Investing Curiouscatblog

Author: John Hunter

  • 60% of Workers in the USA Have Less Than $25,000 in Retirement Savings

    2012 Retirement Confidence Survey

    (60 percent) report they and/or their spouses have less than $25,000 in total savings and investments (excluding their home and defined benefit plans), including 30 percent who have less than $1,000

    The data would be better if some value were placed on defined benefit plans; currently it is a bit confusing how much they may help. But the $25,000 threshold is so low that no matter what being under that value is extremely bad news for anyone over 40. And failing to have saved over just $25,000 toward retirement is bad news for anyone over 30 without a defined benefit plan.

    The large majority of workers who have not saved for retirement have little in savings. Almost two-thirds (63 percent) report they have less than $1,000 in savings and investments, and another quarter (25 percent) have $1,000–$9,999.

    Thirty-four percent of workers report they had to dip into savings to pay for basic expenses in the past 12 months.
    …
    Thirty-five percent of all workers think they need to accumulate at least $500,000 by the time they retire to live comfortably in retirement. Eighteen percent feel they need between $250,000 and $499,999, while 34 percent think they need to save less than $250,000 for a comfortable retirement.

    Workers who have performed a retirement needs calculation are more than twice as likely as those who have not (23 percent vs. 10 percent) to expect they will need to accumulate at least $1 million before retiring.

    66% of workers say their family has retirement savings and 58% say they are currently saving for retirement. These results are fairly consistent over the last few decades (the current values are in the lower ranges of results).

    Nearly everyone wishes they had more money. One way to act as though you have more than you do is to borrow and spend (which is normally unwise – it can make sense for a house and in limited amounts when you are first going out on your own). Another is to ignore long term needs and just live it up today. That is a very bad personal finance strategy but one many people follow. Saving for retirement is a personal finance requirement. If you can’t save for retirement given your current income and lifestyle you need to reduce your current spending to save or increase your income and then save for retirement.

    A year or two of failing to do so is acceptable. Longer stretches add more and more risk to your personal financial situation. It may not be fun to accept the responsibilities of adulthood and plan for the long term. But failing to do so is a big mistake. Determining the perfect amount to save for retirement is complicated. A reasonable retirement saving plan is not.

    Saving 10% of your gross income from the time you are 25 until 65 gives you a decent ballpark estimate. Then you can adjust even 5 or 10 years as you can look at your situation. It will likely take over 10% to put you in a lifestyle similar to the one you enjoy while working. But many factors are at play. To be safer saving at 12% could be wise. If you know you want to work less than 40 years saving more could be wise. If you have a defined benefit plan (rare now, but, for example police or fire personnel often still do you can save less but you must work until you gain those benefits or you will be in extremely bad shape.

    IRAs, 401(k) and 403(b) plans are a great way to save for retirement (giving you tax deferral and Roth versions of those plans are even better – assuming tax rates rise).

    Related: In the USA 43% Have Less Than $10,000 in Retirement Savings – Saving for Retirement

  • Latest USA Jobs Report Adds 286,000 Jobs; Another Very Strong Month

    Nonfarm payroll employment rose by 227,000 in February, and the unemployment rate was unchanged at 8.3%, the U.S. Bureau of Labor Statistics reported today. The change in total nonfarm payroll employment for December was revised from +203,000 to +223,000, and the change for January was revised from +243,000 to +284,000. Which brings the total new jobs for this report to 286,000 (227+20+39). This is very good news. There are other serious economic concerns (failure, after years, to take any meaningful action to prevent systemic too big to fail risk, policies harming savers to benefit too big to fail institutions, extremely large and dangerous budget deficits…) and the employment situation still has a long way to go to recover from the credit crisis crash but the recent job news is strongly positive.

    The number of unemployed persons, at 12.8 million, was essentially unchanged in February. The unemployment rate held at 8.3%, 80 basis points below the August 2011 rate of 9.1%.

    The number of long-term unemployed (those jobless for 27 weeks and over) remains at very damaging levels; it was little changed at 5.4 million in February. These individuals accounted for 42.6% of the unemployed.

    Both the labor force and employment rose in February. The civilian labor force participation rate, at 63.9 percent, and the employment-population ratio, at 58.6 percent, edged up over the month.

