4 Key Retirement Issues to Watch in Debt Negotiations

With negotiators on both sides of the aisle locked in what appears to be a free-for-all, caged death match with political opponents and their own bases, U.S. News & World Report’s Philip Moeller points to key issues on which advisors and retirees should focus in the debate over the nation’s debt and the deficit.

“Beyond the polemics, few people have paid a lot of attention to the plain truth that it will be impossible to make significant changes to the government’s largest spending and entitlement programs in only three weeks,” Moeller writes. “These are fiscal supertankers, and you can’t turn them around quickly. Making major changes to Medicare, Medicaid, and Social Security are complex processes that require thorough deliberation.”

He then goes on to name the four key items that seniors should have on their “fiscal scorecards.” They are:

1) Cost of living: “Annual benefit changes tied to inflation are very important to Social Security recipients,” Moeller notes. “Changes in consumer prices also play a big role in annual adjustments to Medicare insurance premiums. And they are widely used to set annual changes in tax deductions and many other federal programs. Inflation, however, can very much be in the eye of the beholder.”

As Moeller explains, “the measures of consumer price changes used in current benefit calculations are more expensive than another measure that is gaining favor.” That measure, he adds, is the “chained” consumer price index. Briefly described, “Traditional CPI measures track the same items over time. If beef becomes more expensive, the CPI rises. However, in the real world where consumers live, rises in beef prices cause many consumers to buy less red meat and more cuts of less expensive meat.”