US debt debate: What about my retirement?
If you're really worried about a crisis, there are some basic tweaks you can make to your portfolio to better insulate yourself.
The longer the debt ceiling debate drags on in Congress, the more worried many Americans are becoming about whether and how a debt crisis could affect their long-term investments. According to several financial planners MainStreet spoke with, the biggest thing that casual investors have to fear at this point is fear itself.
"I think this is having more of an impact on people's emotions than it is having from a pure economic perspective," said Mark Singer, a certified financial planner and the author of "The Changing Landscape of Retirement." "There have been a string of really bad headlines, not just about the debt ceiling crisis but also the euro, the NFL lockout and other events that make people think everything looks bleak."
Singer says he's found this to be particularly true of people who are five to seven years from retirement and are worried about whether they need to overhaul their investment formula to weather tough economic times. But, as Singer and others contend, it's unlikely that the financial world will be turned upside down next week.
Most analysts expect lawmakers will approve one of the debt ceiling bills prior to Aug. 2, the estimated date on which the U.S. could begin defaulting on its debt payments. And even if legislators miss that date, it's likely the U.S. Treasury would work to juggle around funds to continue making payments temporarily until a bill is approved.
Indeed, the greater concern right now is not default so much as the U.S. having its credit rating downgraded, unless lawmakers approve a strong plan to tackle debt and ensure the country's long-term fiscal stability.
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If the country's credit rating were downgraded, Rose Greene, a certified financial planner with Rose Greene Financial Services, argues that municipal and Treasury bonds could be impacted, and potentially corporate bonds as well, but the impact on investors would likely not be long-lasting.
"Even if this happens, it would be a very short-term event, which is why almost all professionals are counseling to hang in there and not act precipitously," Green said. "When we look at the downgrading of other countries' debt, like Japan or Spain, they only witnessed a negligible change in their government's 10-year yields, not some kind of end-of-the-world hit."
Even short-term turbulence in the bond and stock market may scare folks planning for retirement, but each of the financial planners emphasizes the need to stay calm and stick to traditional long-term investment strategies.
"Everyone has their own risk tolerance, and everyone's portfolio is different, but as long as you have a good, balanced portfolio with no really volatile stocks and a little built-in hedge in there, you should be fine," said Angela Thompson, a certified financial planner with Coast Financial Planning. "And if you're retiring in the near future, your portfolio should already be structured with a conservative bent to it so you wouldn't have high risk investments."
For those who are particularly worried about the pending debt crisis, there are some basic tweaks you can make to your portfolio to better insulate yourself.
Singer, the author and financial planner, suggests allocating more of your funds to alternative investments such as emerging market funds, which are not as deeply tied to the U.S. stock market and may therefore fare better. On the other hand, Vanguard Group spokesman John Woerth says these investors might also be shifting some of their money out of traditional stocks and bonds and into stable value funds, which are not as subject to the ups and downs of the market during tough times.
How much you should shift around your money ultimately depends on you.
"If you are overly concerned, we would say sell down to the sleeping point, meaning that if you want to reduce your exposure to the stock and bonds markets, not dramatically but enough to help you sleep at night, you should do so," Woerth says.
Of course, there are likely some reading this who are eager to cash out some of their investments to play it safe, but Greene cautions investors against going overboard with this strategy.
"If they are really sick to their stomach with anxiety, they can go to cash, but the problem is they will probably never come back (to the market)," she says. "And for some near-retirees, the danger there is outliving their money."
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Just remember, if they do not pay my SS in August, I will pick up a few items and sell them (start with postal truck about 300 Dollars each, like on a auction)---you see they obviously would not have any police anymore, I hope--or would the dictatorship continue, to harass the "people"--Remember how they treated us when we lost several hundred thousand Dollars in floods, due to a non existing infra structure (digging up rivers and creeks), and they still harassed us for SS money even with an entire tax deduction for everything else for several years, but I had to pay penalty and more penalty, so I know how to treat any part of the government--Also they should be careful in the mid west with all the gun slingers, now I finally know why they are!
And all the ranting here about jobs, try to read the paper! there are no jobs, except government and hospitals and food service, schools/college, the rest is a dream and will be, we are long finished with that, take a plane ride to EU and Asia, and return home, then you will surely shut up. Boehner and his job preaching is absolutely pipe dreaming!---We may soon see him cry again, when he gets fired for no real reason, we are in big trouble, and they can not fix it!
The committee found that Social Security does not have the authority to issue checks. The Social Security checks are issued by the Treasury Department headed by Timothy Geithner. Even Geithner does not have the authority to not issue Social Security unless he is directed by President Obama to not issue the checks. President Obama alone will be responsible if Social Security checks are not issued starting on August 3, 2011.
The people that run this country don't care about the taxpayer money,because they know that if they need more money all they have to do is increase the tax so they can take care of their business friend they will give all the excuse they can find, oh yes, ever since the excuse was invented no one is in the wrong.
This plan could help everyone's retirement If I could get someone to understand it, If they pay the 17 million people unemployed five or six hundred dollars per week for two years, and take 28% from the top and give that 28% to the states every week for two years as a one time accounting practice; this will create demand in the markets, and it will create jobs on the city and state level this money to the states should not be paid back, it will stabilize the whole country, and bring in billions of dollars in tax revenues'
Allow these 17 million people to work while they collect this money without penalty,it will bring in more tax money; but stop all other aid to them for two years, like food stamps etc.
with the unemployment problem out of the way for two years, and the states deficits under control the country will have time to recover, and the government , and states will save on food stamp money, and on unemployment money, it would also be a good time to find ways to cut spending without, stopping the recovery, with the economy going strong, it will give more time for innovation to happen, and will be a better job market when the troops return, with the economy going strong they could repeal the Bush tax cuts for everyone to help pay down the debt, this plan will cost around 900 billion dollars, but it will bring in much more than it will cost!
this would help the real estate markets and small business to, and If they plan infrastructure jobs to start kicking in as the two years winds down it will be even better>
This story that MSN has put out is not true.....
It is false, full of untrue facts..
Many people blame President Obama but that is unfair since this financial problem has been building way before he took office.
The reason why he made the statement about Social Security checks no being disbursed is simple: the government needs a debt ceiling increase desperately because money, lots of it was "borrowed" from Social Security and needs to be paid back. The deficit is huge-and without borrowing more money they can't meet payments.
I think this is all crap from our government.
I have been paying into SC for about 40 years and wondering if my money is going to be there.
We should suit our government for spending our funds and charge them interest like they do to us if we are not on time with our taxes.
I think our president should step down, we got him there we could take him down.
If I know I can balance my check book I know not to spend any more, we learned to do this from our junior years in school.
Where in the hell he learned to balance his check books.
This country was build for the people by the people and for the people not for the government.
So all you in congress forgot who got you there We The PEOPLE.
Get your act together and stop spending out kids funds, and get to work.
But you all forgot what our president did not promise the people, was that he is F/..???. us very deep and its hurting our pockets.
Good thing I'm uder age 55 and don't have to worry about retiring....EVER.
Thanks Gen Boom and Gen WWII'ers for taking such good care of the environment and the politics for your offspring. It shows just how much you cared for your largely unplanned families...at least the ones you didn't forget about after the divorce(s). The last 30 years have been especially telling...Paid Work Trumps Family.
Thanks, again. Hope it all works out well for you...I'll be working my 2-3 $10/hr part-time jobs so my companies don't have to bother helping me with healthcare...so don't know if I'll have time to care for you in your obese, diabetic dotage...but hey, at least you will have your sopcial security check to help keep you warm.
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