Monday, April 13, 2009

TAXES - Dues for What?

I just mailed off my tax returns two days early - sent one payment, one refund due. So as I file away the booklets and the worksheets, it's time to reflect on the year 2008.

My corporate 401(k) retirement fund had become two IRAs in earlier years. Now the government requires an old guy to take his mortality number and divide it into the end-of-year IRA balance. You must take that much money out your IRA every year you survive, or pay a penalty. In 2008 I withdrew more IRA money than ever before, to pre-buy the winter propane and to cover a lot of family automotive travel and celebrations.

That's the Individual Retirement Account (IRA) that you started stuffing with tax-free money back in the Reagan years. Some of my IRAs were created more recently out of a Company 401(k). After retirement from a company that matches employee contribution into their "Savings Investment Plan," you may "roll it over" into an IRA, (Individual Retirement Plan). This financial deal is pretty good.

You keep postponing the income taxes on these retirement "benefits" until your yearly income has "subsided." And you also have the opportunity to "manage" certain IRA accounts, now held by banks, credit unions, and insurance companies, with a variety of options, from high risk to very conservative. Results vary from high yield, to modest yield, to heavy losses.

Then there's the Social Security Account that you started way back when you took your first payroll job. Benefits can start at age 62, and it is indexed for inflation. Fortunately, the attempt to "privatize" it onto Wall Street failed in recent years. Begun in 1935, it has kept grandma and grandpa from real poverty since the depression years. Most of it is not subject to income tax.

So I filed away all these records and analyzed what the "Market Crash of 2008" had done to us. (See my posting on this blog by that name).

Is Minnesota a low-enough tax state? Is the federal budget deficit from 2001 to the present alarmingly high? Who is paying for the extravagances of recent years? Wars, BIG HOUSES, second and third homes. Recreational vehicles, larger sport utility vehicles, Big Trucks, fun cars, our kids' cars.

We get the kind of society we agree to pay for. A decent society is marked by justice, adequate healthcare, high quality education, environmental protection, safe food and water, safe bridges and dams, a sustainable global climate.

No, I was not taxed too much. My voluntary contributions to charities were smaller in 2008, because living expenses and home improvement costs left smaller amounts available. Finally, the credit card balances from 2008 are getting smaller.

Happy April 15th!

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