Social Security update

My online students have a short paper for which they are to complete an online questionnaire to evaluate their investment risk level, and then examine various investment options, identify goals, and how they plan to allocate cash now for investing.  I posted the following this morning.

Social Security update

NOTE: Opinions expressed here are my own, and do not necessarily reflect the viewpoints of this organization or other faculty or staff.

-------------------------

Page 392 of the textbook says that the Social Security trust fund will be depleted by 2044.

Last year the Social Security and Medicare Boards of Trustees projected that the theoretical combined OASDI trust funds will be depleted in 2033 (see table below).  OASI is Old Age and Survivors Insurance and DI is Social Security Disability Insurance.  Other components are Medicare Hospital Insurance (HI) and Supplementary Medical Insurance (SMI). [1]

According to the projection, even after depletion continuing tax income would be sufficient to pay 77 percent of scheduled benefits in 2033 and 72 percent in 2088.  Though I do not expect to ring in 2088 and may not even see 2033, some of you may see both!

The textbook further notes: “ . . . the government is somehow going to have to come up with the funds to make good on its pile of IOUs to the Social Security trust fund.”

Allen W. Smith, Ph.D. (Ball State and IU grad) stated that “The government has embezzled all surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs. None of the money was saved or invested in anything.” [2].

At the end of calendar year 2014 our national debt was more than $18 trillion ($18,141,444,135,563) and has grown more than $10 billion by the end of March 2015.

Last fiscal year (October 2013 - September 2014) the interest expense alone on our national debt was $430.8 billion ($430,812,121,372), enough to put $113.56 of food, every month, on the table in front of every man, woman, and child in America.

With $18 trillion in debt and no budget at all – let alone a balanced one - it is unrealistic to believe that our federal politicians will work hard to hold themselves to unsustainable promises made decades ago by their predecessors.  After all, to remain in office they’ve made too many of their own.

Rely on nothing from government.

[1] Source: Social Security and Medicare Boards of Trustees, Summary of The 2014 Social Security and Medicare  Annual Reports <http://www.ssa.gov/oact/trsum> accessed 12/09/2014

[2] Source: <http://www.fedsmith.com/2013/05/23/government-owes-2-7-trillion-to-social-security> accessed 12/10/2014

More on ID Theft

Last week, after our online students in Indiana read an article and watched a short YouTube video about identity theft they wrote short papers on the topic.  The 2012 video, in my opinion, made much too light of online threats.  I also touched on credit reporting and scoring since the “expert” speaker in a previously assigned video made both false and misleading statements, and the impact was evident in their papers.  The students also mentioned Credit Karma.  / Kurt

-------------------------------------------

I enjoy reading all of your papers; for this one, several of you shared stories about how identity theft and fraud has affected you or someone you know.

Early this year, the Federal Trade Commission released its 2014 Consumer Sentinel Network Data Book that reports complaints received by the FTC’s Consumer Sentinel Network during the year.  Identity theft again topped the list, for the 15th consecutive year.

The complaint categories making up the top 10 are:

	Number	Percent
Identity Theft	332,646	13 percent
Debt Collection	280,998	11 percent
Imposter Scams	276,662	11 percent
Telephone and Mobile Services	171,809	7 percent
Banks and Lenders	128,107	5 percent
Prizes, Sweepstakes and Lotteries	103,579	4 percent
Auto-Related Complaints	88,334	3 percent
Shop-At-Home and Catalog Sales	71,377	3 percent

 

The founder and president of Javelin Strategy & Research, a company mentioned in the 2012 Session 9 identity theft video, has since warned that social media users are a growing target for identity theft.  A 2012 BankRate.com article  says that paying with a credit card or debit card makes you vulnerable, and mobile phone users are also a target.  In March 2014, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray warns, "your information is always at risk, every day."

My own interest in the topic likely dates back to 2002 when Walter Kevin Scott – a convicted felon - was working as benefits manager for the Indiana Public Employees’ Retirement Fund (PERF).  Mr. Scott had used a false Social Security number in the hiring process, and the State of Indiana had hired him unaware that he was a convicted felon who had served time in a federal penitentiary -  for identity theft!  During his trial it was disclosed that from November 2001 to August 2002, Scott had unlimited access to the Social Security numbers of 1.2 million current and former public employees and their families  -  the equivalent of nearly one in every six Hoosiers.  Investigators found personal information and pension fund balances of 750 people during a search of Scott's home after he quit working at the fund.

A few years later we began to hear more about breaches, most notably in universities.  In May of 2005, the Lafayette Journal and Courier listed ten universities that had already reported breaches in that year, including Purdue and IU.  Also in 2005 it was reported that identity thieves set up fake businesses and gained access to up to 160,000 consumer records from data broker ChoicePoint.