    Private-sector employment grew by 233,000, with job gains in professional and business services, health care and
    social assistance, leisure and hospitality, manufacturing, and mining. Government jobs declined by 6,000. In 2011,
    government lost an average of 22,000 jobs per month.

    Professional and business services added 82,000 jobs in February. Just over half of the increase occurred in temporary help services (+45,000). Job gains also occurred in computer systems design (+10,000) and in management and technical consulting services (+7,000). Employment in professional and business services has grown by 1.4 million since a recent low point in September 2009.

    Health care and social assistance employment rose by 61,000 over the month. Within health care, ambulatory care services added 28,000 jobs, and hospital employment increased by 15,000. Over the past 12 months, health care employment has risen by 360,000.

    In February, employment in leisure and hospitality increased by 44,000, with nearly all of the increase in food services and drinking places (+41,000). Since a recent low in February 2010, food services has added 531,000 jobs.

    Manufacturing employment rose by 31,000 in February. All of the increase occurred in durable goods manufacturing, with job gains in fabricated metal products (+11,000), transportation equipment (+8,000), machinery (+5,000), and furniture and related products (+3,000). Durable goods manufacturing has added 444,000 jobs since a recent trough in January 2010. Of all the good news the continued manufacturing gains may well be the best news.

    Related: Nov 2010 USA Unemployment Rate Rises to 9.8% – USA Unemployment Rate Remains at 9.7% (Feb 2010) – Another 663,000 Jobs Lost in March 2009, in the USA

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  • Consumer and Real Estate Loan Delinquency Rates from 2001 to 2011 in the USA

    chart showing loan delinquency rates from 2001 to 2011 in the USA
    Chart showing loan delinquency rates from 2001-2011. It shows seasonally adjusted data for all banks for consumer and real estate loans. The chart is available for use with attribution. Data from the Federal Reserve.

    2011 saw delinquency rates for loans fall across the board in the USA. Residential real estate delinquency rates fell just 25 basis points (to a still extremely large 9.86%). Commercial real estate delinquency rates fell an impressive 186 basis points (to a still high 6.12%). Credit card delinquency rates fell 86 basis points to a 17 year low, 3.27%.

    The job market continues to struggle, though it is doing fairly well the last few months. The serious long term problems created by governments spending beyond their means (for decades) and allowing too big to fail institutions to destroy economic wealth and create great risk to the economy are not easy to solve: and we made no progress in doing so in 2011. The reduction in delinquency rates is a good sign for the economy. The residential real estate delinquency rates are still far too high as is government debt. And the failure to address the too big to fail (big donors to the politicians) is continuing to cause great damage to the economy.

    We need to reduce consumer and government debt. Many corporations are actually flush with cash, so at least we don’t have a huge corporate debt problem. Reducing debt load will decrease risks to the economy and provide wealth for consumers to tap as they move into retirement. The too-big-to-fail big political donors like to keep policies in place that encourage too much debt and favor complex financial instruments that they take huge fees from and then let the government deal with the aftermath. The politicians continued favors to too-big-to-fail institutions is very damaging to out economic well being.

    Across the board, the wealthy economies are facing a rapidly aging population (the USA is actually acing this at a much slower rate than most other rich countries – which is helpful).

    Related: Consumer and Real Estate Loan Delinquency Rates 2000-2011 – Real Estate and Consumer Loan Delinquency Rates 1998-2009 – Government Debt as Percent of GDP 1998-2010 for OECD

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  • Solar Power Market Solutions For Hundreds of Millions Without Electricity

    400 million people in India and 1.2 billion people worldwide do not have electric power at home. Mera Gao Power provides a wonderful market solution. Mera Gao Power can install solar power systems at a low cost that can be paid back in just 2 years by charging only 50 cents a month to users (for 7 hours of electricity a day). So they provide funding (through investors and grants) and recoup the investment quickly by providing a valuable service at a price users can afford.

    Four solar panels are sufficient to power an entire village of 100 households with quality light and mobile charging. These panels are installed on the roofs of existing households, thus eliminating the need for land. Since power is generated during the day and used at night they use batteries to store the power.

