Whether it's breaking the news to a client that he's just been fleeced by his own brother or that because of his meager savings rate, he's going to have to work beyond 65, good financial advisers never skirt the hard truths
Whether it's breaking the news to a client that he's just been fleeced by his own brother or that because of his meager savings rate, he's going to have to work beyond 65, good financial advisers never skirt the hard truths.
And neither do good presidents and congressional leaders.
For all the apocalyptic sound bites and partisan positioning by President Barack Obama and House Budget Committee Chairman Paul D. Ryan, R-Wis., in the 2012 budget debate, both leaders failed to convey the full, unfortunate truth to the American people: Gaining control over the runaway budget deficit, and assuring a retirement future for generations of Americans beyond the baby boomers, will require a host of brave and deeply unpopular measures. Those measures inevitably will include some combination of higher taxes, massive spending cuts and painful Social Security reforms that will necessitate that Americans work longer and save more.
END PARTISANSHIP
To be sure, even the most silver-tongued of politicians would be voted out of office immediately if they tried to convey that message to voters — never mind to the powerful corporations and special-interest groups that helped get them elected in the first place. That is why it is imperative that Republicans and Democrats, especially Mr. Obama, call a truce to partisanship and belly up to the deal table ready to put reality ahead of political ideology.
The first place to start is the deficit. At $14.219 trillion, the nation's indebtedness is too high and threatens to derail the nascent economic recovery. If nothing else, the stock market's plunge last Monday on news that ratings agency Standard & Poor's had cut the outlook on U.S. sovereign debt to negative underscores the interconnectedness of the nation's debt load and its economic well-being.
In the meantime, the White House should stop dillydallying in its efforts to assemble a group of Democratic and Republican lawmakers to craft a plan for reining in the deficit. That group should be led by Mr. Obama, not Vice President Joe Biden, as is currently the plan. That's because if Mr. Obama leads that group, it will help him regain the much-needed trust and confidence of Republicans after his fiery April 13 attack on Mr. Ryan's budget proposal and Republican Party values.
Like it or not, a combination of spending cuts and increased taxes must be part of the long-term deficit solution. We urge the Obama administration to stop resisting the idea of spending caps on important government programs, including those that touch upon health and education.
At the same time, Republicans must abandon the notion that the country can afford to extend the Bush-era tax cuts indefinitely. We support ending those tax cuts for high-income earners, but we'd like to see the income threshold raised to capture the truly wealthy. After all, a family earning $250,000 a year and living in New York City or another major metropolitan area is likely to identify more closely with the middle class than with the wealthy.
While it makes sense to cut the corporate tax rate to make U.S. companies more competitive with their foreign counterparts, the White House and congressional leaders should work together to offset that rate cut by eliminating tax loopholes and tax breaks given to big companies and special-interest groups.
BABY BOOMERS
Finally, it is time the president and congressional leaders stop pointing fingers at one another and level with the American people about the true cause of the budget deficit: The nation's 78 million baby boomers are now entering retirement and are beginning to lay claims on promised Medicare, Medicaid and Social Security benefits.
There is no painless solution to the fiscal challenges posed by retiring boomers. The easiest and most effective way to reduce the burden is for people to work longer. Congress should raise the official retirement age and tie future increases to increases in longevity.
By encouraging clients — especially their younger ones — to set aside 15% to 20% of their annual income for retirement, financial advisers play a role in reducing the strain on Social Security. That's because workers with substantial savings will be in a position to delay collecting Social Security benefits.
Advisers also can encourage clients to work longer.
These are not easy conversations to have with clients. But good financial advisers never shy from difficult discussions.
It's time for our elected officials to follow their lead.
