Saving for retirement will get a little more attractive next year. Given the dire state of savings in this country, anything that convinces workers they need to save more will be beneficial.

 

The Secure Act 2.0, enacted in 2022, ushered in several additional improvements in retirement savings, including even higher 401(k) plan catch-up contributions. The object was to make it easier for older American workers facing a retirement savings shortfall to set aside more money quickly. 

 

The facts are that there is a widespread retirement savings shortfall in the U.S. that spans generations. Sixty-five percent of Baby Boomers (age 55-64) have less than $25,000 to $100,000 saved toward retirement. If we use $500,000 as a marker, less than 7 percent of boomers saved that much and only 5 percent of the GenX generation (45-54).

 

Younger generations like older millennials (35-43) are not much better off and 10 percent lack a 401(k) entirely. However, 65 percent of Gen Z and younger millennials (21-34) do have $25,000 to $100,000 saved but doubt whether they will ever reach $1 million by retirement. Overall, if one believes the benchmark total of $1 million is needed to retire, only 2 percent of 401(k) holders have achieved that. And over one-third of Americans today believe they will never reach that benchmark.

 

In 2025, the government will provide a few more incentives to bolster savings. Contributions for 401(k), 403(b), governmental 457 plans, and the federal government's Thrift Plan will inch higher. The new limit for all the above plans will increase by $500 to $23,500.That is not much, but every little bit helps. For older workers, aged 50 and up, additional savings are allowed under a catch-up plan. 

 

While the catch-up contribution limit for those 50 or older remains the same, bringing their total contribution to $31,000, those workers between 60 and 63 years old can save even more in the coming year. The catch-up limit for those in their early sixties increases by $11,250 annually. That is substantially higher than the $7,500 allowable now.

 

The contribution limits for Individual Retirement Accounts (IRAs) will remain $7,000. The catch-up limit for individuals over 50 stays the same as well at $1,000.

 

For those who favor contributing to Roth IRAs, there is some good news. The income limit range for workers will increase to between $150,000 to $161,000. If you are married and file jointly, the range increases to between $236,000 and $246,000, which is up from $230,000 to $240,000. 

 

There are some additional incentives to at least jump-start savings for the 32 percent of working-age Americans (about 58 million people) without a retirement savings plan. The income limit for the Retirement Savings Contributions Credit, also known as the Saver's Credit, was increased. The Saver's Credit, available since 2001, is a tax credit worth up to $1,000 ($2,000 if married and filing jointly) for mid- and low-income taxpayers who contribute to a retirement account.

 

To qualify, you need to be over 18, not a full-time student, or a dependent on someone's tax return. Your adjusted gross income in 2025 needs to be below $79,000 for married couples and $59,250 if you head a household. If you are single or married but filing separately your income cannot exceed $39,500.

 

It baffles me why Americans aren't saving more in retirement accounts. Many say they just can't afford to max out their savings plans even when their companies offer to match some portion of their contributions. That may be true in many cases. Thus far, there is no other way to force Americans to save for retirement other than through the Social Security tax on income.

 

Given the worries over the deficit, funding, and continuing threats by some to cut Social Security benefits, why hasn't it happened already? The simple answer is if you cut Social Security, millions of people with no savings will end up destitute and on government life support in retirement. That would be an even more expensive proposition than the Social Security system.

 

Yet changes to the Social Security program seem inevitable at some point. If so, why not require the government to match retirement plan contributions while reducing Social Security benefits simultaneously for those under retirement age?

 

In the short term, it might be moving the chips from one side of the table to the other, but it need not be forever. The trick would be to incentivize workers to establish a savings habit. That wouldn't take too long. Once accomplished, especially with savings withdrawn from paychecks automatically (just like Social Security taxes), the match could be raised or lowered depending on circumstances.  

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Last week, billionaire Stephen Feinberg of the private equity firm Cerberus Capital Management was selected to fill the No. 2 spot at the Defense Department. That brings the number of billionaires who have agreed to join Donald Trump's second term to an even dozen. Should you be worried?

