House Loans & Per Deim

There is not an advantage to per diem to the employee, it reduces cost for the employer, it reduces how much they pay into your social security, it reduces how much you collect if your injured, you would get that money back on income tax anyway.

It is a loser for the driver.

 

Please describe the force being applied in detail..

 

But its not force is it ?

 

You will have to be very close on your debt ratio, much above 27% and they will not consider you for a mortgage. The next question is how much down payment do you have? It you have 30% or better, they will be a little easier on you, but not much. Should you decide to change jobs in the future, decline the perdiem, it is a looser all the way around. (Save your receipts for the end of the year tax time.) Not only does it not show a true income statement, as you have discovered, it will mess up your SS should you become disabled and need Uncle Sam's help to pay your bills.

 

That will depend on the loan amount and your credit/banking history. I've never had a problem getting a loan for the advertised rate...

Not always. Remember that not only does the company eliminate that 7.65% FICA tax on payrolled per diem money, but so do you. That's $1071/year in payroll taxes that you do not pay (assuming $14,000 in company per diem). And as long as the company pays close to ~$45/day in per diem, you also get the benefit of being able to take the standard deduction ($6,200-$12,400). At a 20% income tax rate, that's another $1,240-$2,480 in income tax savings for YOU (beyond the income tax benefits of per diem itself).

Yes, the trade-off is that your Social Security and/or disability payments will be reduced when you're no longer working: A 30 year-old driver earning $52,000/year and not taking company per diem will be able to draw an inflation-adjusted $1,208/month from Social Security at age 65 (assuming SS is still around and they don't change the rules -- again). A driver earning $52,000 year, but having $14,000 of that as company per diem, can retire at 65 and draw $992/month. Sounds like company per diem is short sighted, right?

The thing is, the US Government is a very poor allocator of resources; it tends to borrow from its investments rather than, well, invest them. In fact, the current Social Security system is essentially a ponzi scheme, the only real differences being that a) contribution into the ponzi scheme is mandatory and b) the social security administration is kind enough to project when its ponzi scheme will fail (currently estimated to happen in 2030).

A conscientious investor can take that extra few thousand dollars and compound them at a higher rate to wind up with a better retirement. If that same 30-year old driver taking company per diem invests just $1,000 of their $2,000+ tax savings into an IRA or 401k at 8%, they'll have $191,555 in their retirement account when they're 65. They can then draw an additional $1,250 per month indefinitely (the account will actually still grow slightly).

So the company per diem driver utilizing less than 1/2 of his tax savings towards private retirement will retire at 65 drawing $2,242/month instead of $1,208/month. Now who's being short-sighted?


But wait, there's more!


The 30 year old driver is utilizing private retirement in addition to the government so he's spreading his risk. Americans seem to take for granted the United States' continued existence; they should not -- great civilizations last, on average, 200 years. So what are the odds that the United States of America will have fallen by the time that 30-year old driver dies at age 90?


Probability of great civilization falling in 60 years = 1 - (199/200)^60
= 26%

There is a 26% chance of a great civilization falling in 60 years! Is that a risk you're willing to take? And that is on top of the risk that Social Security won't be around - assuming the USA does survive.