Advice for Fed Workers, Medicaid Recipients and Investors
If you have felt inundated by the news flow, you are not alone. Five weeks into the Trump Administration and it’s hard to concentrate on where various executive orders and policies stand. Based on time sensitivity, I have chosen three areas of focus today: financial advice for government workers, Medicaid recipients, and investors.
Government Workers: I have received a slew of emails from government employees who are still employed but are worried that the axe could fall at any moment. (This goes for my colleagues in the media, who are facing similar pressures amid a shrinking industry!) For the long-tenured folks, these are usually framed as one podcast listener queried: “Should we stay, or can we go now?” This boils down to whether or not a worker can afford to retire early, or earlier than previously planned.
To answer that question, you’ll need to do some work. Start by calculating how much you spend today. I hear you groaning, but this is the cornerstone of every financial goal, including early retirement. You may need to factor in more money going out for health care, depending on your benefits or whether you can switch to a spouse’s plan. Next, determine what you own (your assets, like retirement, investment, and savings accounts) and what you owe (liabilities). You will then need to see if you will have enough income (pension, future Social Security and money that your retirement and investment accounts generate) to meet your needs. Maybe the numbers line up, but if they don’t maybe you can bridge the gap with part time work; otherwise, it’s back in the labor pool for you.
If you are younger and not contemplating retirement, but are concerned about your job, build up your emergency reserve fund. You should have 6-12 months of living expenses in an easily accessible savings, checking, money market account or certificate of deposit. If you are short on the cash account, you may want to temporarily reduce your retirement plan contributions while you build it up. As I have noted, “During times of transition, cash is the salve to the dreaded “what ifs.” With cash on hand you can worry less, because you have resources at your disposal if you need them.”
Medicaid Recipients: Congress has just begun the budget process, but at even this early stage there has been a lot of conversation about cuts to Medicaid. Because they sound so much alike, it’s worth distinguishing between Medicare (health insurance for those aged 65 and older) and Medicaid, the joint federal and state program that helps cover medical costs for those Americans with limited income and resources. Both programs were established on July 30, 1965, as part of the Social Security Act, and have evolved and expanded over their near-60 years of existence. As of 2023, there were 69 million people (21 percent of the population) enrolled in Medicaid and nearly 48 million in Medicare (14.7 percent).
The financing of Medicaid is a little wonky, in that the federal government matches state Medicaid spending based on a formula specified in the Social Security Act. “By statute, the federal match rate is at least 50 percent in every state, but the lower a state’s per capita income, the higher the federal match rate it receives,” according to the Kaiser Family Foundation (KFF). Additionally, while there are overall rules that are established at the federal level, each state operates its own Medicaid program, which means that eligibility rules differ among states.
Many older Americans are concerned that Medicaid cuts might impact them at the worst possible time in their lives. According to Mark Miller of Retirement Revised, Medicaid “funds health and long-term care for over seven million Americans age 65 and older and nearly eleven million from ages 50 to 64.” Miller cites Justice in Aging, a national advocacy organization focused on senior poverty, which says “more than 6 in 10 nursing home residents rely on Medicaid.”
While we do not yet know if Medicaid cuts will materialize, these are the usual routes to consider for coverage, if an individual loses Medicaid:
Get a Marketplace health plan. Most people qualify for savings to lower what they pay for their monthly premium and when they get care.
Consider a workplace plan.
Sign up for Medicare, if you qualify (like if you’re 65 or older).
Investors: There have been many reports of the economy slowing down, starting with the highly unpredictable consumer confidence data, to a weaker than expected retail sales report. All of the chatter has led to a resurgence of questions about a looming recession and if it’s coming, how investors should prepare. As a reminder, at the start of 2023, the vast majority of economists at large financial institutions believed that the U.S. would enter a recession in 2023, and they were all wrong.
This is not to say that there will not be a recession, of course an economic downturn is a natural part of the economic cycle and when we have a contraction, it is usually bad news for the stock market. But I don’t know when it will pop up and if it does, how severe it will be and how long it might last. If preparing for the worst is your jam (who, moi?) then taking yourself through the retirement exercise noted above is a good start.
Then remind yourself that you are saving for a long-term goal, which is likely years or decades in the future. If you are still nervous, make sure that you have spread out risk with a diversified portfolio and that your cash position is adequate enough to cover 6-12 months of expenses, and to meet specific needs, like a new car, tuition checks or home renovation projects.