From the Editor’s Desk

Gary Foreman

 

Why We All Should Be Concerned about Medicare

Hello to all my Frugal Friends!

Here’s some info that will definitely interest you if you’re on Medicare or soon to be. But it should also be of interest to anyone who’s drawing a paycheck and paying into Medicare.

The Medicare Trustees just released their 2019 report. In it they state that Medicare benefit payments in 2018 totaled $731 billion, up from $462 billion in 2008.

But here’s the critical part. They project that the Part A trust fund will run out of money in 2026. And at that time, payroll taxes will only cover 89% of the Part A costs.

What does that mean to you and me? If you’re on Medicare, you’ll probably continue to be able to see your doctor. But don’t be surprised if fewer doctors are willing to accept new Medicare patients since what they’re paid for services will be squeezed further.

If you’re working and paying Medicare taxes, you probably won’t see your rate increase. I doubt that any politician has the stomach to increase your taxes.

It probably means that they’ll increase the amount of money that comes from general tax revenues and just add it to the federal deficit. It’s the easiest way to kick the can down the road and not face reality today.

If it sounds like I’m frustrated with our politicians, that’s because I am. They have known that this was a problem for years. And instead of taking responsible action while it would have been relatively painless, they refused to face the problem and they let it grow. Now it’s a bigger problem and more painful to fix. And the easy solution, adding it to general spending, will increase the federal deficit, which will blow up in all of our faces someday.

So what can you and I do? Unfortunately nothing that will directly affect the problem. All we can do is elect representatives who understand that you can’t continue to spend money that you don’t have. That the Federal government deficit will eventually need to be addressed. And, free isn’t really free. Someone has to pay for it. Even if that someone isn’t you, paying for this ‘free benefit’ means that there won’t be money for another. Don’t believe me? Check out this article on Opportunity Costs.

So am I frustrated with our elected officials? You bet I am. I just wish that they would act responsibly with our money. After all, it doesn’t belong to them. We earn it. It’s only because we agree to be taxed that they get to spend it.

I don’t want to leave you on a total downer. Here’s a bumper sticker that will probably be seen more and more often and could put a smile on your face. “My other car is a student loan”. Let’s hope that you don’t see it in your driveway!

Keep on Stretching those Dollars!
Gary

Dignity Loans: A Great Name that Has Very Little to Do with Dignity

Hello to all my Frugal Friends!

Here’s one from the ‘will we ever learn’ file. Remember the so-called sub-prime mortgages? Those that were given to people with credit scores below 640 so that they could buy a home? And what a wonderful thing it was for them. At least until they couldn’t afford to make the payments and they lost their home and any of the money that they put into it. Oh, and the economic meltdown that followed. That wasn’t so good.

Looks like we’re doing it all over again. Sub-prime mortgages are gaining in popularity again. (source: Investopedia.com) In fact, lenders have created a few new twists. Not only are they offering interest only loans (that’s where none of your payment goes toward building equity in your home), but they have something called a ‘dignity loan’ – a great name that has very little to do with dignity.

In fairness, there are some new rules for both lenders and borrowers. But the underlying problems remain. People are encouraged to buy a home that they cannot afford. They risk losing their home, their money and their credit rating.

And government agencies (Federal National Mortgage Association, otherwise known as Fannie Mae and the Federal Home Loan Mortgage Corporation, known as Freddie Mac) that guarantee some of those mortgages (source: Foundation for Economic Education), will be on the hook to cover the defaults. With government money.

The lesson we learned in 2008/2009 is still true. Just because someone is willing to loan you money doesn’t mean that you should borrow it. It’s true at a car dealer, your college student loan office, a time share sales office or any other place. Remember that the people talking you into that loan today won’t be there when you have trouble making the payments!

On a happier note, I want to thank the many people who send in kind emails saying how much one of our newsletters or articles have helped them. It’s wonderful knowing that we can make a difference. If you find our articles helpful, please forward a copy of your newsletter to a friend and invite them to subscribe. More subscribers means more great ideas to share with our readers. You can subscribe to The Dollar Stretcher here or After 50 Finances here.

And a final thought seen on a bumper sticker: “Honk if you love peace and quiet”!

Keep on Stretching those Dollars!
Gary

About the Author

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com. Gary shares his philosophy of money here. Gary is available for audio, video or print interviews. For more info see his media page.

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