Heartland Payment Systems Inc. - one of the largest processors of credit and debit card transactions in the U.S – was hacked in 2009.  With vague explanation, one local bank sent new debit cards to replace ones that were not even near expiration.  When the Target and Home Depot names appear in the news we all noticed, but how many of us would even recognize the name Heartland Payment Systems or ChoicePoint?

According to the Identity Theft Resource Center (ITRC), from 2005 to 2013 data breaches increased by nearly 400%. The ITRC defines a data breach as an incident in which an individual name plus a Social Security number, driver’s license number, medical record or financial record (credit/debit cards included) is potentially put at risk because of exposure.  The ITRC reports that, as of June 9, this year there have been 5,377 breaches, exposing more than 786 million records from businesses, financial institutions, schools, health service organizations, and governments.

Last year, Krebs on Security reported that a nationwide beauty products chain discovered a breach in its payment systems and a fresh batch of 282,000 stolen credit and debit cards reportedly went on sale in a popular underground crime store.  That same month, Indiana University reported that information including names, addresses and Social Security numbers of those who attended any of the university’s campuses from 2011 to 2014 was unsecured for more than 11 months because security protections weren’t working correctly.  Purdue associate professor of communication Josh Boyd states, “The recent security breaches . . .  are a good reminder that the online environment involves no guarantees.  If you put information online and somebody really wants it, it’s vulnerable.”

The use of a credit monitoring service cannot prevent ID theft, but it may help you to discover fraud.  About the well-publicized Target security breach during the 2013 Christmas shopping season, Purdue professor of cyber forensics Marcus Rogers warns, "People have to be vigilant for the next six months, year, even up to two years.”  The ProtectMyID credit montoring service offered by Target is a product of Experian, a credit reporting agency, and monitors changes only to a consumer's Experian credit report.  According to Consumer Reports, “The service can give consumers a false sense of security, and Consumer Reports can recommend this deal in its present form only as being better than nothing, and only for consumers who understand its significant shortcomings.”

Credit Karma has been advertised much recently.  Credit Karma is a service that provides no-cost credit scores, credit reports, and credit monitoring from TransUnion.  In 2014, Credit Karma settled with the Federal Trade commission on charges that the company “failed to take reasonable steps to secure” its mobile apps, “leaving consumers’ sensitive personal information at risk.”

To monitor your own reports from Experian, TransUnion, and Equifax, you may order copies through www.AnnualCreditReport.com.  For information about how to order by phone or mail, see the FTC's "Disputing Errors on Credit Reports".  If you’d like an estimated credit score, use a credit score estimator for which you do not disclose identity information.

A high score can be useful at times, but do not make it your primary focus.  The Fair Isaac Corporation (the "FICO" people) tells us that 65% of a credit score is related to payment history and amounts owed.  So as it turns out, some of the actions that can increase your score also make financial sense!  Pay bills on time, every time, and don’t take on too much debt.  Then make sure that the information on your reports is accurate.

It has become clear that no institution, public or private, is immune to data insecurity.  My guess is that by now just about every one of us has been a victim of ID theft whether we know it or not, and there’s nothing that we can do to change that.  Since there is so much that is outside of our control, it does make sense to at least control what we can.  Remain vigilant, and from today forward the less information that you provide - and the fewer places where you provide it -  the better.

Especially if you have a rural mailbox, consider a post office box instead, and remember that outgoing mail is just as important as incoming.  For several reasons, seniors are a very vulnerable population, and if you have a loved one who is aging watch for signs of fraud.  Whether credit card statement, checking account statement, or utility bill, look through every line and understand what is behind every charge.   Not all misinformation on a bill or in a consumer report is necessarily fraud – mistakes do happen.  But certainly make sure that all information is accurate.  If you know someone who has been denied a checking account, you might mention the ChexSystems consumer report and Bank On Tippecanoe; those outside of the Lafayette area may see Bank On Indiana.

The CFPB explains how to check a minor child’s reports from the three major credit reporting companies.  The Indiana Attorney General informs consumers how to place a security freeze with Equifax, Experian, and TransUnion.  The Attorney General has also produced an ID Theft Victim Kit that outlines the steps to follow if a consumer becomes aware that personal information has been stolen or used by someone else.

Considering the outrageous number of major breaches reported during the past two years I’ve just been unable to keep up with tracking.  Nevertheless, quite some time ago I reached the same conclusion as Lafayette editorial cartoonist Dave Sattler following Jimmy John’s September 2014 breach, “The recent security breach by Jimmy John’s as well as Target, eBay, and Home Depot has many wondering How do we protect our identity . . .  One way is to bring back an old friend . . ."