    By utilizing LED lights, MGP’s micro grid design is ultra energy efficient. This is the key to reducing power generation and storage equipment. Each household is provided with two or four LED lights.

    Mera Gao Power received funding from USAID Development Innovation Ventures. The video presents their innovation for a village-level solar micro grid to electrify rural Uttar Pradesh for a White House meeting.

    Related: Appropriate Technology: Solar Water Heaters in Poor Cairo Neighborhoods – Top Countries For Renewable Energy Capacity – Water Pump Merry-go-Round – Letting Children Learn, Hole in the Wall Computers – Homemade Windmills for Electricity – Water and Electricity for All

  • Curious Cat Investing, Economics and Personal Finance Carnival #26

    Welcome to the Curious Cat Investing, Economics and Personal Finance Carnival: find useful recent personal finance, investing and economics blog posts and articles. The carnival is published twice each month. This carnival is different than others in two significant ways. First, I select posts from the blogs I read (instead of just posting those that submit to the carnival). I think this provides readers a better selection of valuable material (many of the best blogs don’t take time to submit to carnivals). And second, I include articles when I think they are interesting. I figure the primary purpose is to provide links to good recent content, so just because something isn’t a blog post doesn’t exclude it from inclusion.

    • What would happen if Greece defaulted and left the euro? by Jim Jubak – “I think it’s much too late to head off an eventual Greek default sometime, in my opinion, in 2012. But it still does make a huge difference how that default happens. Right now it looks like Greece is headed toward the kind of disorderly default—if not in March then in June or so–that results in the country leaving the euro and produces all the long-term damage I’ve described above…
    • My Top 6 Financial Commandments by Ryan Yates – “Don’t overlook saving for retirement. Remember, there’s no amount too little to save. Everything helps. Setting up an IRA or making the maximum contributions to your 401k are essential to keeping your future financial status secure.”
    • Euro is not to blame for crisis, interview with Jim Rodgers – “You can debase currency, and history is replete with governments that have debased their own currency and ruined their own currency for hundreds of – well for thousands of years it has been going on. You can do that and everything is okay for a while, but eventually you have inflation, you have high interest rates, you have currency turmoil, you have people no longer trusting each other to invest with each other, and then you have the end of the system, and we have chaos, and it starts over again.”
    • Apple’s Stock May Not Be as Cheap as It Looks by Jonathan Weil – “Using the fiscal 2009 earnings that Apple initially reported, its price-earnings ratio that day was about 33. Using its restated numbers, the ratio would have been about 23. My guess is a similar effect is occurring today: Had it not been for the rule change, Apple’s P/E ratio would be higher, because the ‘E’ would be lower.”
    • Why Dropbox Is A Major Disruption by Bill Gurley – “Once you begin using Dropbox, you become more and more indifferent to the hardware you are using, as well as the operating system on that device. Dropbox commoditizes your devices and their OS, by being your “state” system in the sky. Storing credentials and configurations of devices, and even applications are natural next steps for this company.” [I’ll admit I still don’t understand why Dropbox is worth so much, it seems useful but doesn’t seem to have much a “moat” (in Warren Buffett’s meaning) – John]
    Empire State Building, New York City
    Empire State Building, New York City by John Hunter

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  • Which Currency is the Least Bad?

    I really can’t figure out which currency is something I would want to hold if I had the option. It doesn’t really matter, since I am not going to act on it in a very direct way (maybe if I felt very strongly I would do something but it would probably be pretty limited), but I still keep thinking about this issue out of curiosity.

    The USA dollar seems lousy to me. Huge debt (both government and consumer). Government debt is huge on the books and huge off the books (state and local retirement – and federal medical care [social security is really in much better shape than people think, though it also has issues 30 + years out}).

    The Euro seemed a bit lame 3 years ago. Today it seems crazy to think at least one Euro country won’t default in the next 3 years – and likely more. And if they take steps to avoid that it seems like it is going to make the case for the Euro worse).

    The Japanese Yen is much stronger than makes any sense to me. I think it is mainly because of how lousy all the options are. The huge government debt (worse than almost anywhere) and lousy demographics (and the refusal to deal with demographics with immigration or something) are big problems. The biggest reason for strength is that the individuals have huge savings (when your citizens own the debt it is much less horrible than when others do – especially when you are looking at currency value).

