Thursday, February 5, 2015

Reality tarnishes my first year of retirement, discovering the first political lie I had lived with.

The Joke is on ME!

First of all, I am a Baby Boomer.

I am in my late sixties and have been retired just long enough to become aware of my unique status in US Politics and the world.

When I walked out the corporate door, I was whistling happy songs and I couldn't wait to get started on these my "retirement years".

Boy, was that a great time for my wife and I.

For a while, that is.

Cost of Living Reality

There were several things that happened over the next year which, I now realize, were harbingers of a more complicated future.

The first thing that got to me was the lie I and pretty much my whole generation had been told. If you remember, we were told to stick our retirement into "tax-deferred" accounts, all of it. Do this and you will live a happy retirement.

OK, years later, essentially decades later, for the next generation, the advice changed during one of our national recessions to; "Sure, use Tax-deferred, but diversify and put some of your savings into after-tax investments.

Well, shame on me. By this time, I was working 12-hour days and all of my money was in Pre-tax savings. What was I supposed to do? Pull it out and then reinvest it? That would be a tax fiasco of epic proportions.

I talked with my co-workers and friends, and the consensus was that seeing as we were already so heavily into tax-deferred accounts, changing now, in our late middle-aged years was not going to be effective enough to warrant the change.

Change Too Late for me

So, I just kept on working and hoping for the best; just like so many of you, it seems.

And, my first year of retirement, I just pulled cash as I needed it to support our lifestyle, and had them take that standard 10% withholding for taxes, and hoped for the best.

Then, I did my first years taxes for the IRS as a retiree.

That was when the reality of the lies told to my generation about savings hit me, directly in the wallet.

You see, those lies we were told were based on an imaginary world. These advisors assumed we, the Boomers would just sit in our paid-for homes and rock in our chairs on the porch until we died. And, that we would use very little of our savings.

These idiots, who had the ears of our politicians actually convinced them (and us, I guess) that we would live a sparse lifestyle and live on a small annual budget.

Not our grandparents

Well, we are not our parents or our grandparents. We are an active generation, with a longer life expectancy and more more things we want to do.

So, I, and the majority of my peers, it seems, immediately started pulling larger portions of our savings to support our lifestyle.

But we had not ben prepared for the income tax implications of these larger withdrawals. Instead of paying less taxes on a lower income, our withdrawals pushed us up and into even higher tax brackets.

And, for me at least, I had to take even more money from my retirement savings to pay last years increased taxes. Which, in turn reduced my level of savings by large enough numbers to start me worrying about how long my savings were going to last my wife and I.

Bucking a Tax System, too late

So, in summary, I live a comfortable lifestyle, which forces me to make withdrawal from my tax-deferred savings. These withdrawals increase my income level for next years taxes to the point that I am in a much higher tax bracket.

So, the next year, I have to not only take out money for my lifestyle, but I have to take out even more to pay much higher income taxes.

We, the Baby Boomers, were lied to. I know that's a strong statement, but it is the truth. We were sold a bill of goods for so many years, that we had already committed our monies and really had no viable alternative for our savings plan.

What has this done to my wife and I?

We are trapped in a position that constricts our expenditures, almost to the point of making ourselves "pauper retirees" rather than happy retirees. If we want to splurge on pretty much anything, we have to sit back and plan on how to pay the extra taxes that our government has decided it needs.

So much for that unfettered retirement my wife and i planned on.

Thanks Congress, I hope those other nations you are spending our money on are really worth the pain you are inflicting on your Seniors.

by Don Bobbitt, 2015
Copyright, DonBobbitt, 2015, All Rights Reserved

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