An unanticipated change in government policy with regard to tax law and government programs such as Medicaid and/or Social Security can have a negative impact on retirement security.
For example, let's assume someone saved diligently for retirement only to find the government has adopted "means testing" and they are no longer eligible for certain programs because their income is too high. Or what about someone who has decided to age in place, and is then affected by significant increases in property taxes?
According to the 2023 report from the Social Security and Medicare Trustees, the Social Security trust fund for retirement benefits is slated to be exhausted by 2033. After that, tax revenues are projected to only make up 77% of benefits. Many experts believe that lawmakers will be forced to reduce retirement benefits by 24%, significantly increase taxes to make up the deficit, or some combination of the two. One can try to plan for one of these possibilities, but Congress may decide to do something different, making current plans obsolete. This is just one of many challenges that retirees face that may require them to adapt to the whims of public policy.
1 Retirement Risk Solutions, David Littell, The American College of Financial Services, 2017.