A Consumer’s Guide on the Debt Deal

A hot topic on most financial sites recently has been the Debt Deal – the speculations, the pros and the cons from both parties, and now the final details signed into law. Now we await the selection of the six Democrats and six Republicans who will have the tasking job on how to reduce over 1.5 trillion dollars by the end of November. Although there is much fall out yet to come, here's a start on who and where we may see the quickest impacts...

• Working Adults – The current Debt Deal did not extend the payroll tax cut passed in 2010, so unless something changes in a separate legislation, it's likely that paychecks will be reduced by 2% beginning in January.
• Retirees – For those who rely on Municipal Bonds for income, there is concern that a reduction in federal spending will equate to less aid for states and local government putting a further burden on those states already struggling. If you or someone you know is in this situation, it might be best to consult a Financial Advisor to review their specific situation.
• College Students – Right now, subsidized loans are still available for the Undergraduate Students; however, the Graduate Students are not so lucky. This benefit will be going away as of July 1, 2012. Another thing to watch is the Pell Grant program which still faces an enormous deficit. What's currently being considered to off-set the debt is to reduce the eligibility for the grants from 18 months to 12 months or by increasing enrollment requirements.
• Housing Market – If you're currently shopping for a house, you might consider sealing the deal sooner than putting it off simply because there is still so many unknowns of how this will all shake out. Right now you know what incentives are on the table and you're able to qualify for. In another six months, those could all change.
• Medicare – With the daunting task of finding another $1.2 trillion in savings in health care costs, Medicare likely faces some changes. The first will be a decrease in payments by 2% which means consumers may find doctors and hospitals revisiting their Medicare policies. Right now, there have been hints of adjusting the Medicare eligibility age to 67 or increasing co-pay amounts.

These are just a few things that consumers may want to follow to see how things work out. If you're at all concerned with your retirement allocations and how any of this impacts your portfolio, please feel free to call our office at 636-240-5055 and we'd be happy to schedule a meeting to review any of your questions.