Yesterday seven members of the White House Deficit Commission voted to endorse the commission’s plan to reduce the country’s budget deficit. The recommendations are far-reaching and include cuts to Medicare and Social Security, gradually increasing the retirement age, and a broadening of the income tax brackets in what is effectively an overall tax increase.
You may or may not agree with the Commission’s recommendations. Additionally it appears unlikely that these suggestions will be enacted into law in the near-term by Congress. None the less there does appear to be a trend toward fiscal austerity and deficit reduction across the country.
The potential implications for our retirement planning should be pretty obvious.
What should we be doing in light of this? Much the same thing we all should have been doing all along.
- We need to assume that we will be primarily responsible for funding our retirement. I’m not saying Social Security and Medicare won’t be around in some form, but why would you want to be in a position where you have to depend on the government or anyone else to fund a comfortable retirement lifestyle?
- Save and invest as much as you can for retirement and other future goals. Balance current consumption and spending with the need to save as much as possible.
- Invest with a plan. Understand and implement investment diversification and rebalancing.
- Plan, plan, and plan some more. If you are not comfortable doing this yourself, hire a fee-only financial planner to help you. If you find a good advisor the money you spend will be repaid many times over.
- Planning doesn’t do much good unless you monitor your progress. Revisit your plan every year or so. Track your progress towards your financial goal(s). Just like any journey, how will you know when you’ve arrived at your destination if you don’t know where you are? Make adjustments as needed.
More than ever a financial plan is critical to your financial success. The past few years have taught us that taking on too much risk can be hazardous. However most of us will not reach our goals by playing it ultra safe either. If you need help on your journey to financial success please feel free to contact me.