The U.S. budget can't be balanced

Shotgunner, how does this relate to early retirement?
 
I think it shows the magnitude of the debt problem and in a simplistic easy to understand way outlines the high probability of tax increases and cuts to or elimination of entitlement programs like SS and Medicare. If the gov't continues to monetize the debt then hyper-inflation is possible. I could keep going but I think you can see that a growing US Debt has the potential to change and hurt our retirement plans and expectations. Did I post this in the wrong place?
 
Thanks for the additional detail, it is helpful. Not the wrong place, but topics in the politics forum such as the one you posted need to be related to FIRE in some way, as do all subsequent comments.
 
Michael I think the size of the current debt and the projections of where it is going in the next 10 years if things don't change is the single greatest threat to the retirement plans we have made. I think the second biggest threat to our retirement plans are the changes our government may make to reduce the annual deficit. The US debt matters a lot to future of taxes, investing, interest rates, inflation and the scope of entitlement programs. Perhaps others don't see it that way, if so I would like to hear their opinions.
 
There isn't anything in the video that should come as a surprise to anyone here, it's all more readily available online than ever with Google and a few minutes time. In fact much of this has been posted here (piecemeal) in the past several years. The video conveniently leaves out revenue growth through a growing economy (vs increasing taxes), but I'm under no illusion that alone will make a big difference.

The left and their constituents are getting what they want, lots of spending. And the right and their constituents are getting what they want, historically low taxes. 2012 on the chart below clearly shows both, though both resulted in large part due to the meltdown/recession. Most of the population can't be bothered. Many more Americans can tell you who got booted off DWTS or American Idol, what celebrity cheated on their spouse or who's in the NBA playoffs - than anything about our national fiscal health. And special interests spend big money (from all of us) to powerfully maintain the status quo using campaign contributions and lobbyists to control tax code and regulations.

We get what we deserve.

But we will dramatically reduce deficits eventually, and the longer we wait the more painful it will be.
 

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Hmmm - I when to a lecture the other day from an econ. prof at UMKC (aka the OWLS).

We need a much bigger deficit - not smaller! The idea that a big deficit is going to hurt us is totally wrong - aka sort of like believing in the flat earth.

Kinda left me listening with my mouth hanging open. Totally opposite of what I was used to hearing. :confused:

Paying off the deficit is very bad for us - and our children/grandchildren.

heh heh heh - being single, retired and with a untaxed portfolio I feel like I have a target painted on my back - future tax wise. :)
 
FWIW, the US fiscal health and economy are my biggest concern WRT a successful retirement. And of course many here have similar concerns, not news. But we do need to refrain from attacking individual politicians or even bashing one party or another...
 
unclemick said:
Hmmm - I when to a lecture the other day from an econ. prof at UMKC.

We need a much bigger deficit - not smaller! The idea that a big deficit is going to hurt us is totally wrong - aka sort of like believing in the flat earth.
Click to expand...
Yes, Paul Krugman has been saying this, too, for a long time. And he's been wrong as long as he's been saying it. Just ask him--The problem with the stimulus and all the other government spending isn't the deficit hole we're digging, the idea that bondholders may decide they want a higher interest rate to loan us more money, and the drag on our economic future from all the repayments we'll need to make. No, the problem is that the spending hasn't been big enough.

Is "economics" as (practiced by columnists) a science if nothing is testable/falsifiable?
 
Midpack said:
FWIW, the US fiscal health and economy are my biggest concern WRT a successful retirement. And of course many here have similar concerns, not news. But we do need to refrain from attacking individual politicians or even bashing one party or another...
Click to expand...

+1
I do enjoy reading about the economic milieu we find ourselves in; it helps me to make sound decisions for my own retirement situation. The political in-fighting has become so loud that I simply tune it out, and regard it as background noise...much like children yelling in a playground. I do appreciate fact-based discussions, though.

Thanks for sharing the video.
 
REWahoo said:
True, but as MichaelB pointed out above, that's a requirement when political topics are posted (see the Community Rules)
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Thank you.

Midpack said:
FWIW, the US fiscal health and economy are my biggest concern WRT a successful retirement. And of course many here have similar concerns, not news. But we do need to refrain from attacking individual politicians or even bashing one party or another...
Click to expand...
Correct. Many of us share this concern. Resolving what to do is important, as is following your suggestion (and community rules) about refraining from bringing politicians, parties and other prominent ideological figures into the conversation.
 
It's unlikely that the deficit debate, tea leaves and my not so trusty crystal ball will cause me to adjust my stock/bond/short term balance in my retirement portfolio based on fear, guesses as to future interest rates or taxes given that my success rate(with hindsight) since 1966 is less than stellar.

After 18 yrs of ER I have sort of given up and gone with a life cycle fund, Target Retirement.

heh heh heh - stay the course and all that rot. :cool: ;).
 
2soon2tell said:
Uncle Mick,

What happened to "psst .... Wellesley"?
Click to expand...

Relagated to history as I became a 'semi' born again(pun intended) Boglehead.

