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6 ways you’ll feel the debt deal

By Jennie L. Phipps ·
Tuesday, August 2, 2011
Posted: 3 pm ET

The U.S. Senate signed the federal debt deal this afternoon. Here are six ways it could affect your retirement planning:

  1. Increased interest rates. Even though Congress finally managed to reach an agreement, the crisis didn't reassure the agencies that rate U.S. credit worthiness. In particular, Standard & Poor's has threatened to downgrade the Triple-A credit rating of U.S. Treasuries. If that happens, interest rates will rise and the cost of credit will go up, making it harder to pay off credit cards and buy new cars. Yes, rising interest rates could be good for savers, but the inflation that goes with it is very bad.
  2. Elimination of subsidized student loans for most graduate students. Graduate school isn't just for kids. I went to graduate school in my 50s, after I lost a job. My 34-year-old son is in graduate school now. I'm not helping pay, but if his financing disappears, I might want to.
  3. Reduced availability of health care. Medicare dodged the bullet in this week's go-round, but it is likely to take a hit between now and the November deadline when a 12-member Congressional committee has to identify another $1.5 trillion in spending cuts. The deal exempts current Medicare and Medicaid recipients from increases, but it leaves open the door to cutbacks in Medicare reimbursements, giving doctors less incentive to treat Medicare and Medicaid recipients.
  4. Social Security cost-of-living adjustments are in danger. The most broad-based and immediate change the Congressional committee could make to Social Security is adopting the chained CPI measure of cost-of-living adjustments. Implementing a chained CPI by 2013 is practically the only way to cut the current cost of paying Social Security. Social Security estimates that the chained CPI will rise about 0.3 percentage points less per year than the current way we measure inflation. If you start taking Social Security at age 62, the result will be an estimated 8.4 percent monthly cut by the time you're 92.
  5. Eligibility for Medicare could rise to 67 and there could be means testing. During one phase of the deficit negotiations, President Obama offered up these possibilities for consideration. If the Congressional committee adopts them -- and it very well might -- they result in a savings of $124 billion over 10 years.
  6. More stock market angst. The chaos created by the indecision over the debt ceiling has prolonged the recession, continued to make jobs scarce, and put a lid on the stock market. The next steps create more uncertainty.  All of this makes it harder to find a job and save for retirement and more difficult to sell a house you don't need or want anymore.
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shirley martinez
August 03, 2011 at 11:05 am

my views of this whole deal is,i think the tea party bullied the president from the beginning.the head of the house looked at the president with contempt,since the republicans have held the house they have constantly voted against anything that would have helped the american people. is this polotics or greed i am disabled and i would have agreed to a tax hike. is this prejiduce since he is the first black leader. now with the senate gotng to recess and not voting over the funding for the faa see what they think about the american people. the tea party should go home and stay and have their tea,they voted against any taxes to be raised on the rich,try living on less than 2,000 a month.let the president do his job,i am white i voted for the best man to do the job.leave color out from the look of contempt you can tell whats on their mind.we voted for him let him do his job.further more we as social security recipients would have given an extra dollar to help the debt how about john mccain who has 15 houses he cant afford extra my heart i know the president was condemed by the repulican party and by many americans he was only trying to do what was best for us and was forced to sign this bill.this is not a recession wake up people this is a depression for many now with this senate not closing on funds for the faa it will be a rippiling affect of joblessnes more people on assitance that the republican are trying to do away with have fun on vacation.let the president do away with this issue himslf he is commander an chief those who aposed this tax increase will see there children do without just as mine have no one climbs so high that they can't reach rock bottom the poor have always been on the bottom and the middle class is almost gone the rich will be right behind them.the speaker said he ran a mile for the president, maybe he should run a few more miles and we get another speaker of the he trying to groom himself for president?now how is the president going to build jobs with this bill ask a republican