Monday, June 01, 2015

Under the Mattress and Backyard Shovel Banking

Getting old and ready to retire, a lot of the benefits you receive from that point out depend on how much money you have in the bank. We are not talking safety deposit boxes, just cash in a bank account. So if you have a stroke and have 100k in the bank, and need to be parked in a rest home, that savings goes poof (rest homes costs 50k per year). Sell your home to move into a rest home, that money goes first before you can qualify for Supplementary Security Income in addition to your Social Security.

Former Speaker of the House Dennis Hastert could go to jail for giving someone hush money. The funny thing is, it was his money and he earned it. It's against the law to make cash withdrawals of less than $10,000 to avoid having the banks report it. They track every cash transaction over $10,000. The government looks at large cash transactions as a sign of illegal commerce. It very well could be. But more to the point, these transactions are invisible from taxation.

Legally you can only give each of your kids $10,000 a year tax free. What is to stop you from giving them, cash? Hmmm.

I purchase gold and silver now and then to add to my retirement funds, (leaving it in the bank to collect interest is an excellent waste of time). I usually pay by cashier’s check, I feel uncomfortable carrying cash. You want to buy one million dollars of gold, go right ahead write a check, no one will question it, you are breaking no laws. I’ve seen two different people show up at one coin shop I frequent, with ledger checkbooks, writing company checks for gold around Christmas time. I could swear the one guy wrote “cleaning supplies” on the check memo.

People are shifting to cash. If you have a debt collector after you, or an ex-wife looking for alimony, you don’t want direct deposit. Your paycheck will vaporize when it hits your account. The same for student loans. If you have a part time job under the table, you’re not going to put the dollars in the bank, it will screw up any government benefits you are currently collecting. Bust your butt to earn an extra $10,000 and find out it goes into your healthcare that was free, until it showed up in your tax return.

Hurricane Katrina showed the Federal government how invisibly large the cash economy was in that city, after the disaster. All of the Federal support checks being mailed down there, all of a sudden had no valid addresses. The words fraud and abuse never surfaced, and if they had, many high up government officials would have qualified for jail time. They whistled by the graveyard on that one.

The mechanic down the street has two prices, one for credit cards and the other for cash. When the phone says press one for English, you know there are two economies, one is hidden.

So what is going on, we have an economy that is collecting less taxes and having more expenses to cover. In order to participate in this "Free lunch program," you have to be broke (excluding your Mercedes and million dollar home--they don't count against you). The new trend is to hide your assets in a safety deposit box or under the mattress. The banks don't pay any meaningful interest. $100,000 in the bank at 1% will pay $1,000 a year. Hide the dollars and get a bonus of $3,600 in food stamps an EBT debit card.

The neat thing about keeping your money out of the banking system, is that no one from Nigeria can get on the phone with you and drain your retirement account. They can’t touch your mattress or the box buried in the back yard. Home Depot has shovels on sale at $15. Tip--don't bury currency or hide it in the walls, rats love the stuff for nesting.

Another good thing, if your care taker wants to make $1,000 the hard way, you have the cash on hand (that’s when having a bad memory is a good thing). You don’t have to go shopping with the wife to have fun—you can have fun, while the wife is shopping.

Interest rates are real low and no one is borrowing, but God help you if you want to withdraw your saving in cash. Retirees have gobs of money in banks, they have monthly statements to prove it. Bernie Madoff’s problem started when people wanted their dollars back. So far, most retirees are content to play the game of “Leave it in the bank.” The problem is, low interest rates have changed the way you play the game. You get more from government, if you can prove you have nothing. What would happen if more people (who have savings) wanted their savings in cash? The government wouldn't be able to borrow those dollars, to give it to those, that have none. But while they have the dollars, get in line and make Bernie proud.


Joseph Oppenheim said...

1. Cost for a rest home can be up to totally tax deductible depending on a person's level of disability, So, can easily reduce costs.

2.Can gift child $14k ($28k from married couple) tax free, per year, also, up to $5.43M tax free anytime, just taxable when after reaching that limit over any or all years, and filing IRS form.

AIM said...

I think that the amount is less than 10k now for a withdrawal to be reported by your bank to the Fed Reserve.

Retirees hoarding, people not spending, etc. are some of the deflationary actions that are also slowing down the velocity of money. This all has the government so nervous that it is moving quickly towards abolishing cash and going fully electronic. The US Treasury's, IRS's and Congress's wet dream... being able to track EVERY penny of EVERY transaction in order to obtain higher tax revenues. Our desperate and misguided government, after years of fiscal and monetary idiocy, will start turning the thumbscrews tighter and tighter on us.

It will take a lot of pain and suffering to get the American people to the threshold of taking action and ridding themselves of an oppressive and destructive government.

dearieme said...

The Romans had a silver coin called a denarius. Allegedly someone buying something in the 18th century in the West of England found one in his change. Handy things, coins made of precious metal.

Jim in San Marcos said...

Hi Joseph

I think the tax deductibility is a moot point after retirement. Kind of reminds me of my unemployed neighbor complaining about the deductibility of his mortgage interest-- "Deduct it from what?"

What I was indirectly suggesting is that you have to have "unregistered assets" in cash or precious metals two years removed from your date with the rest home. Otherwise it could be recovered by anyone owed a debt.

Also the point of being able to give the kids a bunch of money on your death usually involves probate. Between the state, the lawyers, the bank and the executor, you've lost 40 percent. A living trust can avoid a lot of that.

What we are really dealing with here is the ability of others to control how your funds can be disbursed when you become incapacitated. If you don't plan for the contingency of a rest home, your savings are toast.

It use to be that your kids footed the bill for the rest home, and they still do somewhat. It's nice if they have the safety deposit box of your loot to access, while they tell the government, you are broke. Your kids can give you an "allowance" just like you gave them as a child.

Joseph Oppenheim said...

You make a good argument going the traditional and legal route. Plus living trusts can transfer assets in a few days at no costs.

AIM said...

In this country you are rewarded for being poor and penalized for being rich. Backwards and upside down. Just like our government.

Joseph Oppenheim said...

Top rest homes don't accept those on Medicaid. Some cost as much as $200k/year. Many in this country want to reduce help for the poor and think best they die sooner, thus reduce taxes on the rich.