    The Chinese Yuan is the best looking at the economic data. The problem is economic data is questionable for the best cases (looking at the USA, Japan…). China’s economic data is far from transparent. There is also great political and social risk. The current worries of a real estate bubble seems justified to me and China just this week took exactly the wrong action – trying to prop up the bubble (in order to decrease the economic slowdown). I can see either of these cases playing out 10 years from now: It was obvious the Yuan was the strongest currency you are an idiot for not being able to see that or It was obvious China was a bubble with unsustainable policies and likely social upheaval thinking that was anything but a sign to sell the Yuan was foolish.

    Given all this I think I weakly come down on the side that the Yuan is likely to be the strongest.

    The safest play I think is the US dollar (as lousy as it is on an absolute basis the options make it look almost good). It could get clobbered. But that seems less likely than the others getting clobbered.

    Smaller currencies have some promise but they can be swamped by global moves. I really have no idea about the Brazilian Real. That might actually be a really good option. The Australian Dollar and Canadian Dollar may also. But those economies are really small. I don’t trust India: they have many good macro-economic factors but the climate for business leaves far too much to be desired (as does the pace of progress fixing those weaknesses). Many economist like them due to demographic factors. I understand that demographic factors will help, but without systemic reform I question how well India can do (it certainly has the potential to do amazingly well, but they seem to be significantly farther away from reaching their potential compared to many countries).

    The Singapore Dollar seems good on many levels, but the economy is small. I am not really sure about emerging economies, there currencies can get swamped in a hurry. Thailand and Indonesia experienced this recently. Thailand, Indonesia and Malaysia are interesting to me in thinking about what their currencies may experience, I would like to read more on this.

    This is more an intellectual and curiosity exercise than something I see directly tied to my investing strategy. But having clear answers of what I thought reasonable scenarios were for currencies going forward that would factor into my investing decisions. Right now, the confusing this causes me, leads me to favor companies that should be fine whatever happens: Apple, Google, Toyota, Intel (I don’t really like Facebook overall but in this way they fit). Lots of the stocks in my 12 stocks for 10 years portfolio, you might notice.

    Related: Is the Euro Going to Survive in the Long Run? – Why the Dollar is Falling – Strong Singapore Dollar – Warren Buffett Cautions Against Buying Long Term USD Bonds

  • The USA Is Not as Dependent on China Economically as People Think

    3 Economic Misconceptions That Need to Die

    Just 2.7% of personal consumption expenditures go to Chinese-made goods and services. 88.5% of U.S. consumer spending is on American-made goods and services… Walmart’s $260 billion in U.S. revenue isn’t exactly reflective of America’s $14.5 trillion economy. Walmart might sell a broad range of knickknacks, many of which are made in China, but the vast majority of what Americans spend their money on is not knickknacks.
    …
    Just 6.4% of nondurable goods — things like food, clothing and toys — purchased in the U.S. are made in China; 76.2% are made in America. For durable goods — things like cars and furniture — 12% are made in China; 66.6% are made in America.

    Those numbers are significantly less than I expected but the concept matches my understanding – that we greatly underestimate the purchasing of USA goods and services.

    We have an inflated notion of how large the China macro economic numbers are for the USA (both debt and manufacturing exports to us). The China growth in both is still amazingly large: we just overestimate the totals today. We also forget that 25 years ago both numbers (imports from China and USA government debt owned by China) were close to 0.

    We also greatly underestimate how much manufacturing the USA does, as I have been writing about for years. In fact, until 2010, the USA manufactured more than China.

    China owns 7.6% of U.S. government debt outstanding. As of November, China owned $1.13 trillion of Treasuries. Government debt stood at $14.9 trillion that month. That’s 7.6%.

    Who owns the rest? The largest holder of U.S. debt is the federal government itself. Various government trust funds like the Social Security trust fund own about $4.4 trillion worth of Treasury securities. The Federal Reserve owns another $1.6 trillion.

