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I am not an economist, so I lack the formal qualifications to suggest that our country is already bankrupt. But Boston University economics professor Laurence J. Kotlikoff is a very well-respected economist, and in a recent article he summarized our current situation by saying:

Let’s get real. The U.S. is bankrupt.

Professor Kotlikoff took a close look at the Congressional Budget Office data, and calculated that the U.S. government is facing a fiscal gap of $202 trillion.

The reason that his number is so much greater than the $21.9 trillion dollars of debt that most politicians will admit to is that Professor Kotlikoff’s total includes all of the unfunded future liabilities that the U.S. government has already committed to.

Check the U.S. National Debt Clock at to get an update on the debt figure (not including unfunded liabilities).

To put that into perspective, consider that if the government sold all of the gold in Fort Knox (estimated to be 147.3 million ounces) at the current (and historically high) price of $1,776 per ounce, the total proceeds would amount to $261.6 billion.

If there was such a thing as a billion-dollar bill, you would need 1,000 of them to equal one trillion dollars; so $261.6 billion would hardly put a dent in the $202 trillion dollar debt. Even if we could sell all of the gold that has ever been mined in the history of man (estimated at 185,000 tons) at $1,776 per ounce, we would only end up with $10.5 trillion dollars. That would be only enough to pay off about 5 percent of what Professor Kotlikoff estimates as the total U.S. debt.

According to the U.S. Census Bureau, there are a total of about 113 million households in the U.S. If we divide the $202 trillion debt among the total households, each household’s share amounts to over $1,787,611.

There are about 300 million people in America, so if we divide the total estimated debt by this number, it comes to a much more manageable $673,333. Unfortunately, that means that if you are married with two children, your gang’s total share is a little under $2.7 million.

Prior to World War II it was generally considered to be immoral to leave debt for the next generation to pay. Evidently, morality has changed since then to such a degree that today we give little thought to saddling our children, grandchildren and great-grandchildren with a good deal of debt.

Our country is indeed bankrupt; most of us just don’t know it yet. So who is going to help the aging baby boomers who run out of money and can’t pay for their food, rent and medical bills?

Clients need to understand that their future retirement will likely look different then they might expect. Will 100% of Social Security be taxable? Will the ability to even collect a Social Security benefits depend on how much other income a person has? Will Medicare pay less? Will tax rates be higher?

Here are four things you can do to help your clients be better prepared to meet this challenge:

Educate them as to the significance of this problem and convince them to save more money.

If your clients have a need for a permanent life insurance death benefit, discuss the advantages of accumulate some money in vehicles like indexed universal life insurance (IUL), whole life insurance and variable life insurance contracts which traditionally have received favorable tax treatment. Explain that life insurance cash value loans can be accessed without triggering a 1099 (under current law) and why this could prove to be an advantage if eligibility for Social Security or Medicare benefits become “means-tested” in the future.

As an advisor you must become educated on reverse mortgages because many of your clients will need to tap into the “housing wealth” they have accumulated. Reverse mortgages have changed a lot in recent years and no longer deserve the negative “knee-jerk” reaction when they are mentioned.

Make sure they understand the benefits of becoming better tax-diversified. A client who has retirement savings in vehicles that are taxed in different ways will have a tremendous advantage in the future. They can limit withdrawals from their traditional IRA, 401k and other tax deferred accounts to keep in a low tax bracket and supplement this income by accessing the money in their Roth IRA, life insurance contract and home equity (using a reverse mortgage).

What Strategies Do You Use?

So this is a simplified list of the tools that help me run my business. Any other tools you can’t live without?

Let me know in the comments below!