Cunningham Law Office

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BUSINESS MATTERS

Monday, March 3, 2008

SOCIAL SECURITY - A GOVERNMENT CON GAME

Oh where, oh where does all of that social security money go - you know, the amount withheld from your paycheck and the matched amount your employer kicks in?

Take a look. Last year, the federal government took in $824 billion in social security taxes. It paid out $586 billion to retirees, leaving a $238 billion surplus. And where did that surplus go? Here's a partial list. National Wildlife Turkey FOundation of South Carolina, Country Music Hall of Fame in Nashville, research on the sex lives of African fround squirrels, water taxis in Savannah, and junkets for your congressional representatives. That's right. The government takes this surplus and spends it as soon as it comes in the door.

None of the presidential candidates in this election year seem to want to deal with the ticking time bomb called social security. Now you know why.

So where will your social security come from? Take care of those smiling grandkids. They're your "lock box."

The bottom line is this: social security benefits are scheduled to decrease as time goes on. Here's the law as it stands right now. Several years ago, Congress boosted the normal retirement age to age 67 for those born during the "baby boom" years. If you're a "baby boomer" and decide to retire early, your beneifts reductions will be steeper than those who have gone before you. You can expect most of your social security benefits to be taxed as income, and, of course, you will pay more for medicare, even pre-retirement.

So what do you do? If you're in the middle of a career, or you dream about the day when you don't have to haul yourself out of bed every morning to get to work, get serious about a retirement program. Set up that IRA and don't forget to make contributions every year. Pay yourself first. Set up a disciplined savings program and stick to it. Retirement programs are one of the most neglected items put off by small businesses. But delaying this "frill" comes at a price.

Tomorrow will come. Do you want to trudge off to work during your retirement years because you have to make ends meet while your neighbors are just waking up to their morning coffee? It's your choice.

TUESDAY, MARCH 4, 2007

DON'T READ IT - AND WEEP

You may have read about the couple in Cedarburg, Wisconsin who refinanced their $300,000 home in 2005 with a mortgage offering a "teaser" rate of 1.95% for 5 years, only to learn that the "teaser" rate changed after one month to 4.5%. For more of the sad details, go to http://www.jsonline.com/story/index.aspx?id=723768.

The "happy couple" are now entering their 4th year of a lawsuit, now on its way to an appeals court in Chicago. The fuss in this case is whether the mortgage lender properly disclosed the scheduled change in the interest rate. According to the "happy couple," the mortgage lender failed in its duty to disclose. The lender naturally argues just the opposite.

This case has garnered a lot of publicity because if the "happy couple" wins, many lenders may find themselves in the bulls eye of lawyers who are always looking for new ideas to sue.

But I think this case is important for another reason. When people don't take the time to read and understand what they're signing, they may pay a very heavy price, not just in attorney's fees, but in all of the emotional turmoil that lawsuits shower on litigants.This couple did not bother to read the mortgage note they signed - for $170,000. Four years later, there's no end in sight.

How could they be so naive, you ask? The answer lies in this question: have you signed papers that were pushed in front of you at the closing on the sale or purchase of your home without taking the time to read and understand them?

In my experience, people, including very sophisticated business people, are either just "too busy" to take the time to read what they're asked to sign, or they don't want to pay a lawyer to tell them that the documents are going to be acceptable anyway. So we go back to the "happy couple." Do you think they'd pay a lawyer to review the refinancing documents if they had it to do all over again?