Kill Social Security, save retirement

Veronique de Rugy in Reason: One-third of Americans have nothing saved for retirement, according to a study published in August by the financial data aggregator Bankrate. That grim factoid joined a growing chorus of reports highlighting Americans' dismal savings habits. In 2013, the National Institute of Retirement Security (NIRS) determined that 84 percent of Americans are falling short of "reasonable" retirement savings targets. Data from the Center for Retirement Research at Boston College reflect a similar trend, and a recent PBS poll found that 92 percent of Americans believe we face a retirement crisis and that government should act now.

The reality is not quite as grim as these reports suggest. The American Enterprise Institute's Andrew Biggs took a hard look at the NIRS numbers and concluded that "the substance of the NIRS study should give pause to anyone considering drastic policy actions." One reason is that the study uses savings guidelines outlined in a 2012 Fidelity Investments report. But Fidelity suggests that people have enough money saved to enjoy 85 percent of their working income, while the Social Security Administration says most financial advisors recommend a lower 70 percent pre-retirement earnings target. The study also ignores that lower-income earners receive larger Social Security payouts, so their savings do not need to be as high.

America's personal savings rate is a fraction of what it once was. According to data from the Federal Reserve Bank of St. Louis, personal savings rates fell from a high of 17 percent in April 1975 to a low of 2.2 percent in September 2005.

Faced with this evidence, progressives would like to beef up Social Security. But the program already faces a $10 trillion funding shortfall, and economists have found that its existence creates disincentives to work and save. In other words, a bigger Social Security program could make a serious problem worse.

On Tax Day, it's good to be rich

Teresa Tritch in The New York Times: Newly released data from the Internal Revenue Service show that in 2010, the top 400 taxpayers had an average income of $265 million. That was $63 million more than in 2009, the depths of the downturn, and almost back to the group's average in 2008. Recovery, in other words, was well underway for the 0.001 percent of the population. For most everyone else, the stimulus of 2009 was coming to a premature end, marking the start of the effort, still underway, to dig out of an economic pit without a shovel.

The data also show that the top 400 paid an average tax rate of 18 percent in 2010. To compare, the average rate for all taxpayers was 11.8 percent. But if you think that means the rich got soaked, think again. In 2010, 40 percent of households paid no income taxes, not because they were moochers or takers, as Mitt Romney implied during his presidential bid in 2012, but because they were unemployed, disabled, elderly living on Social Security, or for some other reason were making too little to generate a tax bill.

A better measure of whether the wealthiest taxpayers were paying a fair share is to compare their average rate in 2010, 18 percent, to the top income tax rate that year for wages and salaries: 35 percent.

The main reason they paid so much less on average than their top rate would imply is that the wealthiest taxpayers make most of their money from investments, which are taxed at a lower rate than income from a job. In 2010, the top rate for dividends and most capital gains was 15 percent; for high-earners with dividends and for long-term capital gains, it has since increased to 20 percent, with an additional 3.8 percent tax to help pay for health-care reform.

But even those bolstered rates on investment income are still lower than many of today's tax rates on income from work, which top out at 25 percent to 39.6 percent. As a result, many merely affluent two-earner couples, especially professional couples, are bound to pay a larger share of their income in taxes than multimillionaire investors.

That is wrong. And yet the obvious corrective - taxing income from investments at the same rates as income from work - is not on any the agenda of either political party.

Cities can't afford pensions

Gregory A. Stein and Wayne Winegarden in The American Spectator: Unfunded government pensions are driving municipalities across the country into bankruptcy -- from Detroit, Michigan (the largest municipal bankruptcy ever) to Vallejo, California.

Despite the need for states and municipalities to have contributed large annual payments to their pension funds over many years, as a group they failed to do so. When coupled with overly optimistic return assumptions (also designed to reduce annual contribution requirements), it is no surprise that most pension plans are not actuarially solvent.

With the can now kicked, municipalities face unaffordable annual retirement contributions, taking away funds for current services and forcing municipalities like Detroit into bankruptcy. Taxpayers are trapped and public employees are cheated as an ever greater portion of taxes must be funneled into pension programs, or wages and benefits are frozen or cut, and even then, the chances of ever re-stabilizing are slim. Reforms are necessary.

For proof of this, look no further than Detroit, where current workers and retirees, facing massive cuts to promised benefits, had no alternative other than approving a freeze to its current pension plan and replacing it with a hybrid plan where workers bear more of the investment risks.

While Detroit's hybrid approach recognizes the problem, it still ties government workers to a government run pension system that binds taxpayers to cover any investment shortfalls.



That doesnt maximize her impact -- and she only gets to take an $8,500 deduction on her taxes for that year.

