{"id":574985,"date":"2023-05-18T02:00:00","date_gmt":"2023-05-17T23:00:00","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/why-the-debt-crisis-could-be-a-problem-for-baby-boomer-401ks\/"},"modified":"2023-05-18T02:00:00","modified_gmt":"2023-05-17T23:00:00","slug":"why-the-debt-crisis-could-be-a-problem-for-baby-boomer-401ks","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/why-the-debt-crisis-could-be-a-problem-for-baby-boomer-401ks\/","title":{"rendered":"#Why the debt crisis could be a problem for baby boomer 401(k)s"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3d82314c38d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3d82314c38d\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/why-the-debt-crisis-could-be-a-problem-for-baby-boomer-401ks\/#Why_the_debt_fight_is_rattling_markets\" >Why the debt fight is rattling markets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/why-the-debt-crisis-could-be-a-problem-for-baby-boomer-401ks\/#The_long-term_costs_of_brinksmanship\" >The long-term costs of brinksmanship<\/a><\/li><\/ul><\/nav><\/div>\n<div>\n<p>The high-stakes battle over the debt ceiling in Washington is spilling over into financial markets.<\/p>\n<p>Stock values have whipsawed and bond yields have spiked in recent weeks as Wall Street becomes increasingly fearful of a federal default. <\/p>\n<aside class=\"ad-unit ad-unit--mr1_ab\"><\/aside>\n<p>Experts say the damage could be minor and ultimately reversible if lawmakers can avert a default. <\/p>\n<p>But the battle poses serious risks to retirement accounts \u2014 especially for Americans on the verge of leaving the labor market.<\/p>\n<p>\u201cThe timing of a significant drop in the stock market is crucial for about 10 [million] to 20 million Americans,\u201d said Teresa Ghilarducci, an economist and director of the Retirement Equity Lab.<\/p>\n<p>Ghilarducci said the threat is greatest for baby boomers, who are reaching the end of their working years and have less time to recover from a hit to their retirement accounts than younger workers will.<\/p>\n<p>\u201cIf the politics of the debt limit caused the stock market to decrease, even for a couple of months this year, it could have the effect that the steep decline in the stock market did in 2008,\u201d she added.<\/p>\n<p>The renewal of talks between the White House and House Republicans has soothed some concerns on Wall Street. But lawmakers still have much ground to cover before the U.S. runs out of cash as early as next month.<\/p>\n<aside class=\"ad-unit ad-unit--mr2_ab\"><\/aside>\n<p>Treasury Secretary Janet Yellen warned earlier this week the country is already seeing the \u201cimpacts of brinksmanship,\u201d noting the changes seen in the bonds market in recent weeks.<\/p>\n<p>Borrowing costs have spiked as investors become increasingly worried about the federal government\u2019s ability to pay its debts beyond June. Yellen warned lawmakers this week the U.S. could default as soon as June 1 and set off a \u201ccatastrophic\u201d financial meltdown.<\/p>\n<p>\u201cInvestors have become more reluctant to hold government debt that matures in early June,\u201d Yellen said Tuesday at a conference hosted by the Independent Community Bankers of America.<\/p>\n<aside class=\"ad-unit ad-unit--mr3_ab\"><\/aside>\n<p>\u201cThe impasse has already increased the debt burden to American taxpayers.\u201d<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Why_the_debt_fight_is_rattling_markets\"><\/span>Why the debt fight is rattling markets<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"1400\" height=\"984\" src=\"https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/05\/645e611cd75054.74205083-e1684355058809.jpeg?w=900\" alt=\"U.S. Treasury Secretary Janet Yellen, right, and Federal Reserve Chairman Jerome Powell chat prior to a group photo session of the G7 meeting of finance ministers and central bank governors, at Toki Messe in Niigata, Japan, Friday, May 12, 2023. (AP Photo\/Shuji Kajiyama)\" class=\"wp-image-4001843\" srcset=\"https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/05\/645e611cd75054.74205083-e1684355058809.jpeg 1400w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/05\/645e611cd75054.74205083-e1684355058809.jpeg?resize=876,615 876w\" sizes=\"auto, (max-width: 899px) 100vw, 876px\"><figcaption class=\"wp-element-caption\"><em><sub>U.S. Treasury Secretary Janet Yellen, right, and Federal Reserve Chairman Jerome Powell chat prior to a group photo session of the G7 meeting of finance ministers and central bank governors, at Toki Messe in Niigata, Japan, Friday, May 12, 2023. (AP Photo\/Shuji Kajiyama)<\/sub><\/em><\/figcaption><\/figure>\n<p>Yellen cited reporting from the White House Council of Economic Advisers that showed a protracted default could \u201clead to a downturn as severe as the Great Recession.\u201d<\/p>\n<p>\u201cIn its simulation, over 8 million Americans lose their jobs. Business and consumer confidence take a substantial hit. The value of the stock market is slashed by about 45 percent \u2014 wiping out years of retirement and other household savings,\u201d Yellen said.<\/p>\n<aside class=\"ad-unit ad-unit--mr4_ab\"><\/aside>\n<p>Spiking interest rates are hitting the bond market hard, s<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ing another source of growth for retirement accounts.<\/p>\n<p>Richard Johnson, senior fellow in the Income and Benefits Policy Center at the Urban Institute, said uncertainty about debt limit discussions could help drive up interest rates on a longer-term basis.<\/p>\n<p>\u201cThen higher interest rates reduce the value of bonds, and so for those people, that could be a pretty big hit,\u201d he said. \u201cAnd if the bond rates stay high after that, then that would be concerning.