How Does The Increased Government Spending Impact My Retirement?
Lately the United States government Has been spending money like a little kid in a candy store. The government has spent TRILLIONS of dollars fighting the impacts of covid-19 on the US economy. They aren’t doing it without purpose, but no good deed goes unpunished. What they’re trying to do is protect the stock market from the significant drops we’ve seen throughout history when the masses of citizens get scared.
The Novel Coronavirus has unemployment rising dramatically and people no longer spending their money due to the fears of job/ cash flow security (or just because they physically cannot go out to buy things. This is likely to have a huge long-term effect on the US economy, so the United States government plus the Federal Reserve Bank are doing everything in their power to lighten the economic impacts of Covid-19.
These efforts and seemingly limitless spending has retirees asking a big question: “how does this affect my retirement? There’s got to be an impact, right? Well, the answer is, yes, they definitely will be in effect for many retirees. It could end up costing you a lot of your hard-earned money.
To start to understand the impacts, we need to first look at why there’s going to be an affect in the first place. To do that we have to look at the lovely tax numbers.
The Country's Debt
Prior to covid-19 throwing the United States through a loop, as a country we were already spending way more money than we made in taxes. Prior to covid-19, the US was making around 3.5 trillion dollars in taxes each year. Which sounds like a ton of money, but the issue is that we were spending 4.5 trillion dollars each year. We were spending 1 TRILLION dollars more each year than we were making.
The US economy currently has a debt 25 Trillion Dollars+. Which is hard to put into perspective until you visualize this: With 25 Trillion in $100 bills, you could fill an NFL stadium and “Scrooge McDuck” dive off the top into a sea of $100. You’d probably get close to even filling 2 NFL Stadiums.
Moral of the story, it’s a BIG NUMBER! So, even if we dedicated every single dollar that we made in taxes to paying that money back it would still take us over 7 years. The rise of covid-19 is causing this discrepancy to get even worse.
The numbers I’m mentioning don’t even take into account our countries other debts such as the money we’ve promised to pay in the future on things like social security and Medicare. Right now, we have $122 trillion in unfunded liabilities. Which means we have about $122 Trillion that we’ve promised to spend for these different programs.
So what does all this mean? Why am I going on a rant about our country’s debt? Well, ultimately, to pay back that debt – the money’s got to come from somewhere.
There are two likely scenarios:
- Taxes will have to go up
Both of these impacts your retirement. So what can you do?
How Do You Protect Yourself Against Increases In Taxes?
We dive into that very topic in our webinar on reducing taxes in retirement >>> HERE.
Here Are Some Ideas:
- Roth Conversion
- Asset Location
Need more help?
Reach out to us! Or Schedule a time to meet with an advisor >>> HERE