It’s not just you. Uncle Sam has a hard time minding his own B, too. This week, the Congressional Budget Office (the agency that gives Congress budget and economic info) said the annual US budget deficit and growing federal debt could be headed toward 'oh shit' status. You can thank the 2017 tax cuts, defense spending, and expensive programs like Medicare and Social Security.
The CBO also warns rising federal debt can hurt the economy in the long run. Not good for anyone’s wallet. Here’s what else it could mean for yours.
Bond rates could go up. US gov bonds (aka Treasuries) are usually considered one of the safest investments. That’s because you’re counting on the federal gov – vs. a small local gov or company – to pay you back later in exchange for a loan today. So the risks are generally pretty low...and so is the payoff. But when federal debt spikes, bond investors may worry about getting repaid and demand higher yields to make up for taking on more risk.
Your retirement benefits could be at risk. If this sounds like a familiar threat, that’s because it is. Last year, experts projected that the Social Security reserve fund would officially be out of cash by 2035. If the gov wants to maintain this program, it’ll have to spend more. If it can’t, you’ll be on the hook to cover even more of your own expenses in retirement. Pro tip: don’t wait to find out. Start investing for retirement now.
Your tax bill miiight get scarier. One way Congress could cut the growing deficit is by increasing taxes (yay). Remember, cutting them is part of the reason we got here.
theSkimm: You might not be able to control what’s in store for the economy. Or what Uncle Sam does with his money. But you can be smarter about yours. Try adding a little extra to your savings account this month. While you’re at it, give your retirement account some love, too.