If there’s any lesson to be learned from the recent debacle in Washington, D.C., it’s this: Don’t run your personal finances the way the U.S. government does. “Don’t live beyond your means, and don’t increase your debt levels, especially when heading into retirement,” said Greg Rosica, a tax partner in the personal financial services group at Ernst & Young and a contributing author to the Ernst & Young Tax Guide 2011. “Don’t emulate the federal government.” – “How the Debt Deal Will Affect Retirees”
I suppose it goes without saying that the past few weeks have been a rather tumultuous time, and especially so for America’s seniors. It’s quickly proving to be a vital time to take stock of the situation and prepare. Luckily, the news is awash with important reminders and advice about what’s at stake.
First, the debt deal was finally passed. As I mentioned last week, it’s already been called a mixed bag by AARP, but the bad may outweigh the good and there are specific changes to watch with interest. Robert Powell of MarketWatch has put together another resource detailing what you ought to know with a special emphasis on budget cuts on programs (both the $1 trillion already going into affect and future cuts to Medicare), along with interest rates and taxes.
Immediately following on the heels of the debt deal, however, the S&P downgraded the U.S. and forced a rather volatile “market correction.” As SmartMoney points out in this article, it’s like 2008 all over again, because it’s the baby-boomers who have the most to lose and must taken action to engage strategies to protect their nest egg if market forces continue to threaten it.
And, finally, there’s looking to the future… the future of rehashing the past few months and the debt debate. The deal that was reached calls for the commission of a super committee to make more suggestions for cutting the debt. That means Medicare and Social Security might not remain safe, since the debate isn’t actually over. Indeed, if the committee’s suggestions are not implemented, then immediate spending cuts to Medicare will go into affect by Christmas. Reuter’s, for one, thinks there’s reason enough to be wary of the super committee altogether, especially if you’re concerned about retirement. In fact, they’ve found eight reasons to worry.
References: MarketWatch (August 4, 2011) “How the Debt Deal Will Affect Retirees”
SmartMoney (August 8, 2011) “The 2011 Correction: Another Bad Turn for Boomers.”
Reuters Money (August 5, 2011) “8 ways the super committee is not super for retirement”