Retirement Blog

Finance Blogs » Retirement » How shutdown affects retirement

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.

«
»
Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.
83 Comments
Jim
October 13, 2013 at 8:41 pm

I am going to be very blunt. Congress, House and Senate members should be required to work until an agreement is reached as should be required by the salary they are paid by the people. If there is a shutdown, the shutdown should (have) included a freeze on all elected reps pay as long as the shut down lasts-- if Fed employed citizens can be expected to do without pay--let those elected officials who think a shutdown is OK see what its like to have no pay also- NO EXCEPTIONS! If a person is paid a salary by a corporation to do a job- they are expected to do the job as a condition of being paid a salary-- same should go for elected Government officials. STOP ACTING LIKE MIDDLE SCHOOL AGED CHILDREN and DO YOUR JOB-- GET ALONG and GET THIS DONE!

Elaine
October 13, 2013 at 7:57 pm

So when did the Government or any large Company put a new plan of action into effect and have it "letter perfect"?? Since the Affordable Care Act isn't perfect -- let's work together to work it out. We did approve it --- it doesn't mean we can't make improvements ---- it means we have to work together like adults and do the jobs they are elected to do.

Craig
October 13, 2013 at 6:12 pm

Jackie , It's about time to end the Bush Bashing! Obama has been there for over 4 years . Obama added more debt then all Presidents together ! If any President thougth it could have been without hurting our country ,It would have been done already. Obama hasn't done a dam thing except divid the country......

bob h
October 13, 2013 at 4:58 pm

we the people need to wake up....we all should dedicate ourselves to ousting everyone that is in power now, both parties, whether we like them or not...they are all to blame for this problem...we should make sure we campaign against each and every one of them as they come up for election again...they are all hipocrytes...they all get their big fat paychecks, their unbelievable great health care, and their lucrative pensions whether or not they do what we the people ask and need of them. i for one cannot support myself very long if they shut down ss payments.

Jackie phillips
October 13, 2013 at 4:40 pm

I think that the president sure not be blame for all this mess. we know this nation was headed for a down fall anyway because of the things that president bush had already tore up before Obama came into the office. now everybody think he is suppose to be Mr. fix it I'm sorry all this stuff fell on his shoulders. and now they are upset because of the Obama care are you serious please tell this is a joke. he is right everybody need health insurance. you and I know that what they are doing is wrong its not fair to the American people that we have suffer because they are upset because of the health care. I pray that we as a nation come back to God if not I believe more destruction is headed our way.

Craig
October 13, 2013 at 3:56 pm

I'll fell the Govenerment Is for We the people ,For the people, and by the people !If they don't understand that we must get rid of them ALL !!!!!! They work for us.And we should have the right to vote them at anytime they our not doing there job ! If it was me all the White House staff would be impeached !!!! The White House is the peoples house , Not Obamas personnel crib ......

Nancy
October 13, 2013 at 3:34 pm

I think the members of Congress should grow up, learn to compromise and get their job done.
If not they should not get PAID or RE-ELECTED!
They should also be on Social Security and purchase their health care insurance like everyone else. not getting high pay in their special retirement and all the perks they get.

In answer to the comment on de-funding Planned Parenthood. Do you realize how many women need the care they receive from them for free?

Clarence H
October 13, 2013 at 3:11 pm

I like to see more money for the poor people get there money stay the rich people!

Linda W
October 13, 2013 at 12:59 pm

Stop giving millions of our dollars to planned parenthood. We the people of the United States do not wish to fund them. We are the people of the united states and we are saying The president and those who use the budget to satisfy their votes should be impeached. What the president and those he appointed to do his work against all we as American people believe in has taken those rights of the constitution to use wrong.

Douglas
October 13, 2013 at 12:36 pm

When the realization returns that we are a self sustaining nation and have been from the start. The advantage we have taken with our(theUSA) handshake of help is at best The drug of first choice . The only difference I see between Dope Pushers on our streets, and the generosity of this kind nation to the world is the marketable product used. This nation has a questionable generosity at best so all hand shakes turn into arm bars twisting truths and intimidating the lesser thans' or not as good asers' When for some unseen reason we stop a reasonable justification will follow acceptable to the nation. Onward Christian solders, fodder to the war.