Solano Real Estate Scene: Blue collar workers need to invest in their future
There is no way the president will be able to cure everything that ails the USA over the next six years no matter which party wins the 2020 election. To forgive $1.6 trillion in student loans and make the taxpayers suffer the loss is ludicrous. Just because you can get a loan doesn’t mean you should take it.
The federal government may have guaranteed a bunch of these student loans, but banks and student loan companies approved and funded these loans. The lender has a fiduciary responsibility to make sure the borrower can pay the loan back and that same lender has an ethical responsibility to make sure the borrower understands how much their income needs to be after school to afford the repayment.
As a rule of thumb I think the total amount of student loan debt should be no more than one times the borrowers expected second year’s annual income. In other words, if a young adult runs up $100,000 in student loan debt, he/she better be sure their first job pays $100,000 per year by the second year. Twenty trillion in national debt is already plenty of evidence that we cannot spend our way out of the problem.
Kamala Harris said that most American workers don’t own stock so Trump’s stock market gains are not helping the hardworking Americans, many of which are working two and even three jobs. In a previous column I explained that 52 percent of all Americans over 55 have nothing more than Social Security – no IRAs, no 401k plans and no pension plan. The whole point of the IRA, created in 1982, was to help the majority of the population that didn’t have a city, state or federal government pension plan as private companies and corporations across America realized they couldn’t afford to fund pension plans for their long-term employees.
The problem with the IRA and 401k concept is that it is a voluntary program and not all companies even offer 401k plans. The employee needs to voluntarily contribute to their 401k plan or invest in an IRA. This is like the gym or a diet. If a person wants to be physically and mentally healthy, they must voluntarily go to the gym and voluntarily eat the right foods. If a person wants to retire financially independent, they need to voluntarily invest 20 percent of every dollar they make starting at age 25 to 30 in inflation-beating investments like stocks or real estate and take advantage of the tax breaks that come with deferred compensation plans like the IRA and 401k.
A firefighter, police officer or military person does not have to voluntarily contribute or elect to contribute to the pension plan. They simply have to work for 20 to 30 years to become fully vested in their terrific pension plan to retire with a combination of Social Security and their government-backed pension. Ironically, most of these government employers also offer deferred compensation plans to supplement their pension plan and financially educate their employees on the benefits of deferred compensation.
One hundred percent of all IRA, 401k, 457 and 403b plans offer the opportunity to buy stocks and mutual funds. This country needs to teach people to fish or better yet force them to fish rather than give everyone free fish. Hoping that people voluntarily invest in the stock market via IRAs when more than 60 percent of the population is living paycheck to paycheck with no cash reserves is naive and just plain stupid . This is like global warming, it will take 25 to 40 years to change the fact that most Americans are not participating in the American Dream. The only solution to our country’s deteriorating middle class is making investing in income-producing assets, FICO scoring and the benefits of homeownership part of the education curriculum beginning in seventh grade.
