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ECONOMIC REALITY CHECK

A Macro Economic View of Our Nation’s Financial Situation and Social Programs. ECONOMIC REALITY CHECK. WE WILL DISCUSS:. United States national debt crisis Changing demographics Programs at risk -- Social Security, Medicare, Medicaid Shift from government to personal responsibility.

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ECONOMIC REALITY CHECK

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  1. A Macro Economic View of Our Nation’s Financial Situation and Social Programs ECONOMIC REALITY CHECK

  2. WE WILL DISCUSS: • United States national debt crisis • Changing demographics • Programs at risk -- Social Security, Medicare, Medicaid • Shift from government to personal responsibility

  3. UNITED STATES DEBT: • $13.3 trillion U.S. national debt • Projected to be $25 trillion by 2020 • $120,000 of debt per taxpayer • $43,000 of debt per citizen

  4. HOW BIG ARE OUR DEFICIT NUMBERS? 1 MILLION seconds = 11.1 days 1 BILLION seconds = 32 years 1 TRILLION seconds = 32,000 years We have become so immune to large deficit numbers that our ability to comprehend how damaging they are has been tainted

  5. JUST FOR FUN • Go to www.usdebtclock.org • You’ll see our U.S. debt in all areas, in real-time, along with states and their debt situations • Don’t be neutral – be proactive!

  6. WHAT THE C.B.O. SAYS ABOUT OUR DEBT PROJECTIONS: JULY 27, 2010 SUMMARY REPORT Prepared by Jonathan Huntley of CBO’s Macroeconomic Analysis Division Available at www.cbo.gov Published by Douglas W. Elmendorf, Director of the Congressional Budget Office

  7. C.B.O. REPORT Two Forecasting Methods to Predict Debt Increases: 1. “The extended-baseline scenario” 2. “Alternative fiscal scenario” if the “Bush tax cut” were extended GDP: Gross Domestic Product. The total market values of goods and services produced by workers and capital within a nation's borders during a given period (usually 1 year).

  8. C.B.O. REPORT PROJECTS TWO SCENARIOS: 1st scenario -- The debt by 2035 would be equal to 80% of GDP 2nd scenario -- The debt by 2025 would be equal to 110% of GDP and by 2035 it would be 180% of GDP Either scenario poses serious financial consequences for the United States

  9. DEMOGRAPHICS 81 million “Baby Boomers” (1946-64) 38 million Americans already retired Fastest growing population in the U.S. is people over age 80 People are living longer Our birthrate is the lowest it’s ever been – ONLY 4 million babies born last year

  10. NOT GOING IN THE RIGHT DIRECTION Currently 3 workers support 1 retiree for S.S. and Medicare benefits By 2020-2025 there will be 2 workers for every retiree Your grandchildren will not only have to support their family but also 1-2 retirees during their working years

  11. SOCIAL SECURITY What do you look at when you get your annual social security statement? … Me too! Next time, read the first page on the right hand side … “By 2016 S.S. will pay out more in benefits than it collects in taxes…by 2037 the S.S. trust fund will be exhausted.”

  12. SOCIAL SECURITY The first “Boomer” turned 62 in 2008 and took her early S.S. retirement In January of 2012 the first Boomer will turn 66 and collect full benefits 2011 marks the 1st year of Medicare eligibility … with 81 million Boomers coming through the system!

  13. MEDICARE Health insurance system for people age 65 and older in our country The unfunded liability for Medicare is six times that of Social Security It has a projected unfunded liability of $89 TRILLION.

  14. MEDICARE, cont. How many Baby Boomers are currently on the Medicare system? Anyone have a Medigap policy? What has happened to your premiums recently? Notice any changes in approved medications or costly prescriptions?

  15. MEDICAID Medicaid is the health insurance system for the poor, blind, disabled and those with special needs Current income qualifications are $16,000 a year New health insurance legislation changes the threshold income from $16,000 to $30,000 a year

  16. MEDICAID, cont. That legislation brings the total amount of Americans covered by Medicaid to over 40% of the U.S. This makes Medicaid the fastest growing social program, and it will eventually be the largest social program in our country

  17. CURRENT ECONOMIC CONDITIONS • FDIC finds 829 U.S. Banks at risk • 114 Banks have been taken over by the FDIC this year so far (September 1, 2010) • Harrisburg, PA skipped a $3.29 million municipal bond payment to it’s bondholders, most of whom were individual investors (WSJ 9/1/2010)

  18. CURRENT ECONOMIC TRENDS States, counties and municipalities are broke California has paid “IOU’s” to it’s citizens for tax refunds By 2018 67% of Americans will be financially dependent on the Federal Government for support The other 1/3 will pay mightily to support the other 2/3.

  19. UNEMPLOYMENT They tell us it’s about 10% but in reality it’s more like 25% when you consider those who: • Have given up looking for work • Retired early • Taken a part time or marginal job

  20. THREE MAJORPARADIGM SHIFTS GOING ON TODAY #1 Governments won’t be able to take care of our elderly anymore #2 People are living longer than they ever have before #3 Continual transition from an Industrial Age to an Information Knowledge Age

  21. #1. Government won’t be able to take care of our elderly anymore… • Why? Demographics! • Add 80+ million Baby Boomers to the 35 million Silent Generation • 115 million people receiving SS and Medicare

  22. Demographics Gen X (1965-81) = 50 million Gen Y (1982-2002) = 80 million 130 million people, even if all were working, can’t take care of 115 million people in retirement

  23. #2. People are living longer • Average man aged 65 is expected to live to age 81 (70% of US population make it to age 65) • If a woman lives to 53 cancer and heart disease free she is expected to live to age 91 • By 2040 there will be ONE MILLION people over 100 • You must plan on 1 spouse living to age 100

  24. SHIFT #3 • Transition from an Industrial Age --which requires mass human labor to produce goods and services -- to an Information Knowledge Age which does not. • US Steel had 120,000 workers at one time – now they have 20,000 and produce 20 times the amount at a fraction of the cost

  25. Common Sense Quotes “I’m more concerned about the return OF my money than the return ON my money.” “A lot of people are going to be long on life but short on cash.”

  26. HOW WILL THIS INFORMATION AFFECT YOU? Possible issues for you: 1. Your taxes will go up 2. Your benefits will go down 3. Your out of pocket health care costs will go up 4. You and/or your spouse will need to continue working longer

  27. WHAT CAN YOU DO? #1 Do nothing (and this is a choice most Americans will make) #2 Be proactive

  28. DEVELOP A STRATEGY: MAKE YOURSELF SAFE (Would you rather be rich or guarantee that you’ll never be poor?) Put yourself in a position to benefit from a market crash or inflation Send money tax-free into the future to help those you love: spouse, children, grandchildren Create guaranteed income streams

  29. KNIGHTS OF COLUMBUS FINANCIALS • 1983 -- 500 companies out of 2000 with all the top financial ratings • 2010 -- only two (2) companies out of 1700 with the top ratings from: Standard and Poor’s A.M. Best and Company I.M.S.A. certification for customer satisfaction • The other company lost $400 million last year

  30. IS THERE A PERFECT SOLUTION FOR YOU? Nothing is perfect -- but the Knights of Columbus have developed key strategies to help the young, middle aged and retired Brother Knight and his wife anticipate and plan for the upcoming economic impact of the aforementioned issues. THANK YOU FOR YOUR TIME TONIGHT!!

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