of having two separate funds for two distinct purposes of Social Security, the legislation aims to combine them into one unified fund.

That way, with just one fund, there won’t be any separate reporting about DI’s insolvency.

It’s genius! They make the problem go away by eliminating the requirement to report it.

There’s just one small issue. Legally, they have a word for this. It’s called fraud.

You and I would go to prison if we commingled funds like this. But in the hallowed halls of Congress, this is what passes as a solution.

This is so typical– solving problems by pretending that they don’t exist and destroying any element of transparency and accountability.

This pretty much tells you everything you need to know about government.

Look, it’s a hard reality to swallow. But the government’s own data show that these programs are not going to be there for you.

And the story smacking us in the face right now demonstrates precisely how politicians intend on ‘solving’ the problems.

These people aren’t the solution. They’re the problem.

And don’t think that ‘voting the bums out’ will affect anything. Elections merely change the players, not the game.

The only way forward is to invest in yourself, particularly in your business and financial education. Make plans based on the assumption that Social Security doesn’t exist.

And if, by some miracle, it’s still there by the time you retire, you won’t be worse off for having built a larger nest egg thanks to the financial acumen you developed.

 

http://www.zerohedge.com/news/2015-07-29/congress-proposes-fraudulent-new-law-fix-social-security