Washington is continuing to bash income for retirees every front.
First, the U.S. Federal Reserve has been artificially keeping interest rates near zero. This has left retirees earning almost nothing for the last 8 years. So instead of prudently putting their money into bank CDs and quality bonds, they must speculate to earn any investment income. Then, Medicare deductions from social security payments have been ratcheting up sharply for years. Cost of living adjustments for social security have been nearly nothing and will be zero for 2016 – even though food and healthcare keep rising. Now, Washington just made a budget deal that forbids the “File and Suspend” strategy of maximizing your social security benefits.
When your country is broke then: government benefits shrink, rules change, and people face even more financial struggle. I’ve been telling others since 1993 that, “Social Security and Medicare will begin falling off a financial cliff by 2015, it is simple arithmetic. So expect shrinking retirement benefits, it will become more important than ever to save on your own.” Since 1993, the only change in the government debt arithmetic is that it has gotten worse. There is a new medical program called Obamacare that is an additional unfunded liability that will cost well over a trillion in the next decade.
As predicted, retirement benefits have already been shrinking: tiny or no cost of living increases; the monthly charge for Medicare has skyrocketed for high-earners; moving back retirement dates along with changing qualification rules. I predict more rule changes to ratchet down retirement benefits in the future, again, it is a necessity of simple arithmetic of overspending.
As always, your retirement is up to you to fund it, grow it, and protect it. As government finances continue to deteriorate, it will continue to reduce benefits and increase taxes on retirement accounts.
This week, President Obama opened his new retirement account called a MyRA. This is not a good savings vehicle because your money can only go into a single poor long-term investment – a particular fund of government bonds. The U.S. Treasury administers these accounts and they are for people with jobs that don’t offer employer retirement accounts. In promoting these accounts, the U.S. Treasury actually makes fraudulent claims: It carries no risk whatsoever (but the fine print says your interest is not guaranteed plus the government is already insolvent); There are no fees (but there are imbedded fees in all government bond G funds like this one). Plus, you are kicked out of the plan if your account ever accumulates to a meager $15,000. Please avoid the MyRA account.