 

The wealth and business background of these individuals have sparked concerns that the next four years will favor business interests and those of the wealthy above all else. If we include Trump, Elon Musk, and Vivek Ramaswamy, the total thus far would be 15. At last count, U.S. News and World Report estimated that the total net worth of these billionaires as of Dec. 10 was more than $382 billion. That would be equivalent to the Gross Domestic Product of 172 different countries.

 

The Departments of Treasury, Commerce, Education, Interior, and Defense will be run by these wealthy individuals as will the Small Business Administration and NASA. In the $100 million to megabillion-dollar net worth range, are another group of ambassadors, advisors, the energy secretary, and the head of the Social Security Commission.

 

The facts are that American politicians have always been wealthier than most Americans. That is true in other countries as well. For wealthy individuals serving one's country may truly be altruistic since government jobs are thankless and underpaid for the work required. Service is also a massive step down from what these people can and do make in the private sector. However, it is also true that wealthy lawmakers usually favor pro-business policies.

 

In the recent election, 150 billionaire families spent a total of $1.9 billion supporting both presidential and congressional candidates, according to a study by Americans for Tax Fairness. That was a 58 percent increase over what was spent in 2020. The lion's share of that money went to the Trump campaign ($568 million), compared to $127 million to Kamela Harris. Those figures underestimate the real totals since many donors conceal their identity when funding political causes. Elon Musk alone is thought to have contributed as much as $277 million to the Trump effort in 2024.

 

Some critics believe that the entire trend in political spending by the one percent is an effort to shape the terms and future of American democracy in their favor. They point to Trump's running mate, Senator and now Vice President-elect JD Vance, a protégé of billionaire Peter Thiel, as an example.

 

Last week's controversy over Musk, the head of the proposed Department of Government Efficiency (DOGE) is a case in point. Musk, who holds no elected office, mounted an 11th-hour protest over the bipartisan congressional deal designed to fund the government for a few more months.

 

What had begun as a clean and simple piece of legislation two weeks ago, became a free-for-all by legislators on both sides to attach additional spending for pet projects. Musk pointed that out on social media and demanded the agreement be revised.

 

The political blowback from House members was immediate. Both Republicans and Democrats called press conferences. Some (mostly Democrats) accused "President Musk" of sticking his nose where it doesn't belong. The criticism continued, despite Trump's backing of Musk's arguments. How dare a civilian interfere with the work of elected officials! 

 

In any case, a compromise was put together quickly and the legislation passed, but much of the pork in the bill was dropped. The politicians claimed victory. Musk and Trump lost, according to the media but I have a different take. It seems to me that we, the people, won. Why?

 

We all know that this kind of wasteful spending happens all the time in Washington. It is hidden from the public and usually attached (and buried) in a bill of something important that both sides can defend such as disaster relief. Over time, this or that boondoggle or bridge to nowhere is revealed, and we shake our heads over the duplicity of it all. "Something must be done," we mutter in outrage, but nothing ever is. We shrug our shoulders and over time go on about our business. The politicians are counting on this. And yet, over the last few decades, we became increasingly less happy, than angry until today the entire political system is in doubt.

 

The difference this time was that one of these billionaires not only blew the whistle on the practice but had at his fingertips a vast avenue of communication called X to announce it to the world. Was it unorthodox? Absolutely. It may take similar actions and/or out-of-the-box thinking to change a fossilized system where we all talk about a good show but take no action.

 

I would counsel readers to avoid  jumping to conclusions because many of these appointees are wealthy and not from "acceptable" backgrounds in government. That does not mean I approve of all the former president's appointees no matter how much money they may have. Far from it. Nor did I approve of all of Biden's appointments.

 

But nothing says that a team of billionaires will automatically promote a business-as-usual attitude toward the problems facing this country. Franklin D. Roosevelt was a man from a wealthy family. He gave us the New Deal, shepherded us through the Great Depression, and led our country to victory through a World War.

