S&P, a credit rating agency, cautioned of US long term debt from ‘stable’ to ‘negative’ in 2011. This impacted the US debt rating.
Collectively and Individually
Both at a country level and at an individual level, reining in debt is critical.
Collectively as a nation our entitlements are not sustainable. Retirees run the risk of bankrupting the country with their Social Security, Medicare, and Medicaid entitlements in their present form. This effects the US debt rating.
The Role of Retirees
We can hope that the Baby Boomers will delay taking Social Security to age 70, but so far that has not been the case. So far, especially with this recent recession, they are starting to take not just at Full Retirement Age (65) but many, way too many, are starting at 62.
We need more retirees to stay in the workforce and contribute to Social Security.
We need them to delay drawing from Social Security.
Medicare
Medicare is a mess. The way doctors are paid directly from the program needs to be overhauled. It’s incredibly cost-inefficient and can lead to temptation too strong for some doctors to resist trumping up procedures.
Reigning in Personal Spending
Individually we need people to stop living beyond their means and start contributing to their retirement plans. That is starting to happen but we need more of a sense of urgency.
A person needs a sense of urgency if they are not already maxing out their 401(k) and maxing out their IRA.
Hopefully the Federal budget will get under control with the entitlements. This would go a long ways towards helping the US debt rating.
And hopefully individual budgets will get under control by people living below their means and prioritizing their future.
Next Step
Ready to take the next step and work with a fee-only CFP? Reach out to schedule a Discovery Meeting to learn more.