How The S&P Caution of US Debt Is A Good Thing

Yesterday’s news of S&P, a credit rating agency, caution of US long term debt from ‘stable’ to ‘negative’ needed to happen.

We’ve got a big freight train headed in our direction and we are all sitting on the tracks having a picnic, thinking nothing is going to happen.

But yes it will if we don’t collectively and individually fix this mess coming our way.

Why collectively and individually?

Because it’ll take both for this country to get onto the right course regarding debt loads.

Collectively as a nation our entitlements are not sustainable.  The Baby Boomers will bankrupt this country with their Social Security, Medicare, and Medicaid entitlements in present form.

We can hope that the Baby Boomers will delay taking Social Security, but so far that is not 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 Baby Boomers to stay in the workforce and contribute to Social Security, not retire and draw from Social Security.

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.

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.

You need more of a sense of urgency if you are not already maxing out your 401(k) and maxing out your IRA.  Both.  Not just one.  And that’s just to start.

So let’s do this already.  Get the Federal budget under control with all these entitlements and get our individual budgets under control by living below our means and absolutely prioritizing our future over current pleasures.

(Disclosure: I am a Fee-Only Financial Planner.  Here’s my website).