Measuring the Past Value of a Dollar
In my Wills and Estates class the other day I learned of a website called Measuring Worth.com. This site lets you measure the historical worth of a dollar. A dollar from my birth year is worth from $5.01 to $16.63 today depending on what measure you use. Using the Consumer Price Index which is the most common measure you get a value of $6.21. That helps you realize the effect of inflation.
They also have several other calculators including one that lets you measure what a historical investment in the Dow Jones, S&P 500, or Nasdaq would have returned. Those returns don’t include reinvested dividends though which makes the returns lower than they should be. Also, for those from the United Kingdom they have calculators for the pound using the UK GDP, CPI, and other data.
Enrolled in 401k
I was surprised to receive information on how to enroll in my employer’s 401k earlier this week. I assumed I wouldn’t be eligible to enroll since I’m not actively working there currently. The website did allow me to enroll though. The plan matches 100% for the first 3% contributed and 50% for the next 2%. I signed up for a 5% deduction to take full advantage of the match. I could have contributed up to 25% of my income but I decided not to since it will be difficult for me to contribute the full $5000 to my Roth IRA and I want to max out my Roth before making more 401k contributions.
This may not mean much though. I hope to work there this summer but I’m not sure how much or if I’ll be able to work there though. Getting a job that will give me legal experience is my first priority for this summer. If I still have time to work the pizza job then I will do that as well. If not there is no harm in signing up since it is free. My contributions and the employer match vest immediately so I’ll get that money even if I don’t work there after this summer. I think I can then just roll the money over into my Roth IRA but I need to check on that.
Get up to 50% Return with Saver’s Credit
Using the Saver’s Credit you may be able to take the credit of up to $1,000 (up to $2,000 if filing jointly) if you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans. Here is a table showing what your credit would be depending on your filing status and income.
|
Single AGI |
Head of Household AGI |
Joint File AGI |
|
0-15500: 50% |
0-23250: 50% |
0-31000: 50% |
|
15501-17000: 20% |
23251-25500: 20% |
31001-34000: 20% |
|
17001-26000: 10% |
25501-39000: 10% |
34001-52000: 10% |
As you can see it would be pretty hard to end up in the 50% bracket. I haven’t gotten all my tax information yet but I believe I would end up in 20% bracket coming close to getting to the 50% bracket. I won’t qualify though because I was a full-time student for 5 months of the year.
Another thing to keep in mind is if you don’t owe any taxes than this credit won’t do you any good. You can’t get a refund of the credit itself. The best it can do is reduce your taxes to zero which should result in an increased refund.
I’m thinking I’ll probably credit for the credit for the 2009 tax year. I’ll be attending school less than full-time in the spring semester. With attending school and then studying for the bar there is a good chance my income will be low enough to qualify for the credit. Depending on where my income ends up I could use a traditional IRA to lower my AGI enough to qualify for a higher percentage credit.
If you don’t make a lot of money and you contribute to a qualified retirement account make sure to determine whether you qualify for this credit.
Take SS Early and Still Receive Full Benefit
There has been a lot of speculation about how long Social Security will be around and in what form it will be in the future. Figures vary but it is reported that the trust fund will start running at a deficit in 2018 and will be unable to pay full benefits by 2040. I have 22 years until I can file for Social Security so I decided to do some research on Social Security.
I was surprised to find out that you can file at 62 and still get your full benefit amount at age 70. With the uncertainties surrounding Social Security I would prefer to start getting my benefits as soon as possible. In order to get benefits at 62 and still get full benefits at 70 does require some work. The Social Security Administration allows you to “withdraw your application” for benefits at 69, reapply at 70, and get the same larger monthly check as someone who delayed taking Social Security until that age. The catch is that you have to pay back all benefits you have received. You won’t have to pay interest on the money though and you can get either a tax credit or tax deduction on any income taxes you paid on the Social Security.
This works if you are able to save and invest your Social Security benefits. Doing this gives you will roughly $20,000 in earnings if the benefits are saved at 5%. In addition to the extra $20,000 you will also have a significant increase in the amount of Social Security benefits. For those born after 1960 like myself there is a 77% increase in benefits from age 62 to 70. This option may not be around by the time I’m ready to file for benefits but for those retiring soon it is something to consider. For a more detailed look at the math involved visit the Retire Early Home Page.
Saving On Minimum Wage
Recently there have been several PF blog posts focusing on the minimum wage and the thought that most PF blogs are out of touch with the minimum wage earner. Since I earn the minimum wage I’m going to share my thoughts on this subject.
I earn the MO minimum wage of $6.50 per hour. I do also receive tips and supplement my income with other sources so overall I make more than the minimum wage. However I didn’t work the first three months of the year and I usually work less than 40 hours so my annual income will be close to that of a full-time minimum wage worker.
I do believe it is possible to get ahead on minimum wage although ideally you would seek a job earning more income as soon as possible. My current job is delivering pizza and my restaurant has never been fully staffed. Every city I’ve lived in there was always plenty of openings at restaurants. It might not be the greatest job but it does allow you to make a bit more than minimum wage and pays the bills until you can find something better.
To get ahead on minimum wage you definitely need to be frugal. If you click on my expense/income tracking category you can see how I’ve been spending my money. By watching my spending I’ve been able to pay off debt and/or increase my savings every month.
Here is what I have done since April:
- Paid off approximately $1600 in credit card debt
- Paid cash for over $1000 of oral surgery/dental expenses
- Established a $1000 emergency fund
- Opened a Roth IRA and funded it with $700
- Paid off $575 in student loan debt
- Bought private health insurance
I also paid a significant tuition bill and had large car repair expenses. I may not be getting rich but I’m definitely making progress. My current goal is to put 50% of my income towards savings or paying down debt. If I can do this on minimum wage than so can others.
Depression and Money
Sorry for not posting the past few days. I’ve been experiencing a bout of depression and when in this state I don’t feel like doing anything. Not even things that I like such as blogging.
I know some people are probably thinking if I weren’t a Tight Fisted Miser and would spend some of my money I wouldn’t be depressed. It doesn’t work like that for me though. I’ve tried spending my way out of depression in the past and it didn’t help. That is how I ended up having to declare bankruptcy eleven years ago.
I’ve learned to keep my depression from causing me to waste money. Depression still hurts me financially though. It keeps from doing things to increase my income. It makes it difficult for me to keep a job and keeps me underemployed. Part of the reason I’m working the jobs I currently have is because they are so mentally and physically easy that I can deal with them even when depressed. The biggest impact depression is having on me currently is law school. It led to my poor decision to transfer schools and it led to me not putting in enough effort in school and being put on academic probation. I’m trying to work through it now but it is making it difficult for me to concentrate on the paper I have to write to be considered for re-admittance. It is better today and I hope it stays that way.
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