War Is Coming

Investing & Retiring, Social Security

War is coming. This one will not be a traditional type of war. This conflict will be fought inside the borders of the United States, between foes of different birth-years armed with little more than outrage and hyperbole. The point of this war isn’t land or power. The purpose of this battle is to affix blame for the mess that we call the nation’s finances.

The primary battlefront will be Social Security and Medicare, because these programs collectively represent commitments that dwarf the nation’s $20 trillion debt. Even on the surface, these figures beg the question: who is going to pay for all of this? Moreover, these obligations operate on an intergenerational contract that isn’t actually binding.

Recently, The Atlantic published a piece that asserted that these programs are nothing more than a fraud, where “It’s the grandparents stealing from the grandchildren.” That assessment followed a widely acclaimed book, A Generation of Sociopaths: How the Baby Boomers Betrayed America, in which the author accused older Americans of systemically plundering the nation’s economic landscape in part with their commitment to entitlements.

decades back without the baby bulge.

It is a mathematical certainty that the longer the present pay-roll tax rate remains in effect, the higher the future pay-roll taxes must be….” (Emphasis added). Basically, his warning can be reduced to: “Hey Congress, it isn’t possible to sell dollars for dimes forever.”

The baby boomers were not even a consideration at the time of his testimony. No hands of the era were wringing over increasing life expectancy. Yet, before the first boomer was born, Altmeyer predicted our current situation with pinpoint accuracy. After 22 separate tax increases, the man looks like Nostradamus.

On the other side of the battle, Creators Syndicate columnist the boomers a pass at least on the issue of Social Security. She argues that boomers were actually the first generation to change the financial path of the program by electing a Congress responsible enough to raise taxes and reduce benefits sufficiently to accumulate a reserve that would carry the nation through the hordes of retiring boomers.

It is true that, in 1983, Congress did raise taxes and lower benefits. The problem with that narrative is that Congress focused these changes primarily on Gen-Xers and those who followed. T went to those people who were 11 and younger in 1983. In other words, Congress reached a bipartisan agreement that our kids would pay the taxes that voters wouldn’t.

on larger portions of wages over a longer career than his predecessors. In exchange, he has to wait two additional years to collect full benefits. Today, at 50, he expects to start collecting those benefits the year in which benefits are forcibly reduced. Those benefits that he receives will be taxed at greater and greater rates over time.

Regardless of where you plan to retire, the number one factor in ensuring that you can retire on your terms is your 401(k). Make sure that your 401(k) is maximizing its potential with this free analysis that checks your fees, fund mix, and other factors to help you hit your retirement goals.

Photo ©iStockphoto.com/bauhaus1000

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