estate planning, Financial Planning

The senior income crisis, protecting your income and investments into retirement – Part 2

By Rick Law, Elder Law Attorney in Aurora, IL Just how much has the economic landscape changed? We and probably you, too, have lived long enough to see the United States evolve from the world’s greatest creditor nation to the biggest debtor nation in world history. Perhaps even more shocking to both baby boomers and their parents is that we now owe over $2.5 trillion dollars to the Chinese government. Who could have ever imagined that during our lifetimes the communist Chinese would be more fiscally prudent than the United States of America? The work world has also changed drastically. Do you know which work sector is considered the only “job growth industry” in the United States today? The U.S. government. Yes, that’s right.  Today there are fewer than 12 million manufacturing jobs left in the United States, but there are 22.5 million government jobs—and growing. We grew up and benefited from the post – World War II era of prosperity that eventually fueled a massive stock market run-up. The stock market peaked in 2000 and took a nosedive that same year when the technology bubble burst. Since then, there have been some rallies in the market, but (after adjusting for inflation) its dollar value hasn’t come close to what it was before. “Dollar value” is another important concept. Recently on a trip to a true banana republic in Central America, we were told that the residents of that country preferred almost any currency over the U.S. dollar because it is depreciating so rapidly. The world is awash in dollars that the U.S. Treasury has pumped out to deal with the Financial market mess and the enormous amount of deficit spending by the U.S.  government.  In fiscal 2011, the U.S. government actually borrowed 40 cents of every dollar it spent! Inflation due to excess money supply has pummeled the finances of seniors on fixed incomes. The annual increase in the price of gasoline is about 33 percent and rising daily. Beef is up 9.6 percent, coffee up 97 percent, butter up 19.6 percent, and so on. Yet the U.S. government says it’s worried about deflation pressures. That’s because the government has its own way of measuring inflation, and the formula has been designed to underemphasize the thing that most normal people buy. The government uses a weighted formula for determining the Consumer Price Index (CPI), and according to that formula there has been no inflation during the last two years. Let’s consider that further… If the government calculates that there is no inflation, it can keep its own expenses down, since seniors receive no Social Security or other benefit increases unless the CPI reports inflation. In other words: No reported inflation = no cost of living increase in senior incomes. You know from everyday experience that the actual costs of fuel and food and medicine are rising rapidly. But if your income is calibrated to the CPI—as are Social Security benefits—then your income crisis is just getting worse. To combat the most recent financial meltdown, the U.S. Treasury has been lending trillions of dollars at roughly 0 percent to big U.S. banks, big foreign banks and the “too big to fail” Wall Street brokerage/banking firms. In other words, the richest and most speculative groups in the world are receiving free money from the U.S. government, which they in turn are encouraged to lend. Unfortunately for Main Street America—which cannot get a loan—the favored borrower is the U.S. Treasury.  That’s right! Our treasury is lending money at 0 percent to the “fat cats,” and then borrowing it back from them at roughly 3.5 percent for a 10-year treasury bond. By the way, that’s called an “infinite yield.” If you have no cost of capital and you can get a return on lending or speculation with that money, the return on investment calculation is astronomical. No wonder the folks in the financial district of New York City think we’ve been out of the recession since 2009! Meanwhile, the seniors who are the savers and investors—the people who actually worked to accumulate money for their retirement—have seen their safe money income choices pulled out from under their feet.  Certificates of deposit in banking institutions now yield close to 0 percent returns. Both bank and brokerage firms offer money market accounts that pay nearly 0 percent interest.  The lack of a reasonable return on safe investments is coercing many conservative and frugal investors into making higher risk investments that are unsuitable for their age and risk tolerance. Everywhere we look there are ads promoting gold, exotic commodities, junk bonds, variable index annuities, highly leveraged stocks and foreign currencies. But there is hope.  Next time we’ll look at how a trusted legal advisor with a focus on seniors can help. If you’re ready to start getting your estate in order and secure your assets for the “worst-case” scenario, please give our office a call at 800-310-3100. Your first consultation is absolutely free.  We’ll let you know what steps you need to take, right now, to protect yourself and your family.  Call now. Sincerely, Rick L. Law, Attorney, Estate Planner for Retirees. Rick was named the #1 Illinois elder law estate planning attorney by Leading Lawyer Magazine. He has been quoted in the Wall Street Journal, AARP Magazine,, and numerous newspapers and articles. Rick is the lead attorney for Law Elder Law, LLP, focusing in Estate Planning, Guardianship, and Nursing Home Solutions. His goal is to give retirees an informed edge when it comes to dealing with an uncertain future.  Get flexible retirement strategies that work during good times and bad, plus information on how you can save your home and assets from being used to pay for long term care.  Appointments available in Chicago, Aurora, Oak Brook, Schaumburg, and Joliet.  Call 800-310-3100 for your free consultation now!