Government Deficits Could Be Bad News For Seniors In The Long Run
Many Americans have had their retirement planning severely impacted due to the recent economic downturn. Equity markets have lost over 40% off their record highs and it will take some time for that to recover but another looming problem for retirees on the horizon.
The record setting deficit this year and the ballooning national debt could come back to haunt seniors and other soon to be retired individuals. When the economy does finally recover, somebody is going to have to pay up for the big bill the government is currently running up.
Unfortunately this will likely mean higher taxes sometime in the next few years. Studies have shown that for many seniors, taxes are already their highest single expense, eclipsing healthcare costs by a large margin.
Tax considerations should be a major factor when planning for retirement and the likely changes will have a significant impact. I think we are going to see a big growth in tax shelters as individuals try to reduce their tax liability.
Even those who don’t face retirement for sometime will have to rethink how they plan because we are seeing a lot of troubled companies eliminating 401k matching, which has been a staple for decades. Since nothing has been done yet to address the future insolvency of Social Security, in some ways it may be even harder to plan for those who still have quite a few years until retirement.
Every ones situation is different and it is important for everyone to talk to your financial planner and discuss how higher taxes in the future could affect you.
