Dangerous Financial Curves Ahead

  • Two recent stories have caught my attention. Unfortunately they're both cautionary tales of danger up ahead. But, just like the highway department warns us of a dangerous curve ahead, these articles can warn us to slow down so that we can get through the dangerous financial curve before it's too late.

     

    The first was the annual report by the trustees of Social Security and Medicare. The news was a little worse than last year. They project that Medicare will run out of money by 2026, three years sooner than last projected. They also expect the Social Security trust fund will be empty in 2034, just 16 years from now.

     

    Here's how one article from RealClearPolicy.com puts it:

     

    "The Social Security report estimates the program will run out of reserves in 2034, after which benefits would have to be reduced by about 25 percent to keep spending within available annual revenue. Over 75 years, Social Security has an unfunded liability of $13.2 trillion. Restoring permanent solvency to the program would require raising the payroll tax rate immediately from today's combined employer-employee rate of 12.4 percent of taxable payroll to 15.2 percent. Alternatively, Social Security benefits would need to be cut on a permanent basis by about 17 percent.

     

    Taken together, the combined unfunded liabilities of Social Security and Medicare are more than $50 trillion, according to official government projections."

     

    With Washington being gridlocked, it's time to start making course corrections in your retirement planning. It's critical if you're in your 50s or 60s. But still important even if you're much younger.

     

    One way that you might take action now is to find a way to bring some extra income into your home. Either to cover retirement expenses or to fully fund your retirement savings plans. You'll find our library section "Guide to Earning More Money" helpful.

     

    Just to make it clear, my intention isn't to panic anyone. I doubt that my Medicare coverage will disappear in a few years. But it could be changed. I just want to encourage you to take action before the dangerous curve is on you.

     

    The second story/event was an increase in the interest rate by the Federal Reserve 2 weeks ago. BusinessInsider.com reported: "In a two-day meeting, the Federal Open Market Committee voted to lift the target range for the federal funds rate by 25 basis points to between 1.75% and 2%...banks will respond by raising their prime lending rate, the starting point of borrowing costs for nonmortgage loans like credit cards and auto loans." And they expect to do it again and again before the year is over.

     

    What does that mean to you? According to a USAToday.com article "Fed rate hike will add $2.2 billion in credit card interest charges. At the end of March, the average interest rate charge on cards, according to the Fed, was 15.32%, an 18-year high. But that exorbitant rate is likely to go up to 15.57% within two billing cycles, CompareCards says, as lenders pass along the higher rates to clients."

     

    If you owe any money - mortgage, auto loans, student loans, credit cards, personal loans - now is the time to find the lowest rate you can. Especially if you have good credit. If you have a small credit card balance you might benefit from a zero interest card. Reduce the balance as much as you can before the interest free period ends.

     

    Same thing with mortgages and other loans. Spend a few minutes with Steps to Get Out of Debt to see ways to reduce the amount you owe.

     

    BTW, we've already checked out any resources that we recommend to make sure that they can be trusted.

     

    Keep on Stretching Those Dollars!
    Gary


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