 

To many, Michael Bloomberg, another billionaire Wall Streeter, did the impossible. He changed the face of New York City, straightened out its finances, and served three terms as mayor. Yes, some said he was arrogant and insensitive to the poor but there has never been a mayor like him to this day.

 

Many argue that these rich people lack experience in government service. That may be a good thing. They will make plenty of mistakes, but billionaires learn fast. In comparison, those public/private/ lobbyists/politicians who have spent their careers moving in and out of government service are the people who have brought the country to where it is today. These politicians often seem to have only one remedy for what ails us as a nation — more of the same.

 

 We face a crisis today and it doesn't take a rocket scientist to figure that out. Voters in this populist era are angry. They are demanding major changes in both our political and economic systems. A return to a time when robber barons exploited the government for their ends will last as long as an ice cream cone in July. The rank-and-file of Americans will not take kindly to getting shafted once again.

 

Remember that most of those billionaires boot-strapped their way to where and what they are today. They know what it takes to succeed in the private sector. Can they apply their tools to the public sector? That remains to be seen, but I will at least give them the benefit of the doubt.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

 

Jan. 20 is just around the corner. It is Day One in the tariff wars that our next president is intent on launching. The corporate world is trying to dissuade him from that course of action, with no success. 

 

It is an economic fact that the cost of tariffs is passed on to the consumer. If tariffs are high enough, some imported products simply cease to be available, which can cause supply chain interruptions. At some point, buyers balk at paying higher prices. When that happens, tariff costs hit business profit margins directly. Everyone loses.

 

In the last column, I explained why Donald Trump is adamant that tariffs are the only way to turn around the trade imbalances that have plagued our country as far back as the aftermath of World War II. In his first term, Trump's tariff policies were partially successful but not without a cost. Some countries hit back with their tariffs. Our farmers were hurt so badly that Trump was forced to authorize multibillion dollars in direct aid to keep many farmers afloat. Yet, the MAGA math indicates that whatever harm is done will be worth it in the long run.

 

However, an important element in this equation is being ignored by Trump and many economists. We will use Germany as just one example. As the powerhouse of Europe, Germany has been enjoying large trade surpluses with the U.S. for many years. Back in the heyday of mercantilism (16th-18th centuries), a country would take these trade surpluses and convert them into piles of silver and gold that would sit in their monarch's coffers for years. That is not the case today. 

 

Germany, as well as China, Japan, and most other European nations have much higher savings and investment rates than we do in the U.S. Why should that matter? Because instead of hoarding their cash profits on trade (the modern-day equivalent of precious metals), they have been taking their current account trade surpluses and recycling those capital flows back into the U.S. and other countries. Those flows find their way into building new plants and equipment in the U.S., creating jobs, investing in our technology, and purchasing our stocks and bonds. 

 

This flow of funds allows the American consumer to continue to save less and spend more. The risk is that by raising tariffs, we reverse this process. These offending nations would see their current account trade surplus go down as their exports to the U.S. slowed. That means they would have less capital to invest back in America.

 

I see other differences between the Trump approach and the mercantilists of old. Back in those days of colonial expansion, currencies did not represent the value they do today. Only gold and silver were considered stores of wealth. Today, nations can do more than just raise tariffs in response to a burgeoning tariff war. 

 

Since Trump has already telegraphed his intent to levy tariffs on America's trading partners, exporters have already acted by using their currency to lessen the impact on their trade balance. How — by reducing the value of their currencies against the dollar.

 

If Mexico, for example, is hit with a 10 percent tariff on exports and allows its currency to depreciate versus the dollar by 10 percent, the price to importers remains the same. No harm is done, and it is business as usual. This is why the U.S. dollar has been strengthening against just about every currency all year.

 

Another area where Trump departs from the mercantilist model is government control. He believes in the heavy hand of government as far as trade is concerned, but he is in the opposite camp where rules, regulations, and taxes by the same government are concerned. Unlike the nations of old, he does not believe that wealth is finite, nor should it be measured by the amount of gold, silver, or even crypto that a nation holds.