However selling the last of my 'few good stocks' has proved harder than when I quit smoking.

heh heh heh - I think it's a male hormone thing. :D
 
This sort of thing is like worrying about the tax code, gravity, and what teenagers are thinking about while they masturbate. We aren't going to solve the problem and nobody would listen if we did.

FWIW, I think history is probably a good guide. The last time the US was this indebted we simply inflated our way out of the mess over 2 or 3 decades. Given my wonderful demographic luck thus far, I will probably be the 1966 (63?) retiree all over again.
 
I think the information in this video is central to ER. Most of us have run firecalc, have analysed our swr, and all of that. The foundation for all those calculations is that the financial picture doesn't stray too far from what we have seen in the past. I have noticed on this and other boards that when someone questions the foundation, it's not a welcome topic. And it is easy to see why...we have all bought into this system, and if it goes too far south, and we go from the good life to something more like the life of those who didn't 'prepare for the future', then we start looking a lot less smart.

But it's not like we, as investors, have our hands completely tied. It might be hard for those of us that have US assets to avoid the possible future tax tsunami, we don't have to ride the USD down the hill, should that come to pass. So having a heads-up on the fact that the US fiscal house is completely out of whack is important to an ER, imho.
 
brewer12345 said:
This sort of thing is like worrying about the tax code, gravity, and what teenagers are thinking about while they masturbate. We aren't going to solve the problem and nobody would listen if we did.
Click to expand...
Gravity and teenagers aside, I'm not as fatalistic about what "we" can do. Maybe we can't make a difference but if we don't even try, it's assured, and we'll have only ourselves to blame. Not that US circumstances are anywhere near the same point --- the establishment in Tunisia, Libya, Egypt and Syria (to name a few) discounted their ordinary citizens at their peril. I don't know if social media will become more influential, it will be interesting to watch. YMMV
 
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JOHNNIE36 said:
MichaelB, half of the threads on this forum have no relationship to early retirement.
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REWahoo said:
True, but as MichaelB pointed out above, that's a requirement when political topics are posted (see the Community Rules)
Click to expand...

OK, but I'm trying to figure out how this could be seen as NOT being related to FIRE? Why would the level of debt's effect on the economy even be questioned? Or what some threads in this forum had to do with FIRE, but were not questioned.


-ERD50
 
sengsational said:
I think the information in this video is central to ER. Most of us have run firecalc, have analysed our swr, and all of that. The foundation for all those calculations is that the financial picture doesn't stray too far from what we have seen in the past. I have noticed on this and other boards that when someone questions the foundation, it's not a welcome topic. And it is easy to see why...we have all bought into this system, and if it goes too far south, and we go from the good life to something more like the life of those who didn't 'prepare for the future', then we start looking a lot less smart.

But it's not like we, as investors, have our hands completely tied. It might be hard for those of us that have US assets to avoid the possible future tax tsunami, we don't have to ride the USD down the hill, should that come to pass. So having a heads-up on the fact that the US fiscal house is completely out of whack is important to an ER, imho.
Click to expand...

+1

So, let's discuss what kinds of portfolio adjustments might be appropriate to mange this risk.

1. More foreign investment?
2. More cash?
3. Gold?
4. Other tangible assets (real estate, art, jewels, etc.)?
5. What AA is best? How would one adjust from his/her current AA?

Here are some very preliminary thoughts (as in I've thought about it about as long as it took me to type it). Primarily, I want to stimulate some practical discussion on how to prepare for this.

1. Yes, in countries without our debt problem and not so directly linked to our economy.
2. Err on the high side of cash on hand (an example would be to keep 6 yrs of cash like the Galeno model) versus just 1-3 yrs.
3. Some maybe??
4. Needs more thought. What was valuable during the Great Depression?
5. More cash per above and more investment in foreign debt. What about equities?
 
:dance: Guns, Gold and 7 years of freeze dryed food. :ROFLMAO: I was a tad younger(late 60's and 70's) then. :facepalm:

Ying and Yang wise - Mother Earth News and Howard J. Ruff are still in business.

In fact Ruff has a relatively new book out.

Heh heh heh - Me? Ate the food back packing(not 7yrs worth though), the guns went in Katrina, and I still have a few gold coins in the safety deposit box. Sold the mining stocks long ago.

' God Looks After Dunkards, Fools, and The United States of America.'

Boglehead - stay the course, stay balanced and soldier on. :cool:
 
Huston55 said:
+1

So, let's discuss what kinds of portfolio adjustments might be appropriate to mange this risk.
Click to expand...

If you look at what worked the last time around (not that next time will be a carbon copy), it was commodities and related items/equities, real estate and cash, pretty much. The one thing you absolutely want to avoid is very long duration bonds. Stay away from 30 year treasuries, for example. If you have a mortgage, it might be wise to get a 30 year fixed rate loan and leave it in place. That all assumes next time looks like this time. Inflation linked bonds are probably a good idea, too (I have been buying my yearly allocation of I bonds since TIPS have gone nuts).

Personally, I have been trying to include commodity equities in my portfolio and am staying away from bonds longer than 7 or 8 years out. I hope to refi my mortgage this summer to a 30 year fixed. Otherwise I just keep a diversified portfolio.
 
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