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Three Major Financial Challenges We May Face as a Country - Are You Prepared?

January 21, 2020
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As of February 22, 2019, the unfunded liabilities in the United States were over $122 Trillion and growing (usdebtclock.org). Many Americans are deferring a significant amount of money into qualified retirement plans in favor of deferring taxes today but paying taxes in the future on their account value at that time. In my experience many of my clients have not accounted for the future taxes that will need to be paid. No one can predict what the future holds regarding taxes but based on what I currently see, a clear path is not evident in managing our debt load without significantly raising taxes in the future. As a Financial Advisor, I regularly discuss asset allocation and diversification, I also encourage my clients to consider diversifying their tax risk. The median savings for families whose wage earners are between 50 and 55 years old is only $8,000. For those who are between 56 and 61, it's $17,000, reports the Economic Policy Institute (Ester Bloom, June 13, 2017 cnbc.com).

In my opinion, this paints a bleak picture for many Americans and our Country as a whole. Guaranteed pension plans have been abandoned by many companies, leaving millions of Americans dependent on their own savings and Social Security, assuming they have the required work history and earnings. I believe that these circumstances could lead to a social epidemic and I am concerned that many Americans are not addressing this in their planning. Just because an individual is saving enough does not mean they won’t be negatively impacted if many of their neighbors and fellow citizens have not saved enough.

Based on a WASHINGTON (AP) report (on pbs.org from June 5,2018 6:17PM EST)— Medicare will run out of money sooner than expected, and Social Security’s financial problems can’t be ignored either, the government said Tuesday in a sobering checkup on programs vital to the middle class.

The report from program trustees said Medicare will become insolvent in 2026 — three years earlier than previously forecast. Its giant trust fund for inpatient care won’t be able to fully cover projected medical bills starting at that point. The report says Social Security will become insolvent in 2034 — no change from the projection last year.

The rising cost of health care coverage, long-term care costs and depletion of programs designed to help Americans pay for these needs has created another significant challenge for Americans. This article may leave you with a feeling of doom and gloom, but with proper planning, there is much that can be done. The sooner you begin or expand your planning the more of an opportunity you will have to address these future challenges.