January 14, 2013
The Only Easy Day Was Yesterday For Retirement Planning
As I have previously discussed, Congress recently passed the American Tax Relief Act of 2012 (ATRA). While ATRA caused problems in its own right, the next rounds of legislation could be more unnerving for the market. As of right now, members of Congress still need to work on a resolution to increase the federal debt ceiling, prevent the sequestration of across-the-board spending cuts that Congress deferred for two months in ATRA, and pass "a continuing budget resolution funding the operations of the government." The problem here is that the Democrats and Republicans are still at odds over every aspect mentioned above. "With Republicans warning they won't increase the debt ceiling unless big spending cuts are made and President Barack Obama insisting he won't bargain over that ceiling or make spending cuts without more tax revenue thrown in, the stage in set for ugly—and possibly significant—action."
So with all this turmoil, it is important for a person to take certain steps to protect their retirement finances. Here are five steps a person should to take.
- A person might want to move his or her funds into cash or money markets but only in the short term.
- A person might also want to establish a long term asset allocation.
- A person then needs to endure the volatility in the marketplace. While the increased volatility in the marketplace would most likely make the previous option look unappealing, this course of action would likely be more profitable in the long term.
- A retiree should save to pay for medical costs in retirement. A taxpayer might also want to use a Health Savings Account (HSA) for high retiree medical costs. However, a person can only qualify for a HSA if a person's individual coverage exceeds $1,250 or a family's exceeds $2,500.
- A person might want to add more funds to their pre-tax retirement accounts, such as 401(k)s.
See Janet Novack, Five Ways To Protect Your Retirement From Washington's Fiscal Follies, Forbes, Jan. 9, 2013.
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