Tax Attic

Jerry Coon

Jerry Coon

Now that the Pope has set a modern precedent by resigning, I wonder if our Supreme Court Justices will take a look at his action and think about instituting a retirement age for the Supreme Court. If the Pope can admit that age takes its inevitable toll, why can’t that same rule apply to the Supreme Court? While it has been 600 years since the last Pope voluntarily stepped down, it’s not unprecedented for a Justice to voluntarily resign. In fact, 54 Justices have resigned with Justice John Paul Stevens the latest to resign in 2010 at the ripe age of 90. The average appointment age for Justices has been 53 years old with the average Justice serving for 15 years. Back in the 1800’s and 1900’s, when the average life-span was substantially shorter than it is now, that meant the average Justice left office in a coffin. Since 1970, the average Justice has served for 26 years and four out of the current Justices are in their mid to late 70’s. They seem to be more hesitant to leave today. I realize that the Supreme Court Justices are the cream of the crop when it comes to judicial thinking and reasoning. However, in today’s pressure-cooker judicial environment, is there such a thing as judicial burn-out? Is a Justice susceptible to burn-out more when he/she is 60 or 70 or 80? Are decision-making abilities affected by burn-out? I think so and believe our highest Court should have a retirement age. I also think the Court will have to institute such a rule itself. Congress could pass such a law but they are having trouble agreeing on whether the sun came up this morning, let alone passing a law to force a Supreme Court Justice into retirement.

Something that just about everyone agrees on is the fact that United States taxpayers don’t save enough money towards retirement. Without some change, many of us will be woefully short of the funds needed upon retirement. There are a variety of ways to save for retirement including Individual Retirement Accounts, both traditional IRAs, Roth IRAs, 401(k)s, 403(b)s, 457s, Simple IRAs, SEPs, etc, and including, for a shrinking number of taxpayers, employer negotiated pensions. Wade Pfau, professor of retirement income at the American College, recently published a study that analyzed saving levels in conjunction with different markets dating back to the 1800’s in an attempt to discover a level of saving that would ensure sufficient funds for retirement. Professor Pfau came to the conclusion that setting aside 16.6% of income over a 30 year period that was invested in a diversified portfolio seemed to be effective. It’s important to note that the 6.2% contributed by each taxpayer to the Social Security fund and the 6.2% matched by the employer and sent to the Social Security fund are not factored into the equation. However, the 16.6% does include other matching retirement money set aside by the taxpayer’s employer. The truth, however, is that not many taxpayers save 16.6% of their income whether the employer’s matching funds are counted or not. It’s an admirable goal, though, so let’s look at some of the ways to get to the 16.6% level of saving. First, most taxpayers under the age of 50 can invest up to $5,000 in either a Traditional or a Roth IRA. Taxpayers age 50 or more can add up to another $1,000. The key two words in the previous sentence are “up to”. If saving $100 per month is what can be put aside, that still totals to $1,200 for the year. For a taxpayer earning $30,000, to reach 16.6%, it would take putting $4,980 aside. That may not be possible but $1,200 may be within reach and that is 4% towards that savings goal. Second, many employers match the first 3% of 401(k) contributions. The taxpayer saves 3% and the employer matches 3% for a total of 6%. 4% in the IRA and 6% in the 401(k) brings this taxpayer up to a savings rate of 10%. Finally, for that last 6.6% or $1,980, we might have to enlist the aid of an expert’s expert like Dave Ramsey. Dave would say to work on setting aside an emergency fund amounting to six months of living expenses. That is savings in my book and should count towards the 16.6%. Next Dave would say to pay down debt. The elimination of credit card debt, education debt, vehicle debt, etc. allows a taxpayer to save more in IRAs and other retirement accounts as well as make sure that emergency fund is fully funded. It appears that 16.6% can be obtained but it may have to be reached using a variety of programs. This is Jerry Coon signing off.

 

 

Jerry Coon is an Enrolled Agent

and Registered Tax Return Preparer.

He owns Action Tax Service on

Northland Dr in Rockford.

Contact Jerry through his website:

www.actontaxservice.com.

 

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