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Endless Deficit Spending and Advisor Marketing to Seniors

You might see the near record federal deficits as a good news-bad news story for financial advisors.

The good news is might skinny with this story. Maybe it will lead seniors to take a second look at their government pensions. Maybe they’ll choose to save more money for retirement. Perhaps they’ll decide to seek out an advisor with some sound ideas on how to live off their retirement accounts.

The bad news is that government spending is totally out of control. The Federal Reserve Bank can’t raise interest rates without causing the interest expense on the debt to balloon even higher than it is today. So seniors get very little on their short term money. It takes a lot more money in the bank to get a livable income.

This article from today’s The Wall Street Journal lays it all out. The picture ain’t pretty.

Deficit in July Totals $165.04 Billion

The U.S. government spent itself deeper into the red last month, paying nearly $20 billion in interest on debt and an additional $9.8 billion to help unemployed Americans.

Federal spending eclipsed revenue for the 22nd straight time, the Treasury Department said Wednesday. The $165.04 billion deficit, while a bit smaller than the $169.5 billion shortfall expected by economists polled by Dow Jones Newswires, was the second highest for the month on record. The highest was $180.68 billion in July 2009.

The government usually runs a deficit during July, which is the 10th month of the fiscal year. So far in fiscal 2010, the government spent $1.169 trillion more than it made. That figure is about $98 billion lower than during the comparable period a year earlier.

For all of fiscal 2009, the U.S. ran a record $1.42 trillion deficit. Fiscal 2010 might run a little higher—the Obama administration sees $1.47 trillion.

Wednesday’s monthly Treasury statement said U.S. government revenues in July totaled $155.55 billion, compared with $151.48 billion in July 2009.

Spending was higher, totaling $320.59 billion. July 2009 spending amounted to $332.16 billion.

Year-to-date revenues were $1.75 trillion, compared with $1.74 trillion in the first 10 months of fiscal 2009. Spending so far in this fiscal year is $2.92 trillion, versus $3.01 trillion in the prior period.

Spending for benefits for the unemployed year to date totaled $121.4 billion; for July, the tab was $9.8 billion, the Treasury statement said.

Years of deficit spending by Washington have led to a mounting national debt. Interest payments so far in fiscal 2010 amount to $185.25 billion; by contrast, corporate taxes collected by the government during the same 10 months were $139.71 billion. Interest payments in July alone were $19.9 billion.

Source: http://online.wsj.com/article/SB10001424052748704901104575423601722830706.html?mod=WSJ_hp_mostpop_read

With interest rates near zero for short-term money, interest expense is $19,900,000,000 for July. So retirees depending on bank CD’s shouldn’t get their hopes up. You need to tell them about better ways to provide for their day-to-day retirement income.

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