A better plan would be for Judy to donate $10,000 worth of Stock ABC directly to her charity of choice. By transacting a direct donation of appreciated assets, the charity gets the full $10,000 since it isnt required to pay capital gains tax on Judys assets. Plus, Judy gets to take a deduction of $10,000 on her tax bill. Now that is what we call a win-win situation.

Giving through a Donor Advised Fund

Another option for those of you who like to retain control in both investment selections and how funds are distributed is a Donor Advised Fund (DAF). Think of this as a personal savings account for money you plan to donate to charity. These giving vehicles are relatively easy to set up, and the benefits may be significant.

Contributions can be made to the DAF as often as you want; Money can remain in the fund to be invested (and potentially grow), and you direct grants from your account to qualified charities on your own schedule.

A DAF also can reduce paperwork that can come with charitable contributions. If youre donating 100 shares of a security, for example, a DAF makes it easier to donate the proceeds to 20 charities at a time, instead of going through the administrative work you may encounter with direct donations.

Finally, a note for those of you who have good intentions but tend to procrastinate: As its nearing the end of the year, and if you havent yet decided which charity youll donate to, but still want to maximize your tax break, you can buy yourself a bit more time by contributing assets to a DAF and claiming the deduction for this year. You dont have to wait until the funds are distributed for the tax benefit.

As ever, this shouldnt be taken as a substitute for individualized tax advice. We recommend that you discuss your specific situation with a qualified tax adviser.

Bruce Helmer and Peg Webb are financial advisers at Wealth Enhancement Group and co-hosts of Your Money on News Radio 830 WCCO on Sunday mornings. Email Bruce and Peg at This email address is being protected from spambots. You need JavaScript enabled to view it.. Securities offered through LPL Financial, member FINRA/SIPC.



Seth Champion, owner of Champys Famous Fried Chicken, drove to Athens, Georgia, on Tuesday to personally see the Coming Soon signs go up on the newest Champys location deep in the heart of SEC football country.

The Chattanooga-based restaurant started on Champions personal savings and a small, nine-person staff in 2009 and has now grown into a five-restaurant brand.

Champys operates three restaurants in Alabama, one in Chattanooga and now one in Georgia. The popular M. L. King Boulevard restaurant is where it all was born.

I left the corporate world after about seven years, and decided to move over to Chattanooga and start a company, Champion said. I took every last dime that I had, 401K and everything, credit cards, and leveraged everything I had on the line to put Champys on MLK.

Champion believes the restaurant has enjoyed success because the food is cooked to order, from scratch, and when combined with the unique atmosphere and beer selection, creates an unbeatable formula.

Champions recipes are based on the Mississippi Delta fare his family cooked for years back home in Indianola, Miss., which is also the hometown of Blues legend BB King.

When I moved to Chattanooga, I really missed home, and that aspect of the food, and that culture and that soul of the place, he said. And I just created Champys so I would have something that would be similar to back home.

The ML King Boulevard restaurant alone now employs 45 people, while company-wide, Champys has about 130 employees. Champion said the five restaurants are continually hiring to keep up with demand.

While looking for the next Champys city, Champion visited towns, including Knoxville and Greenville, SC, but Athens is just a great fit, he said.

Athens is home of the University of Georgia, which has an undergraduate enrollment of 26,278, and a football stadium that seats 92,746 people -- and its less than three miles up the road from the new Champys.

Josh Collins, operator of the Athens Champys, is a native of Monticello, Georgia, about an hours drive from Athens, and he graduated from UGA in the mid-1990s. He later lived in Chattanooga for about a decade, in which time he befriended the Champions.

Now, hes excited about returning to Athens, which he has considered home since attending UGA, and taking a piece of Chattanooga with him.



Development of the new Madison Station development at the corner of North Madison Avenue and Shelbyville Road in Middletown was delayed by a partial roof collapse and waiting for approval of building plans.

But the 8,710-square-foot retail development should be ready for occupants after the first of the year, said John Hollenbach, a principal with real estate development company Hollenbach-Oakley LLC. The estimated cost of the project is $1.9 million.

The center design is reminiscent of an old train station because its on the same property where a Louisville Interurban Railroad Station was, as Business First previously reported.

The anchor tenant for the center, Coals Artisan Pizza, originally was expected to open in October this year, but owner Mark Peters said the likely open date now is early to mid-March 2015.

His wife and co-owner Madeline Peters said the new location -- Coals second -- will be similar to their Frankfort Avenue store, with wood paneling, a private dining room for special occasions and the same light fixtures. It also will have a vintage-looking neon sign.

It is coming up beautifully right now, she said. I think this will be very successful.

The couple is investing personal savings into the construction of its new store but declined to say how much.

The restaurant will occupy 3,700 square feet, while the remaining 5,000 square feet will be occupied by two or three other tenants, Hollenbach said.

We are working with a few different prospects right now.

Caitlin Bowling covers these beats: Restaurants, retail, human resources, and women minority affairs.