Take care.

Kurt Burnett

Retirement and Social Security

If you make any money, the government shoves you in the creek once a year with it in your pockets, and all that don't get wet you can keep. —  Will Rogers

This week my students are discussing retirement planning, and noted in their textbook that the Social Security trust fund will be depleted by 2044.

Last year the Social Security and Medicare Boards of Trustees projected that the theoretical combined OASDI trust funds will be depleted in 2033 (see table below).  OASI is Old Age and Survivors Insurance and DI is Social Security Disability Insurance.  Other components are Medicare Hospital Insurance (HI) and Supplementary Medical Insurance (SMI). [1]

According to the projection, even after depletion continuing tax income would be sufficient to pay 77 percent of scheduled benefits in 2033 and 72 percent in 2088.  Though I do not expect to ring in 2088 and may not even see 2033, some of you, my children and grandchildren may experience both!

The textbook further notes: “ . . . the government is somehow going to have to come up with the funds to make good on its pile of IOUs to the Social Security trust fund.”

Allen W. Smith, Ph.D. (Ball State and IU grad) stated that “The government has embezzled all surplus Social Security revenue, generated by the 1983 payroll tax hike, and spent the money on wars and other government programs. None of the money was saved or invested in anything.” [2].

At the end of calendar year 2014 our national debt was more than $18 trillion ($18,141,444,135,563) and has grown more than $10 billion by the end of March 2015.

Last fiscal year (October 2013 - September 2014) the interest expense alone on our national debt was $430.8 billion ($430,812,121,372), enough to put $113.56 of food, every month, on the table in front of every man, woman, and child in America.

With $18 trillion in debt and no budget at all – let alone a balanced one - it is unrealistic to believ
e that our federal politicians will work hard to hold themselves to unsustainable promises made decades ago by their predecessors.  After all, to remain in office they’ve made too many of their own.

Financial projections are never simple, but considering that a congressional representative needs to think no further then the next election we might just as well roll the dice.  Whether from “borrowing” or “embezzling”, it’s clear that there is no pile of OPM that is safe from politicians.

Rely on nothing from government.

 [1] Source: Social Security and Medicare Boards of Trustees, Summary of The 2014 Social Security and Medicare  Annual Reports <http://www.ssa.gov/oact/trsum> accessed 12/09/2014

[2] Source: <http://www.fedsmith.com/2013/05/23/government-owes-2-7-trillion-to-social-security> accessed 12/10/2014

Fraud Today, April 20, 2015

Our local CBS affiliate has provided very good coverage of the Money Smart Week events at http://wlfi.com/2015/04/14/tippecanoe-countys-events-for-money-smart-week and http://wlfi.com/2015/04/17/learn-identity-protection-at-financial-fraud-seminar.

This morning it also reported about a local business that was a victim of fraud – one in which a caller claimed to be from the electric company and the business owner, even knowing that she had paid the bill, applied nearly $2,000 to a prepaid card.

I’ve met very bright people who have been victims of fraud and in hindsight they feel foolish.  But it’s very easy to become a victim and it takes guts to publically admit when you’ve been taken.

Desperation, fear, and a sense of urgency seem to get many people into trouble, as with the Grandparent scam and the payment of phantom or nonexistent debt.  Add feelings of helplessness and hopelessness, and we’re more highly susceptible to fraudulent foreclosure services and credit card debt reduction schemes.  Every time someone does fall, it empowers the cons and puts even more of us at greater risk (and in the case of robocallers, greater annoyance).

Several years ago a local insurance agency failed to report an embezzlement, which led to what the newspaper later described as the “pass-along problem of embezzlement”.  It all came out into the open a few years later when the individual embezzled from a local nonprofit agency.  I was working in this agency at the time and had known the individual since elementary school, and never would have dreamed it of her.  On the Friday that she was escorted out of the building I was away at a conference, and on Monday I was puzzled that the normally upbeat atmosphere was gloomy.

This agency did report it, and when the investigation was completed a year later she was arrested in Arizona where she was working as a bookkeeper.  One long-time small business owner that I had talked with seemed to shrug it all off, explaining that embezzlement is just another type of employee theft.  Once you discover a hole you plug it, and then wait for the next one to spring.  Even though the agency took a lot of heat, some good that resulted is that local nonprofits learned how to tighten up internal financial controls.

Since there’s so much that is out of our control it certainly makes sense to at least control what we can.  Keep learning, and think through financial decisions with as little emotion as possible.  The fewer personal details that you put out there – and the fewer places where you do – the better.  Be vigilant, and help friends and loved ones when it looks like they’re headed for trouble.