Weekly Update from RLA Tax and Wealth Advisory

By:  Dennis Tubbergen

Social Security Crunch Time

         “The Wall Street Journal” ran a story about the Social Security system that had an interesting perspective.  The article was titled, “The Next Class of Senators Won’t Be Able to Dodge the Social Security Crunch”. (Source:  https://www.wsj.com/politics/policy/the-next-class-of-senators-wont-be-able-to-dodge-the-social-security-crunch-67193b54)

         No matter how you look at things politically, it’s difficult to refute the fact that collectively speaking, politicians think only as far as the next election.  This has been the case for my entire adult lifetime.  Back in 1983, when the Social Security normal retirement age was raised, those less-than-popular revisions to a popular program on which millions of Americans rely took effect after the politicians enacting those changes had long left office.

         There are many other examples of political can-kicking that I could reference, but in the interest of brevity, I’ll just say that the collective group of politicians enacting changes has the positive changes take effect immediately but defer negative changes until later, at least until after the next election.

         But when it comes to Social Security, the can-kicking is about to cease.  According to the article referenced above, by late 2032, incoming tax revenues and Social Security reserves (which are another story for another day) will not be enough to pay promised Social Security benefits.  That means a U.S. senator elected for a 6-year term in 2026 will be forced to deal with the problem.

         Social Security now comprises 22% of Federal Spending.  President Trump has voiced opposition to Social Security cuts, but he leaves office in January 2029.  Senator Lindsey Graham, who is running for his fifth term in the US Senate this year, was quoted in the article saying, “I’m willing to do my part.  You’ve got to look at age adjustments, you know, means testing benefits.  You’ve got to put it all on the table.  All on the table.”

         So, what might that mean for you?

         If you have other assets that are ‘significant’ as defined by the collective group of politicians at the time, perhaps you’ll receive reduced benefits or have your benefits taxed at a higher rate.

         Your children will likely have a normal retirement age under the Social Security program of age 70 or even 75.

         And presently, Social Security taxes are paid on the first $184,500 in earned income.  There is talk of eliminating that cap.  For a self-employed high earner, that could mean federal tax of 37% plus Social Security and Medicare tax of 15.3% plus any applicable state income tax.  In a state with a relatively modest income tax rate of 4%, that would mean a combined tax rate of 56.3%.

         Downright confiscatory.

         And high-tax states like California or New York would be even worse.

         Not to pile on, but that’s only Social Security.  I haven’t discussed Medicare or the official national debt, which is now more than $38.5 trillion.

         If you have income and assets, you’d be wise to start positioning your assets and personal finances in such a way as to prepare for the end game.  While none of us knows what that might look like, I’ll suggest that there will be two major courses of action.  One, higher taxes for affluent Americans who’ve accumulated assets, and two, easier money policies to avoid an outright default.

         In my view, there has never been a more opportune time to do planning than the present.

Scary Words

         Let me preface these comments by disclosing that I view the world from a freedom-loving perspective.  And I don’t apologize for those views. 

         From that perspective, the words spoken by the new Mayor of New York, Zohran Mamdani, in his inaugural address were deeply troubling.  In case you missed it, here’s what he said.  “We will replace the frigidity of rugged individualism with the warmth of collectivism.”

         Collectivism is one of the principles of communism.  While this view was once considered fringe, it is now being embraced by the mayor of the largest city in the United States.

         If you’re like many Americans who aspire to a comfortable life brought about by being rewarded for your efforts, these words are simply frightening.

         Once in place universally, socialism is nearly impossible to reverse.  There is an old saying regarding socialism/communism that I read again recently, “You can vote your way in, but you have to shoot your way out.”

Mortgage Rates Fall

         After peaking at 7.04% in January of 2025, the rate on a 30-year mortgage fell to 6.18% to close the year.  (Source:  https://www.zerohedge.com/personal-finance/mortgage-rates-dip-3-year-lows-home-sellers-outnumber-buyers)

         The rate decline comes as the real estate market has officially transitioned into a buyer’s market.  The real estate brokerage firm Redfin reported that in November 2025, there were 37.2% more real estate sellers than buyers.  That’s the largest gap between sellers and buyers since 2013.

         In real numbers, that 37.2% gap amounts to more than 529,000 more sellers than buyers. 

         This is still a trend in motion, and in my opinion, real estate ask prices will continue to fall as they “catch up” to the trend.         

RLA Radio

         The RLA radio program this week features an interview I did with Karl Denninger about his 2026 forecast. The program will also show you how to obtain a written copy of my 2026 forecasts.

         The RLA radio program is available by clicking on the "Podcast" tab at the top of this page, or you can find it on your favorite podcast channel.

Quote of the Week

“I’m not offended by blonde jokes because I know that I’m not dumb…and I also know that I’m not blonde.”

                                                               -Dolly Parton