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The Real Federal Debt?

Federal Debt ChartFederal Debt is a scary topic that defies comprehension.  Just what is a trillion dollars anyway? I’ts awfully hard to wrap your head around

It’s even more ethereally depressing to come into information that would indicate the size of the federal debt is many times larger than what is generally reported, according to https://nationaldebtadvice.org.uk/.  But when you really look at at Federal obligations and promises, our debt is in fact far larger than the +/- 15 Trillion commonly bantered around.

Here’s a bit from CNBC on the topic.

Our REPORTED federal debt is $15.5 trillion. That includes $10.8 trillion in public debt…money used to run basic government operations … and $5 trillion in trust fund debt for things like highway work and airports.

The $15.5 trillion number is what gets thrown around most in political debate and coverage.

But there is a bunch of government spending commitments NOT included in that $15.5 trillion number. These include almost $6 trillion in expected retirement benefits for federal employees and veterans, $8 trillion in Social Security benefits that will come due, and the biggie…. $37 trillion in Medicare benefits.

Thanks to various government accounting rules, these numbers don’t get included in the main number until they actually come due. It strikes me that’s a little like only counting your car payment, rather than the whole car loan, as your debt load. But better minds than I come up with these rules.

We as a society will need to come to terms with this debt.  Government has long over-promised, and it may need to enter a prolonged phase of under-delivering to get back on even ground.

What do you think of the Federal debt load? Is it a time bomb, or is it manageable?

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Medicaid Annuity

A Medicaid annuity is simply a term describing the use of an immediate annuity to protect assets against expected costs of nursing homes and healthcare charges.

Medicaid won’t pay for nursing home care for individuals with assets over certain thresholds.   Thus, many individuals transfer all of their wealth to a third party insurance company to purchase a Medicaid friendly annuity.  This turns assets into guaranteed cash flow, and keeps the individual eligible for Medicaid benefits.

While some states disapprove and prevent this technique through look back clauses that identify spend down strategies, most states allow the Medicaid annuity. The basic requirements are:

  1. The annuity must be irrevocable
  2. Non-Transferable
  3. Actuarialy Sound
  4. Include payments over the lifetime of the annuitant without balloon payments.

For  many individuals, the cost of nursing home care can be devastating over a very short period of time. In the absence of long term care insurance, many individuals in the past have been advised to impoverish themselves to qualify for Medicaid assistance. This can leave the remaining spouse with financial difficulties in the future.

Medicaid annuities vary greatly state by state.  We can assist by connecting you to a specialized planning and professionals in this field.