Tuesday, May 08, 2007

I Won't Follow This Advice #2

Occasionally, I read commercially published articles which provide advice very different to what I have found successful in my own experience. I will be highlighting these articles periodically in a "I Won't Follow This Advice" segment. These segments represent my opinion and one should consult a professional before making any decisions. Here's segment #2.

Spend Every Dime! Why U.S Tax Saving Policy Makes Savings A Suckers Game by Henry Blodget rationalizes the low US savings rate by claiming that tax policies are disincentives to saving. His point is that people intuitively know that inflation and taxes reduce the value of money saved. Therefore, people spend all their money today instead of saving.

Mr. Blodget's rationalization makes some sense until he points out that savers should get the same tax breaks as real estate 1031 exchanges that defer tax gains until a future date. Whoa! If real estate is such a good savings deal, why don't tax payers intuitively know this fact and be heavily saving in real estate. In addition, Mr. Blodget conveniently doesn't mention that tax advantaged saving vehicles already exist, IRAs and 401Ks.

While I agree that the government should have more incentives for savings, I am not holding my breath. Personally, I will continue to save 20% of my income and look for favorable tax treatments for my savings. In the long run, my retirement will benefit, even if the tax code is still unfavorable.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

Photo Credit: morgueFile.com, Clara Natoli

This is not financial or saving advice. Please consult a professional advisor.

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