 

That puts him at odds with the core belief that supported mercantilism. As for acquiring colonies, his policy appears to be both nationalist and anti-imperialistic. Trump has shown himself to be against foreign entanglements and has no interest in acquiring territory (unlike China, Iran, Russia, and other quasi-mercantilist societies). He does not see it as America's role to right every wrong or spend money or American lives on people and causes which he believes has nothing to do with our interests.

 

That does not mean he plans to withdraw America from the global scene as many might fear. The U.S. is just too big an entity to accomplish that. Instead, because of his mercantilist leanings, if other nations want us to intervene then they must be prepared to pay for that privilege. He has made that point with Taiwan, and with the countries that comprise NATO, and will do so at every opportunity, in my opinion. 

 

 Many voters see our new president as a strong leader. They applaud his desire to wield more power and authority than others have done in his office. Given the present populist era where distrust of government and our economic system are at historical highs, this is not surprising.

 

Although he has a soft spot for pomp and circumstance and may envy autocratic leaders, he seems less interested in power for power's sake. Time and again, the mercantilist in him, appears to support one conclusion: if there is an advantage to be had (whether in finance, economics, or policy) by simply cutting a deal, that is what he will do.  

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

Mercantilism is often associated with Donald Trump's economic policies. Can reaching back into the past truly make America great again? That is up for debate.

 

For those few of us familiar with the term, mercantilism was the dominant economic system in Europe from the 16th to the 18th centuries. It was a world where it was believed that global wealth was fixed and finite. To become powerful, a nation needed to acquire as much wealth as possible. Back then, a nation's wealth was measured by how much gold and silver it accumulated.

 

If this period evokes visions of tall ships, the Spanish Main, and epic exchanges of cannon fire between Spanish galleys and English Sea Hawks, you wouldn't be far wrong. All nations strove to maximize their wealth by exporting more goods than they imported by any means possible. Those that could plundered far-flung lesser more undeveloped nations and carried back sugar, timber, cotton, cocoa, gold, minerals, and more.

 

It was a period where many European countries raced and fought to establish colonies. The extraction of raw materials fed a rapidly growing manufacturing system at home. The end products were then sold back to the colonies in exchange for precious metals and more commodities.

 

This resulted in a favorable trade balance under strict governmental control where sea-faring nations established protectionist policies such as tariffs, navigation acts, and quotas that limited imports while promoting domestic industries. It was a beggar-thy-neighbor approach to economic development. Exploiting others led to power at home, vast piles of gold and silver, continuous conflict among rival nations, and ultimately revolutions among colonies.    

 

Now that we have established the concept, fast forward to today. Is Trump truly a mercantilist in the traditional sense? Let's look at the tariff issue that occupies center stage and worries many economists. Trump argues that for decades various countries have taken advantage of America's goodwill in many areas from defense spending to trade balances. He has singled out China, Mexico, Canada, Japan, Germany, and others as targets of his tariff initiatives.

 

There is no question that these countries have been running sizable bilateral current account surpluses with the U.S. for decades. Many of his critics forget that Trump is certainly not the first president to have complained about this situation. In the 1960s, 1970s, and 1980s, Richard Nixon, Ronald Reagan, and John F. Kennedy were just a few of our leaders who attempted but failed to balance the terms of trade between us and other nations.

 

Given this background, one could argue that enough is enough and Trump's approach is long overdue. The question is whether it works in a mercantilist world where our trading partners can levy tariffs in response. Critics argue that a tit-for-tat response will only send global trade downward and the U.S. economy along with it.

 

That could happen but it is far more likely that our partners will settle for buying more of our imports and selling us less of their exports in exchange for a tariff break. It happened in round one of the Trump administration and could happen again. Next week, I look at how Trump's brand of mercantilism is far different than what came before him.

 

Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.

More than 40 percent of Americans are now classified as obese while 75 percent of adults are either overweight or obese. A new group of drugs called GLP-1 receptor agonists have come on the scene to help in the battle to lose weight. Are they as good as we think?

