Ken Himmler.com

 

Today we see news that Social Security will be increasing by approximately 5.8%. While this might seem like a boom to those who are retired it will be a grim result. On average those who are on retirement only have 50% – 60% of their annual expenses covered by Social Security. As an example if you have a monthly expense of $3,000 then Social Security may be paying $1,000 of this. If you get on average $63.00 increase (that by the way will be the average increase) it really only increases the total income by 2.1%. Considering that inflation has gone up between 6% to 9% (depending on who you ask) it wont really make a dent. The problem is that most of the expense dynamics are out of whack. As an example: Property taxes have gone up by close to the same rate as the real estate went up from 2003 – 2006. Now real estate has dropped off by about 40% in value the taxing authorities should have dropped the tax rate by the same – right? Not even close, most taxing authorities have used their power to actually increase or keep the actual tax paid the same. Here is an example, In Sarasota, Florida there is an office building that was originally purchased for $850,000. The tax cost per year was $12,500 in 2006. Here it is 2008 and the tax cost is still $12,500 yet the value of the building is only $450,000. That is real value – meaning that it would have to drop to that to be able to sell the building. The challenge is that the tax appraisers office uses comparables. This means that they look at all the building that have sold recently to determine the fair market value. What happens in a declining market – buildings don’t sell. IN this example the last building that could be used as a comparable was sold in 2006. This means that the tax rate is based on the highest sold building which was two years ago. Here is my suggestion for a sound way of making money and inflation proofing your retirement income. Start your own government and tax the citizens under this method.

 

Tags: property taxes, Social Security

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