It is said that all things are connected, even things that take place at a distance, and there is that “butterfly effect” that is said to prove this assertion. But when it comes to estate planning and otherwise preparing for the latter portion of your life, there is a very direct connection between your own future and some of the decisions that are made by the politicians in Washington.
With this in mind we would like to highlight the role of the “super-committee” that has been convening in Washington to decide how to reduce the federal deficit by $1.5 trillion over the next decade. A significant portion of the committee would like to do this without increasing revenue, and it doesn’t take an economic genius to deduce that the only way of doing this would be to reduce spending.
Reducing spending sounds like a great idea to many, but the problem lies in the fact that the money spent is not all used to fund exotic ant studies. American senior citizens rely on a good portion of the spending. In fact, according to the Congressional Budget Office, spending on Medicare and Medicaid comprises no less than 23% of the federal budget. Social Security outlays consume 20% of the budget.
To complicate matters, the population is aging rapidly and more and more people are applying for these programs. So, how can you trim $1.5 trillion from the deficit without raising revenue streams while actually increasing spending on programs for seniors as more Americans become eligible for them?
The answer is that you can’t, so the super-committee is considering cuts to Medicare. They could do any number of things, from raising the eligibility age to instituting a voucher system in lieu of Medicare as we know it to shifting more of the burden of cost onto senior citizens.
Regardless of your politics, if you’re planning for retirement you would do well to pay attention to the recommendations that are made by the bipartisan Congressional super-committee. They must come up with a plan by November 23rd, and it has to be voted on by 23rd of December.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.