Getting to a point where you can retire comfortably is no easy feat. It requires patience and planning. You need to sock away money you’d much rather use immediately. Enlisting the help of experts, such as financial advisers, is also a step millions of Americans take. But evidently, we haven’t planned well enough for retirement. There’s a budding retirement crisis on our hands, and there doesn’t appear to be an easy way out.
Even our government is doing us a disservice. Take recent attempts to overhaul health care, for example. Tens of millions of people stand to lose coverage, many of them senior citizens. This is one of many ways the government is undermining the interests of retirees and making it harder for everyone else hoping to retire. It runs deep, too, from your 401(k) to the rules dictating what your adviser can assist you with.
Here are 15 ways the government is making it more difficult to retire. First, you might have to do it without health care.
1. Proposed cuts to Medicare
The first and most obvious way policymakers are making retirement more difficult is through changes to the health care system — most notably by making big changes to Medicare, the health care program for seniors. Although nothing is set in stone, Republicans are trying to pass the American Health Care Act, which would eat away at Medicare’s funding. The first time the Congressional Budget Office scored the act it found the bill would cut $880 billion in federal funds to Medicare over the next 10 years, dropping coverage for 14 million people.
Next: Medicaid is up for cuts, too.
2. Proposed cuts to Medicaid
In addition to the proposed Medicare cuts, Medicaid — the health care program for the poor — would also take a hit. This would be devastating for poor and sick seniors who don’t have the financial safeguards (or savings) to stop working. If huge cuts are made to the Medicaid program, millions of sick and poor seniors could find themselves in a lot of trouble.
But it’s not just health care costs that threaten to bankrupt you. Policymakers are also fooling around with traditional tools meant to help you retire.
Next: 401(k)s could see some changes.
3. Messing with your 401(k)
If you contribute to your 401(k), rumors swirling around Washington might have you sweating. Specifically, it sounds as though the Trump administration has considered passing legislation that would mess with your 401(k) pretax contributions. For the typical American making contributions, the danger is your money would be taxed first and then put into the 401(k). Additionally, this could dissuade employers from offering the plan.
Next: Policymakers are also taking aim at programs devised by states, too.
4. Gutting state retirement programs
While Congress was pondering your 401(k), it also made another damaging move. In a rollback of an Obama-era rule, policymakers scuttled the states’ ability to create retirement plans for private-sector workers. According to CNN Money, there were plans already underway in seven states. The goal was to help smaller businesses offer retirement plans to their employees, but the Republican-controlled Congress felt these plans wouldn’t be able to outperform private-sector alternatives.
Next: IRA contributions are low.
5. Low maximum IRA contributions
A key issue with individual retirement accounts is they have relatively low contribution limits. But that’s not a new problem unique to the current administration. It’s been that way for a long time. By law you are able to contribute up to $5,500 per year to an IRA (traditional or Roth) if you’re younger than 50. Compare that to what you’re allowed to contribute to a 401(k), for example, which is $18,000. If we were to bump up that $5,500 limit on IRA contributions, people would be able to sock away more money for retirement.
Next: Financial advisers might not be that much help.
6. Fiduciary rule
You might have heard arguments relating to the “fiduciary rule” in recent months. This refers to a rule under the Department of Labor that requires financial professionals (planners, advisers, and brokers) to work in the best interests of their clients. The rule would, for example, stop a broker from selling you a product or service you don’t need in order to earn a fee from the sale.
It’s a consumer safeguard — and one that is in danger of being removed. There is absolutely an argument to be had about the merits of the rule. But if it is abandoned, you could be open to increased risk.
Next: Social Security needs revamping.
7. Reluctance to fix Social Security
The Social Security system is in trouble, and it has been for a long time. But policymakers are reluctant to devise a fix, which is why they call the topic the “third rail” of American politics. Social Security cuts verses spending is still a politically divided topic. When it comes to reducing benefits for current retirees, 84% of Democrats and 69% of Republicans disagree, according to a National Institute on Retirement Security study. And 86% of Democrats and 63% of Republicans disagree with reducing Social Security benefits for future retirees.
