Text Box: September 2006 Text Box: Volume 3, Issue 2 Text Box: Whitecap Investments Text Box: benefits promised under current law. That is before any bridges or highways are built and before any teachers' or police officers salaries are paid. If any new entitlement benefits are added, such as more generous prescription drug coverage or long-term care, the future burden will be even higher. Impact on the Federal Budget: Another way to look at e Social Security and Medicare deficits is to assume we do not raise payroll taxes but fill the gap with general income tax revenues as we are doing right Text Box: Brief analysis: Social Security & Medicare Projections 2006 by Mike Moore — National Center for Policy Analysis.. Text Box: Take Over the Reigns of Your IRA from Kiplinger’s Retirement Report Text Box: This year's annual reports for Social Security and Medicare show the combined unfunded liability of these programs is $84 trillion in today's dollars - up more than $7 trillion from last year's report. The unfunded liability identifies the difference between what has been promised to current and future generations above what will be collected. in taxes. Social Security and Medicare will consume an ever-increasing portion of workers' incomes unless the government either breaks its promises to future retirees or makes significant changes to our elderly entitlement programs. Future Payroll Tax Burdens: To­day Social Security and Medicare Part A (Hospital Insur­ance) benefits are funded by a 5.3 percent payroll tax on wages - 12.4 percent for Social Security and2.9per­cent for Medicare. But as the 77 million baby boomers retire, spending will grow substantially. As­suming payroll tax rates rise to meet the obligations:When today's college students reach retirement age in 2050, paying their Social Security benefits Will require a payroll tax of about 16.7 percent on their children and grandchildren - more than one third greater than today's rate . When Medicare Part (hospital insurance) is included the payroll tax Text Box: burden will rise to 25.1 percent-more than one of every four dollars workers will earn that year. In addition to these two programs, taxpayers will also have to pay for three-fourths of Medicare Part B benefits, mainly covering physicians' fees. (Retiree premiums offset a quarter of the cost) Taxpayers will also foot the bill for 86 percent of the newly enacted Medicare prescription drug program (Medicare Part D). And they will pay for seniors' medical bills through other govern­ment programs, including Medicaid and the Veterans Health Administration. Although the cost of these programs are mainly paid from general revenues under current law, they can also be expressed as a percentage of tax­able payroll: The burden of Social Security and all of Medicare (parts A, B and D) will climb to 33.6 percent of payroll by 2050 - more than one in three dollars of taxable payroll. When other government-fund­ed health care programs for the elderly (such as Medicaid and the Veterans Health Administration) are added, the total burden will reach 37.9 percent by mid-century. Thus, almost 40 percent of the wages workers will earn in 2050 has already been committed to pay Text Box: IRA has doubled, he says. Although only a small percentage of IRAs are self­-directed, the numbers are growing, according to cus­todial firms that handle the record keeping for these accounts. Hugh Bromma, chief executive officer of Entrust Administration (www.entrustadmin.com). Based in Oakland, California, says his company has $2 billion in assets, up from $350 million five years ago. Assets under management at Text Box: STOCKS, BONDS and mutual funds have a place in any IRA, but perhaps your retire­ment plan has room for a racehorse or a restaurant. Many individuals who are not satisfied with returns on conventional investments are plowing some of their IRA money into every­thing from commercial buildings to community banks. Just about any investment is allowed except for life-insurance contracts and collectibles. Vincent McCord is a convert. Three years ago, Text Box: McCord, 59, invested the $250,000 in his IRA as a limited partner in two apartment complexes and a small shopping center in Las Vegas. When two of the ventures were sold, McCord, who runs a semicon­ductor start-up in San Jose, California, rolled his profits into two real estate properties in Phoenix. He's also invested in a commodities fund and a yearlong promissory note from a company offering him 20% in interest. The value of his