Millions of peoples' retirement accounts could be diminished by the potential massive debt crisis looming in America's future. According to a Washington Post editorial by Sheila Bair, chairman of the Federal Deposit Insurance Corp. (FDIC.)
"The US needs to take urgent action to cut its debt in order to prevent the next financial crisis, which may start in Washington. The federal debt has doubled over the past seven years, to almost $14 trillion, and the growth is a result of both the financial crisis and the government's 'unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit,'" Bair wrote.
Retiring baby boomers will impact government spending heavily and this year, combined spending on Social Security, Medicare and Medicaid are expected to make up 45 percent of primary federal spending, compared with 27 percent in 1975, she explained.
"Defense spending is similarly unsustainable, and our tax code is riddled with special-interest provisions that have little to do with our broader economic prosperity," Bair wrote. "Overly generous tax subsidies for housing and health care have contributed to rising costs and misallocation of resources."
If no action is taken, US federal debt held by the public could rise from 62 percent of gross domestic product this year to 185 percent in 2035, she warned.
"Eventually, this relentless federal borrowing will directly threaten our financial stability by undermining the confidence that investors have in U.S. government obligations," Bair said.
"With more than 70 percent of United States Treasury obligations held by private investors scheduled to mature in the next five years, an erosion of investor confidence would lead to sharp increases in government and private borrowing costs," she added.
There needs to be "a bipartisan national commitment" for an austerity package of both spending cuts and tax increases over many years in order to solve the problem, according to Bair.
"Most of the needed changes will be unpopular, and they are likely to affect every interest group in some way," she said.
We at Christian retirement suggest the following actions and ideas for your consideration that can positively impact your future retirement:
1. Readjust your lifestyle to live on less
2. Make saving a priority
3. Cut personal spending
4. Establish and contribute to your personal retirement account
5. Widely diversify your investments after seeking competent professional advice
6. Plan on the possibility of having to retire on less than you may have anticipated
7. Expect the value of your home to decline during the coming years
8. Anticipate the eroding power of inflation
9. Consider investing in and taking possession of precious metals
10. Discuss your options and prioritize your retirement plans
11. Contact your congressmen to express your concerns and share your opinions and personal wishesby Christian Retirement . com