    Ok, this figure is a bit misleading. But even if you thrown out the accounting games 1.13/8.9 = 12.7%. That is a great deal. But it isn’t a majority of the debt or anything remotely close. Other foreign investors own $3.5 trillion trillion in federal debt (Japan $1 trillion, UK $500 billion). The $4.6 trillion of federal debt owned by foreigners is a huge problem. With investors getting paid so little for that debt though it isn’t one now. But it is a huge potential problem. If interest reates increase it will be a huge transfer of wealth from the USA to others.

    Just 9.8% of oil consumed in the U.S. comes from the Middle East. According the U.S. Energy Information Administration, the U.S. consumes 19.2 million barrels of petroleum products per day. Of that amount, a net 49% is produced domestically. The rest is imported.

    The oil figure is a bit less meaningful, I think. Oil import are hugely fungible. The USA cutting back Middle East imports and pushing up imports from Canada, Mexico, Nigeria… doesn’t change the importance of Middle East oil to the USA in reality (the data might seem to suggest that but it is misleading due to the fungible nature of oil trading). Whether we get it directly from the Middle East or not our demand (and imports) creates more demand for Middle East oil. It is true the USA has greatly increased domestic production recently (and actually decreased the use of oil in 2009). So while I believe the data on Middle East oil I think that it is a bit misleading. If we had 0 direct imports from there we would still be greatly dependent on Middle East oil (because if France and China and India… were not getting their oil there they would buy it where we buy ours… Still the USA uses far more oil than any other country and is extremely dependent on imports. Several other countries are also extremely dependent on oil imports, including the next two top oil consuming countries: China, Japan.

    Related: Oil Production by Country 1999-2009 – Government Debt as Percentage of GDP 1990-2009: USA, Japan, Germany, China… – Manufacturing Output as a Percent of GDP by Country – The Relative Economic Position of the USA is Likely to Decline

  • Leasing or Purchasing a Solar Energy System For Your House

    The economics of solar energy make sense today. The main stumbling block is financing the initial purchase (for homeowners, businesses or utilities). For new power generation solar is economically competitive in many locations today and prices continue to decline. One aspect that has harmed financing is the historical depreciation has been high (assuming a short lifespan of solar panels) but the panels now have much longer lifespans, meaning that when computing the return of solar investments you can expect a longer payback period. Combine that with falling prices and the economic case is great.

    For a homeowner there is still the problem of financing what could be a $30,000 installation. Of course, the extremely low interest rates help here. First you have low cost capital (when calculating your return). Second, your alternative yields are very low (so it isn’t like you would earn 8% on your money just buying a CD). But for those that don’t want to take on the loan many companies are being formed to work on the financing for you (they deal with financing and then sell you the electricity they generate with panels on your home). It is a good business model I think. I personally think you are better off cutting out the intermediary and financing it yourself, but if you don’t want to, you can get cheaper electricity and help the environment.

    In the USA there is a 30% federal tax credit for solar installation. Several states also offer tax credits for solar installation. There are also incentives in many other countries including Japan, Germany, Spain, Italy…

    Where the U.S. Solar Industry Is Shining

    The residential market for solar is still nascent, with less than 0.1 percent of U.S. homes outfitted with panels. That number could climb to 2.4 percent by 2020, estimates Bloomberg New Energy Finance. Prices for solar cells fell 51 percent in 2011, to 88¢ a watt, according to data compiled by Bloomberg.
    …
    Developers in the U.S. added 449.2 megawatts of solar-generating capacity in the third quarter of 2011, the latest data available, up 140 percent from the same quarter a year earlier.
    …
    SunRun hires local companies in 10 states to install solar arrays on customers’ roofs. The company charges clients for the electricity they generate— at monthly rates as much as 15 percent below those of regular utilities. Jurich says she expects SunRun to have a presence in 15 to 20 states within five years.

    I own JinkoSolar stock which manufactures solar panels. This is based on the belief that solar has reached a point where it is a good way to generate electricity and we have huge needs for electrical power generation world wide.

    Related: Top Countries For Renewable Energy Capacity – Global Wind Energy Capacity Exceeds 2.5% of Global Electricity Needs – Solar Energy: Economics, Government and Technology – Oil Consumption by Country 1990-2009

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  • USA Individual Earnings Levels: Top 1% $343,000, 5% $154,000, 10% $112,000, 25% $66,000

    Very interesting USA federal tax data via the tax foundation. Top 1% has adjusted gross income of $343,000; over $154,000 puts you in the top 5%; $112,000 puts you in the top 10% and $66,000 puts you in the top 25%.