 

You may have heard about them or some of their brand names like Zepbound, Wegovy, and Ozempic. The use of these drugs has exploded in popularity to the point where companies like Lilly and Novo Nordisk have had problems keeping up with demand. 

 

There is nothing magical about the science behind these drugs. GLP-1 mimics a protein naturally produced by our small intestines. The receptors for these medicines are located across the body. They help us lose weight because receptors in the gastrointestinal tract slow down and send signals to the brain that give us a sense of feeling full.

 

There are some side effects but nothing too serious for most patients. We are still learning how these medications impact the body. They are currently approved for treating diabetes, obesity, and those with a history of cardiovascular disease in people who are overweight. There are a few drawbacks to these drugs at present.

 

Typically, GLP-1 agonists are administered as injections in the abdomen, upper arms, outer thighs, or upper buttocks via a syringe and needle or a pre-filled dosing pen. The shots are generally taken once a day or once a week.

 

For many, this is a big turn-off. Fortunately, you will be able to take tablets soon. The typical weight loss is from 5-15 percent of body weight over at least 12 months. But GLP-1 is no quick fix. Like exercise, you must stick with it. If you stop taking it, most people regain the weight they lost. And you can't expect to magically lose weight while you continue to eat all that junk food you get.

 

The second drawback is the expense. These medications' list price is around $1,000 to $1,400 a month. Without insurance, we are talking $12,000-plus per year for these drugs. Many insurance plans cover some portion of GLP-1 costs, but the extent of coverage can vary significantly. 

 

You probably are wondering whether Medicare covers GLP-1 medications. They do for certain medically accepted indications such as heart attack or cardiovascular disease but not for weight management. To qualify, you must have a BMI of 30 or higher, or 27 or higher with comorbidities like high blood pressure, high cholesterol, or type 2 diabetes. They are currently covered through Part D plans.

 

Coinsurance amounts are pegged to the list price of drugs. As such, Medicare beneficiaries who qualify could still face monthly costs of $250 to $430 before they reach the annual out-of-pocket drug spending established by the Inflation Reduction Act (IRA). The IRA  cap for out-of-pocket expenses was around $3,300 in 2024 and will be $2,000 in 2025. Most retirees living on modest incomes would still find the cost of GLP-1 prohibitive.

 

In November 2024, the Biden administration proposed that Medicare and Medicaid cover obesity medications. In doing so, they sidestepped a 20-year-old piece of legislation that prevented Medicare from covering drugs for "weight loss." The new proposal specifies that the drugs would be covered to treat the disease of obesity and prevent related conditions. Those conditions are serious and include diabetes, high blood pressure, cardiovascular disease, sleep apnea, fatty liver disease, and arthritis.

 

The classification would also mean that every state Medicaid program would be required to cover the drugs starting in 2026. Between the two programs, an additional 7.4 million Americans would gain coverage. The price tag would be high, at least $36 billion over a decade. However, there are more obesity drugs in the pipeline and prices should fall as competition heats up. Starting in 2025, Medicare will also be able to negotiate a lower price for Wegovy as well as many other popular drugs. 

 

As for the future, the costs and usage of GLP-1 medications could change significantly under the second Trump administration. An entirely new team of individuals, including a retired congressman, a surgeon, and a talk-show host could play pivotal roles in how the government goes about safeguarding America's health.

 

Under Robert F. Kennedy Jr., an environmental lawyer, politician, and anti-vaccine organizer, we can expect radically different views and actions in health care, medicine, food safety, and science research. Early indications are that Kennedy, who has been picked to run the Department of Health and Human Services, is not a big fan of Ozempic. He does not believe that using popular GLP-1 drugs is ever going to make America healthy again. His remedy would be to provide good food to Americans. He believes that providing three nutritious meals a day to all Americans would solve obesity and diabetes overnight. 

 

The problem is that for many Americans the admonition to change your diet, eat less, and exercise more has failed to dent the problem. Why not give the country an avenue that shows a much better chance of success over the long term?

 

Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.