Personal Finance Essays
The Wall Street Journal on April 8, 2016, the author Jason Zweig says the government is not responsible for the retirement savings of the people. The government since the great depression in the middle of the 20th century created the social security system which guarantees (in theory) a pension and retirement funds to all the people that are over sixty years and serves more than thirty years or more, depending on the institution or company (Zweig). The welfare state created by the government and emulated by other countries in Europe and America works similar a pyramidal scheme. The new members of the pyramid support the retirement funds of the elder members. The system works well at the moment the Baby Boomers entered into the working force, but today the system is affronted a cash flow problem, that is, when the Baby Boomers are retiring. In 2014, the Social Security System of the United States of America had a deficit of 39 billion dollars. The pyramidal scheme of the welfare state is not sustainable in the long term because today the Baby Boomers generation (born after World War II) are retiring and the speed to generate more income to the system is slower that the cash requirements of the system.
For the previous reason, Jason Zweig, and many other columnists, economy leaders and authors recommend that the people must take the leadership in their financial future, retirement funds generation and saving, tax strategy and cash flow generation.
There are in the market several investor advisors that give recommendations to the people how to administrate their wealth, but at the end, the responsible for the financial future is the people. The people must acquire financial education to have control over their financial decisions and control of their future. Many authors consider a mistake in saving in 401k schemes because those generate revenues lower than the inflation and is taxed at high rates. The taxes applied to individuals, in the United States of America case and other countries, are greater than corporate taxes because the individual taxes are calculated with the "Overall Income" of the individuals, instead of the corporate tax that affects only the "Net Revenue" of the corporation. The people must use corporate strategies to have more control of their financial future including having enough funds for their living and a positive cash flow taxed with low rates.
In other article written by Tom Herman about the Tax Filling of 2015, he shows the disadvantages of the Tax Law for individuals giving more benefits and control for the corporations to pay fewer taxes. The individuals have only the following resources to reduce tax payments: education payments, tax deductions, charitable expenses, social security excess, and dividends (Herman). Those values may reduce the amount of tax payments for the individual but require paperwork and additional payments to accountant advisors. The other disadvantage of the individuals is that the tax deductions has limits affecting to the individuals that invest in different assets and does not have the ability to reduce the tax payment, different situation with the corporations where the company may include in the income statements deductions by interest, depreciation and amortization. The best recommendation for an individual is to create a business to obtain tax benefits and save enough money for invest and retirement.
The personal finances are not the responsibility of a financial advisor or the government; it is total responsibility of the individual, and the key to success is the financial education. The individual must prepare with more financial education to select the best assets to invest, the best strategy to save money and the best decisions to make. The retirement savings and the tax issues are part of the strategies the individual must improve with more preparation and education to achieve economic success for himself and his family.
Works Cited
Herman, Tom. The Wall Street Journal - Tips for Filing Your 2015 Taxes. 31 January 2016. Web. 14 April 2016.
Zweig, Jason. The Wall Street Journal - You Are Responsible For Your Retirement Savings. 8 April 2016. Web. 14 April 2016.