    The chart only shows federal income tax data. So the costly social security tax (which is directly based on earned income* so in reality is federal income tax but is handled in a separate account so is consistently not classified as income tax data) for outside the top 5% (income above $106,800 [for 2011] does not have to pay the social security tax) is not reflected in the rates paid here.

    Looking at the data excluding social security is fine, but it is very important to remember the social security (plus medicare) tax is the largest tax for, I would guess, most people in the USA. Social security tax is 6.2% paid by the employee plus 6.2% paid by the company – a total of 12.4%. That part of the tax was capped at $106,800 in income for 2011. The medicare tax is 1.45% of income paid by the employee and 1.45% paid by the employer (and it has no cap). So that totals 2.9% (for the employee and employer tax) and brings the total to 15.3%** for most earned income.

      

    Number of Returns with Positive AGI

    AGI ($ millions)

    Income Taxes Paid ($ millions)

    Group’s Share of Total AGI

    Group’s Share of Income Taxes

    Income Split Point

    Average Tax Rate

    All Taxpayers

    137,982,203

    $7,825,389

    $865,863

    100.0%

    100.0%

    –

    11.06%

    Top 1%

    1,379,822

    $1,324,572

    $318,043

    16.9%

    36.7%

     $343,927.00

    24.01%

    1-5%

    5,519,288

    $1,157,918

    $189,864

    14.8%

    22.0%

     

    16.40%

    Top 5%

    6,899,110

    $2,482,490

    $507,907

    31.7%

    58.7%

     $154,643.00

    20.46%

    5-10%

    6,899,110

    $897,241

    $102,249

    11.5%

    11.8%

     

    11.40%

    Top 10%

    13,798,220

    $3,379,731

    $610,156

    43.2%

    70.5%

     $112,124.00

    18.05%

    10-25%

    20,697,331

    $1,770,140

    $145,747

    22.6%

    17.0%

     

    8.23%

    Top 25%

    34,495,551

    $5,149,871

    $755,903

    65.8%

    87.3%

     $ 66,193.00

    14.68%

    25-50%

    34,495,551

    $1,620,303

    $90,449

    20.7%

    11.0%

     

    5.58%

    Top 50%

    68,991,102

    $6,770,174

    $846,352

    86.5%

    97.7%

     > $32,396

    12.50%

    Bottom 50%

    68,991,102

    $1,055,215

    $19,511

    13.5%

    2.3%

     < $32,396

    1.85%

    Source: Internal Revenue Service. Table via the tax foundation.

    Other interesting data shows that the top 1% earn 16.9% of the total income and pay 36.7% of the total federal income taxes. Those in the top 1-5% earn 14.8% of the total income and pay 22% of the income taxes. Those in the top 5-10% earn of the income 11.5% of the income and pay 11.8% of the federal income taxes. So once you exclude the main tax on income (social security) and use adjusted gross income the tax rates are slightly progressive (higher rates for those that are making the most – and presumably have benefited economically the most from the economic system we have).

    Given that this is skewed by excluding the regressive (higher taxes paid by those earning less – social security is the same rate for everyone except those earning the very most who don’t have to pay it on their income above $106,800 [in 2011]) social security tax I believe we should have a more progressive tax system. But that is mainly a political debate. There are good economic arguments for the bad consequences of too unequal a distribution of wealth (which the USA has been moving toward the last few decades – unfortunately).

    In addition to the other things I mention there are all sorts of games played by those that desire a royalty type system (where wealth is just passed down to the children of those who are rich, instead of believing in a capitalist system where rewards are given not to the children of royalty but to those that are successful in the markets). A good example of the royalty model is Mitch Romney giving his trust fund children over $100 million each. These schemes use strategies to avoid paying taxes at all. Obviously these schemes also make the system less progressive (based on my understanding of the tax avoidance practiced by these trust fund babies and those that believe it is ethical to give such royalty sized gifts to their royal heirs).

