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January 07, 2016 at 12:04 PM
Last month, I shared the first half of a presentation that I use to help prospects and clients organize their thinking about the economy and the way it will affect them and their money.
Understand that prospects often don’t know how to determine if what you’re sharing will help solve their problems because they haven’t thought about what their problems might be. As a result, it is hard to get emotionally invested in finding a solution to those problems.
After discussing taxes (the focus of last month’s column), I ask prospects if they think government benefits like Social Security, Medicare, and Medicaid will be lower in the future. They always say “yes.” And many believe they will not receive any Social Security benefits.
I then ask whether they realize there are 100 million Americans over age 50 — nearly half of the number of people eligible to vote. There will be 130 million Americans over age 50 by 2030. I ask whether those voters will allow anyone in government to prevent them from receiving the Social Security and Medicare benefits they have earned. They say “no,” adding they’ll punish anyone in government who touches those benefits.
As a result, the government will use sneaky ways to reduce those payouts. Here are some examples: increasing the age of eligibility; and reducing or eliminating cost of living increases. The government is already eliminating strategies to maximize Social Security benefits such as “claim and suspend” (which allows couples to use spousal benefits and “delayed retirement credits” simultaneously).
I also ask prospects if they think the U.S. can grow its way out of the problem. Japan has had negative growth or deflation for a decade. South America is currently experiencing negative growth.
Europe will probably continue to see negative growth for at least the next decade. Even China’s growth has fallen to a currently revised 6 percent growth rate that many believe is actually much lower, in the 2 or 3 percent range.
The Congressional Budget Office predicts the U.S. economy will be fortunate to average 2 percent annual growth over the next decade. We have actually had several quarters of negative growth in the past few years.
I then ask this amazing question:
