Did the Insurrection Blow Up Your Long-Term Financial Assumptions?
by Doyle Ranstrom on Jul 25, 2022
Every day, I receive emails from various money management groups, investment advisors, and market services. As one would expect, most of them this year have dealt with current market and economic conditions. Many discuss previous market declines and economic challenges including multiple stock market declines and the inflation years of the 1970s and 1980s. They almost all end with a long-term positive outlook. The markets may go down short-term but will eventually recover and inflation along with other current economic problems will be addressed.
For most of my career I have told clients the same thing and continue to do so for that matter. I graduated from college during the recession of 1973-1974. As a professional, I have been thru the market and economic events of 1987, 2000-2002, 2008-2009 and a number of minor market and economic challenges.
But I often wonder, both privately and publicly, is this time different? There was one consistent assumption looking backwards, the United States as a country had a united commitment to democracy. Think about it, WWI, WWII, Korea, Vietnam, Afghanistan/Iraq, as a people, we were united on our commitment to democracy.
But before going farther, please consider the following:
- What percentage of retirees are dependent on social security benefits?
- Studies have found that about 25% of retirees rely on social security for 90% or more of their income and about 50% of retirees receive at least half of their retirement income from social security.
- When does the social security trust fund run out of money?
- 2034 and if Congress does not act, social security benefits will reduce to about 78% of the previous amounts. The majority of retirees will not be able to absorb this decline in retirement income if that were to happen.
- When does the Medicare Part A Trust Fund assets become depleted?
- Currently it is expected the assets of Part A of the Trust Fund will be depleted in 2028.
- What percentage of Medicare is paid by premiums paid by retirees?
- About 15%. 34% comes from current workers, 45% from General Revenues and the balance a variety of small sources.
During previous market declines, no one was worried about an internal take over of the US Government and the end of US democracy. We all assumed our democracy was safe. Directly related to this, no matter the immediate situation, current and future retirees could assume that social security and Medicare benefits would be there over their years of retirement. It was and continues to be an assumption which is a foundation of retirement planning.
But is the assumption that the US will continue as a democracy still valid?. If not, then why are the assumptions of social security and Medicare valid?
The January 6th Committee has proven beyond reasonable doubt the results of the Presidential election were accurate which was a fact the vast majority of us already knew. It also has proven there was an organized attempt by the former President and his supporters to end Democracy and take over the country installing a new regime. Keep in much of the testimony has come from members of his staff including family members.
So what would have happened if the Insurrection would have been successful? If the assumption that our democracy is not longer valid, what does that mean for other long term assumptions? What would have happened to social security or Medicare benefits? Why would those long-term assumptions continue to be valid? The stock market would have declined, but would the assumption it would recover still be valid?
Hopefully we will never find out, but I truly believe if the Insurrection had been successful every long-term retirement planning assumption would be at risk. I also believe if politicians who continue to be Trump supporters and support the "big lie" win upcoming National or state elections, their victories will put every current and future retirees financial security in jeopardy.
Please go back and review the above mentioned facts related to social security and Medicare. Do you really want to trust your future financial security which is tied to these programs to politicians who either directly or indirectly are trying to end democracy? This is unprecedented in our country and in my estimation, if successful going forward, a game changer.
If you value the financial assumptions that provide long-term stability for you and all current and future retirees, I would strongly urge you to vote against any candidate running for National or state election who is a Trump supporter. Not only does the future of democracy depend on this, but so does your long-term financial security.