Now I feel sorry for Ms. Bauer who was laid off from her resort job in Kohler, Wisconsin just one year after her divorce was finalized. This chain of events led to bankruptcy followed by the move back to the parents' home. Today Ms. Bauer is employed and saving money so she can purchase a house while her parents cover her basic living expenses.
So what should we make of this news that financial planners who were quoted in this same AP story saying this is a growing trend of parents offering substantial financial support to clearly mature/adult children? Perhaps Ms. Bauer made some unwise , even lavish, purchases along the way or perhaps she has a gambling addiction -- the story never tells us and I am not doing this blog posting to focus on what she may or may not have done correctly in her life.
Instead let me focus on -- Bill and Shirley Smith -- Ms. Bauer's parents. You have to admit their assistance to their daughter is a loving statement but let's focus on their life in retirement. First let's assume Ms. Bauer started working at age 22 so now that she is 50 years old that means she has been paying into the Social Security system for 28 years -- money that has gone into the "trust fund" (I don't trust the government with our funds I say!!) that exists to pay her parents' retirement payment. So for 28 years Ms. Bauer has paid 7.65% into the Social Security/Medicare funds (FICA) while her employers over those same 28 years have contributed another 7.65% (money that could have been paid as salary to Ms. Bauer if the government did not confiscate it via taxation). A whopping 15.3% of her earnings went to the federal government which is ON TOP OF personal income taxes, state income taxes, etc. Full details on this tax policy are at --
http://www.nyc.gov/html/opa/html/taxes/socialsecurity.shtml
To REALLY simplify this math let's also assume Ms. Bauer made $50,000 each and every year of her 28 working years so 15.3% of $50,000 over 28 years =
$214,200
Final note -- this same AP article noted that Ms. Bauer was saving money so she could have enough for the 5% down payment needed on a home for herself but she only had 2%. I have to guess that if she had this $214,200 in her savings account earning a measly 2% interest she would still be better off than letting the government keep her money in the "trust fund" to keep paying her parents' retirement checks so they can afford to house their 50 year old, bankrupt daughter.
No, whether flaws or personal financial mistakes Ms. Bauer made along the path that led her back to her childhood bedroom pale in comparison to the $214,200 robbery the government committed at the "Bauer State Bank" .
FICA off federal government,
Todd
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