\u201d<\/p>\n<aside class=\"ad-unit ad-unit--mr5_ab\"><\/aside>\n<p>While higher rates could produce better results money in interest-bearing bank accounts, those invested in long-term bonds \u201care the ones that are going to get hit,\u201d he added.<\/p>\n<p>Ghilarducci warned the market volatility poses serious risks for 401(k) and individual retirement accounts (IRAs).<\/p>\n<p>\u201cPeople have been following sensible advice by putting more bonds in their retirement accounts as they got older, but the Federal Reserve and the debt limit has now made those bonds a lot less safe than they ever were,\u201d she said, referring to the market-stifling impact of rate hikes.<\/p>\n<aside class=\"ad-unit ad-unit--mr6_ab\"><\/aside>\n<p>\u201cThese are retail products that the workers manage themselves,\u201d Ghilarducci said, referring to 401(k) plans and IRAs, \u201cand they don\u2019t have the kind of hedges that an endowment fund or a defined benefit plan would have.\u201d<\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_long-term_costs_of_brinksmanship\"><\/span>The long-term costs of brinksmanship<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"1400\" height=\"787\" src=\"https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?w=900\" alt=\"\" class=\"wp-image-3899545\" srcset=\"https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg 1400w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=160,90 160w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=300,169 300w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=768,432 768w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=1280,720 1280w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=645,363 645w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=320,180 320w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=256,144 256w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=512,288 512w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=640,360 640w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=876,492 876w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=960,540 960w, https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/03\/stocks_NYSE_03132022_AP_.jpg?resize=50,28 50w\" sizes=\"auto, (max-width: 899px) 100vw, 876px\"><figcaption class=\"wp-element-caption\"><em><sub>Traders work on the floor at the New York Stock Exchange in New York, Monday, March 13, 2023. (AP)<\/sub><\/em><\/figcaption><\/figure>\n<p>Experts are also concerned about the potential of mass exit from financial markets and retirement accounts if the debt fight \u2014 or, worse, a default \u2014 causes panic among Americans.<\/p>\n<p>\u201cOne concern is that if this volatility \u2014 does it scare people from saving from investing in the stock market because they don\u2019t want to lose their capital,\u201d Johnson said. <\/p>\n<aside class=\"ad-unit ad-unit--mr7_ab\"><\/aside>\n<p>\u201cThen that becomes a concern and that could have a longer-term impact even if this event volatility doesn\u2019t last.\u201d<\/p>\n<p>Craig Copeland, a senior research associate at the Employee Benefit Research Institute (EBRI), said recent internal polling showed \u201cpeople were concerned about volatility and, therefore, they didn\u2019t feel comfortable about retirement.\u201d<\/p>\n<p>\u201cPeople that are near retirement age or making that decision\u2026those people are going to be in a very difficult situation,\u201d Copeland said. <\/p>\n<p>\u201cIf they already have their date set, they could be in a situation that\u2019s going to be very difficult to recover from.\u201d<\/p>\n<p>The EBRI is a research nonprofit funded by a wide range of investment managers, pension funds, and AARP.<\/p>\n<p>Copeland added there is a risk Americans start \u201canticipating a default or start selling im<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>tely if there is a default before really understanding the impact of it,\u201d particularly younger workers.\u00a0\u00a0\u00a0<\/p>\n<p>\u201cTo react in a way that moves everything out, because of this one issue, would be shortsighted because you will not know when to jump back in,\u201d he continued. \u201cAnd you may miss some of the biggest gains.\u201d<\/p>\n<\/div>\n<p>Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.<\/p>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/thehill.com\/business\/4009081-how-the-debt-crisis-could-affect-your-401k\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The high-stakes battle over the debt ceiling in Washington is spilling over into financial markets. Stock values have whipsawed and bond yields have spiked in recent weeks as Wall Street becomes increasingly fearful of a federal default. Experts say the damage could be minor and ultimately reversible if lawmakers can avert a default. But the&#8230;<\/p>\n","protected":false},"author":1,"featured_media":574986,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/thehill.com\/wp-content\/uploads\/sites\/2\/2023\/05\/645bda5420cf39.16049909-e1684354978139.jpeg?w=1280","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[81188,117,134353,5069,73014,90482,88571,134345,143387],"class_list":["post-574985","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-janet-yellen","tag-business","tag-court-battles","tag-economy","tag-health-care","tag-house","tag-newsletters","tag-state-watch","tag-teresa-ghilarducci"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/574985","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=574985"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/574985\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/574986"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=574985"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=574985"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=574985"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}