The problem is the system will become insolvent at some point in the future. Expenditures will overtake income. Policymakers, as a result, need to make a choice: Do they raise taxes to pay for it or lower payouts? Or, in another controversial move, do they increase the age at which people are eligible?
Next: Payout calculations could change.
8. Tying Social Security to the consumer price index
Another issue plaguing the Social Security system is how the payouts are actually calculated. Specifically, cost-of-living adjustments are being targeted by new legislation that could change how much an individual receives. Cost-of-living adjustments typically amount to raises every year, as the cost of living goes up with time. But some policymakers want to tie those “raises” to a new variable: the consumer price index for seniors.
This could have potential upsides, but it doesn’t address the overarching issue: The whole system is set to be depleted by 2034. Although seniors could end up seeing bigger checks in the near term, this idea could speed up the system’s demise.
Next: Pensions are in trouble.
9. Pension problems
Let’s not forget about a retirement relic from generations past: the pension. Pensions are still around, of course, but they’re much rarer than they used to be. Many employers simply don’t offer them, and a lot of pension funds are having trouble staying solvent. There are a lot of reasons pensions are in trouble, and government played a role. Several years ago, while President Barack Obama was in office, a rule passed that allowed employers reduce what they had to put into pension plans while simultaneously reducing their liabilities.
Pensions are expensive, and it makes sense that businesses would want to move away from them. But in terms of the retirement crisis, that’s not good news.
Next: Lobbying isn’t for the average American.
10. Endless lobbying
Why is it so hard to file your taxes? Lobbying. Why would your representative support the removal of a fiduciary rule? Lobbying. How about health care? Why is it such a mess? Lobbying — at least, in part.
So, yes, lobbying is an ongoing and important part of the legislative process. But the typical American doesn’t have a lobbyist looking out for their individual interests. Insurance companies, financial institutions, and other entrenched interests do. All of that lobbying has had profound effects on your ability to retire. There’s a lot of money at work, and it’s not necessarily working in the interests of those hoping to retire.
Next: The government’s debt affects everyone.
11. Government debt
The national debt affects your retirement. And unfortunately there isn’t a lot you can do about it. Brian Rehling of Wells Fargo Investment Institute told The Street that the growing debt keeps interest rates low. That means “people essentially have to save even more for retirement because those low rates and low returns mean that they’re not going to have as much in retirement as they may have in a higher-rate environment,” Rehling said.
Next: A shutdown could affect your payments.
12. Government shutdown worries
Since the 2013 government shutdown, the threat of another continues to loom. And that can affect your retirement. Federal employees, both active and retired, can miss out on some retirement benefits and services, according to The Washington Post. But even private citizens might experience some late Social Security payments if government employees are on furlough.
Next: Americans need more education to navigate retirement.
13. Education is lacking
The National Institute on Retirement Security study reported 87% of Americans said retirees don’t know enough about managing investments. And 80% agreed the average American can’t save what they need for retirement on their own. Plus, more than half of respondents said managing savings on their own was a key factor that made preparing for retirement difficult. It’s not up to the government to hold your hand through retirement, but it seems it isn’t doing enough to educate Americans on retirement programs.
Next: The government just doesn’t understand.
14. Remaining unaware
The National Institute on Retirement Security survey also found Americans overwhelmingly believe the leaders in Washington don’t understand the struggle retirement is for most citizens. According to the survey, 85% said politicians don’t understand what the average American has to go through to plan for retirement. Even when split down party lines, 82% of Democrats and 88% of Republicans agreed leaders don’t understand how hard it is to prepare for retirement.
Next: Americans want priority.
15. Not prioritizing retirement
Finally, according to the National Institute on Retirement Security survey, Americans felt the government doesn’t prioritize the retirement crisis. Of the respondents, 86% believed politicians should be doing more to ensure a secure retirement for all Americans. Breaking it down, a whopping 98% of Democrats wanted leaders to give it higher priority, compared to 82% of Republicans.
Additional reporting by Mary Daly.