    I don’t like the royalty based model of behavior. I much prefer the actions of honorable capitalist such as Warren Buffett and Bill Gates that give their children huge benefits that any of us would be thrilled with, but do not treat them as princes and princesses who should live in a style of luxury that few kings have every enjoyed based solely off their birthright. Both Bill Gates and Warren Buffett have honorably refused to engage in royal seeking behavior that many of their less successful business peers have chosen to engage in. Those that favor trust fund babies are welcome to their opinion and have managed to get most of congress to support their beliefs instead of a capitalist model that I would prefer so they are free to engage in their desire to parrot royalty and honor the royalty model of behavior.

    * earned income – you also don’t have to pay social security or medical tax on unearned income (dividends, capital gains, rental income…). Again this by and large favors wealthy taxpayers. Everyone is eligible for the same favorable tax treatment but only those that have the wealth to make significant amounts of unearned income get this advantage.

    ** the social security tax has been reduced by 200 basis points (this relief was recently extended) as part of dealing with the results of the too big to fail banking caused credit crisis. So under the temporary reduction the personal tax rate is 4.2% and the total cost is 13.2%.

    Related: Taxes – Slightly or Steeply Progressive? – Taxes per Person by Country – USA State Governments Have $1,000,000,000,000 in Unfunded Retirement Obligations – Retirement: Roth IRA Earnings and Contribution Limits

  • Curious Cat Investing, Economics and Personal Finance Carnival #25

    Welcome to the Curious Cat Investing, Economics and Personal Finance Carnival: find useful recent personal finance, investing and economics blog posts and articles. The carnival is published twice each month.

    • India’s panel price crash could spark solar revolution – “In India, electricity from solar supplied to the grid has fallen to just 8.78 rupees per kilowatt-hour compared with 17 rupees for diesel.”
    • Buffett Says Bonds Among Most Dangerous Assets on Inflation – “Over the past century these instruments have destroyed the purchasing power of investors in many countries, even as these holders continued to receive timely payments of interest and principal… Current rates… do not come close to offsetting the purchasing-power risk that investors assume.”
    • How much should you save with each paycheck to reach retirement goals? – “For many, saving 10-15% will indeed be enough. If you find that you’re not currently on track for the retirement you envisioned, you can take steps now to change that.” [10-15% of income for retirement probably can be about right if you plan on working a standard 40-50 years and start adding close to 10% before you reach 30, and investment results are decent, and … and … and … Obviously if you don’t add at those levels starting earlier you will need to save more later. – John
    • Why Spain’s Unemployed Are Heading For Germany – “Spain’s near-23 percent unemployment rate is driving highly educated people like Fuente and Sandino abroad by the tens of thousands. This year more people left Spain than moved there for the first time in more than a generation. And Germany’s a principal destination.”
    • We Prefer Being Forced To Save – “Employers can do a number of things in addition to automatically enrolling employees and increasing their contributions amounts. They can make the websites easy to understand and be proactive about forcing the providers of the plans to make things less complicated. Even something so simple as having the retirement account website automatically bookmarked on work computers could go a long way.”
    • Why Has the Baltic Dry Index Collapsed? by Steven Hansen – “just a small increase in the supply of ships can make a major difference in a very competitive marketplace. It makes the BDI an inoperative economic indicator, and one less tool which can be used as an economic metric.”
    • Looking for higher dividend yields–and dividend growth? Here are three picks by Jim Jubak – “Pipeline master limited partnership Kinder Morgan Energy Partners (KMP). The partnership paid $4.32 a unit in 2010 and $4.58 in 2011 and thanks to new pipelines serving the U.S. energy boom and the likely drop down of assets from general partner Kinder Morgan’s (KMI) acquisition of El Paso (EP), I think the partnership will see growing cash flows that it can pass through to unit holders.”
    • 5 Big Car Buying Mistakes by David Weliver – “We ignore financing terms. This makes no sense: Fighting tooth and nail with a car salesman for three hours to get an extra $500 off the price, and then financing the car with no money down at 6.0% for four years at a cost of over $2,000.”

    For the second time in 2 weeks WordPress just completely failed to save a post I wrote 🙁 this is my second creation of this post.