• Harry N. Stout

175- Staying Focused on Money Matters


You might wonder why I haven’t posted on the flood of money related proposals coming out of the first few weeks of the new federal administration. My view is that at this time you would be wasting unnecessary time and energy trying to pivot your money decisions trying to figure out all the actions you might need to take. Here are my thoughts on the major factors that will likely impact us. For most, how they impact your money will take time to understand.


Interest Rates

I believe you are looking of at least two more years of historically low interest rates. I do not see bank savings account rates greatly improving any time soon. Rates on credit will also be about the same, but I believe banks will take whatever actions they can to keep their profits coming in. If the economy slows dramatically, expect tougher terms to borrow money. If you have not already, look to refinance your mortgage, student loan and other debt to lock in these low rates.


Tax Reform and Rates

My belief is that taxes of all types are headed higher. This would include federal and state income tax rates, property taxes, estate taxes, wealth and other local taxes. My thoughts are that these increases are inevitable because we need to pay for all the pandemic deficit spending and related costs. In particular, I see tax levels for higher income households, however you define them, as heading higher first. Be it households earning $250,000 or $400,000. They will be the first to feel the impact of the increases. Also, pay attention to local property taxes. Many towns are suffering because of lower revenues.


Stimulus Payments and Unemployment

We will likely get a new series of stimulus actions but I believe they will be more focused with the next go round. I can see actions being taken to extend unemployment benefits for those forced out of their jobs due to the pandemic and actions to support small business. I also think action will be taken to increase the federal minimum wage. I will share my thoughts on the minimum wage in a separate post.


Reform of Social Programs

The new administration will likely table a number of measures aimed at improving and reforming Social Security, Medicare, Medicaid and Obamacare (now being referred to as Bidencare by some sources). Their first actions will all be related to fighting the pandemic, including vaccinations and longer-term measures to deal with the reality that this virus will be with us for a long time in one form or another. Next, I believe there will be actions focused on extending health insurance access and reducing cost for lower income families. Major proposed reforms will take time, debate and some form of collaboration between both political parties to pass.


Infrastructure

I can see the possibility for a large federal investment in infrastructure being passed. This could generate new jobs. This investment could address everything from our crumbling roadways and bridges to significant investment in carbon reduction. I would support anything we can do to improve our environment and I believe there are solutions to our problems if just we sit down and agree to fix them.


Retirement Savings Reform

There have been a number of new proposals made to increase minimum Social Security benefits, improve inflation adjustments for existing retirees and improve access and effectiveness of 401(k) plans to increase retirement income and disclosures. In my view these are all long-term efforts.


Summary

Keeping your focus on your money basics and how they are being impacted should be primary. The proposed changes being debated cover a wide range of areas that will impact your job, savings and retirement. As is often the case when administrations change, it will take some time for all of this flurry of activity to sort itself out. I am a firm believer in keeping financial drama to a very low level. Keep working on your basic money habits including keeping your employment skills at a high level. In my opinion changes will likely be forthcoming, particularly involving higher taxes of all types – income, property and wealth. Significant changes to the social safety net will take much longer to implement. All of these will take time to take shape. Reduce financial drama. Keep working on the day-to-day money challenges you have.

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