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How shutdown affects retirement

By Jennie L. Phipps · Bankrate.com
Tuesday, October 1, 2013
Posted: 7 pm ET

If the federal shutdown persists, your retirement and even your retirement planning could be affected. Here's why.

Social Security. These payments are part of the mandatory budget. "In the original authorizing legislation, there is no provision for the federal government or Congress to deny these payments," says Jay Ryu, associate professor of public finance and budgeting at Ohio University. The offices are remaining open, but about one-third of all Social Security employees will be furloughed. That could slow down paperwork, applications and processing, Ryu predicts.

Medicare and Medicaid. These two programs are also mostly off the table, although Medicare may be subjected to some automatic, across-the-board reductions, Ryu says, thanks to the Budget Control Act of 2011, which was enacted as a compromise to end that debt ceiling crisis.

Federal retirement benefits. Federal retirement annuity payments will continue to be paid on time, the National Active and Retired Federal Employees Association, or NARFE, assures its membership. Also unaffected are life, health and long-term care benefits. NARFE does warn that government paperwork will be slowed.

Veterans Affairs retirement benefits. Veterans Health Administration hospitals and health care facilities remain open and operating, but the U.S. Department of Veterans Affairs put out a statement warning, "Claims processing and payments in the compensation, pension, education and vocational rehabilitation programs are anticipated to continue through late October. However, in the event of a prolonged shutdown, claims processing and payments in these programs would be suspended when available funding is exhausted."

Your 401(k) and other retirement savings accounts. This disruption could put a big damper on stock prices and investment returns, eating into retirement security.

This government shutdown is a prelude to a bigger problem -- that of the debt limit. A breach of the debt limit would cause havoc, and possible economic collapse could result if our country doesn't pay its bills.

"The 'full faith and credit of the United States government' is absolutely the most valuable economic asset we have," says Gerald Epstein, professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts Amherst. "It is the center of the world financial system. It allows us to borrow money at lower rates than any other government. Global faith in the credit of the United States is worth trillions of dollars to U.S. taxpayers and investors. Allowing our politicians to throw that away is liked flushing those trillions down the drain."

Tell your congressman you can't afford this and to get these issues resolved quickly.

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83 Comments
Carla
October 13, 2013 at 9:54 pm

The precedence for this mess in our government was set when Clinton was in office and the republicans impeached him...at that point it became, political parties totally divided. Republicans against democrats and then the republicans sided and took the so called tea party under their wings. It is no longer a country of democrats and republicans working for "we the people". The tea party had their agenda and they joined the republicans and made a bigger agenda against "we the people". Why and how can we start a revolution for "we the people"? Lets get back to what "we the people" want and voted for in the past election..it wasn't for Romney and his beliefs and party!! "We the people" voted and Obama won! The republicans and tea party lost and now it's their time to be POOR sports and do everything they can think of to get what THEY want and NOT what the majority voted for "We the People". Wish we could fire them all and take away their health care and retirements!

Joani F.
October 13, 2013 at 9:53 pm

If I acted like the representatives are doing in Washington I woud be tarred and feathered and run out of town! We are at the mercy of a minority group who think only of theirselves and their private fortunes in big business when they retire or are voted out of office. They should remember that this country was made possible by people who believed in a nation "Under God" not under the Godless. My husband is a retired disable veteran who was promised by our government that he would be cared for if he fought for this country. He is 80 yrs old and I am 84. We will be living on the streets if the shut-down is not settled.

brenda
October 13, 2013 at 9:18 pm

I agree with some of the people who says that Congress needs to be without pay until a solution to this shutdown is solved, As long as it's not going to hurt their pockets this mess can go on forever, Let their kids or wife have to do without and then watch how quickly they fix this mess, until it start hurting their own livelihood I don't think much will be done. A lot of what's going on is confusing to me, Is it not good for all Americans to have insurance? Wouldn't it save us as taxpayers a lot of money that we now have to pay to cover people that don't have it. And people that's here illegally would have to go back where they came from if no one is readily paying their medical bills (I hope). If insurance isn't something everybody needs , Then who's going to pay the bill when they get sick.

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