Though it expressed optimism that a deal will be made, the rating company said that “risks have risen that the debt limit will not be raised or suspended before the x-date and consequently that the government could begin to miss payments on some of its obligations.”
In the summer of 2011 — even after the United States skirted a default — instead of rallying, stocks sank. Standard & Poor’s still downgraded the government to AA+ from AAA status. At the time, the credit-rating agency said the partisan impasse was detrimental to future discussions to control the nation’s soaring debt.
And here we are again — same problem, same political drama.
“Brinkmanship over the debt limit to advance political agendas, and failure to reach consensus on the country’s fiscal challenges are recent signs of the deterioration in governance,” Fitch said.
Repeated debt limit battles and near-default episodes could erode confidence in the government’s ability to meet its obligations, the company said.
In response to the Fitch warning, a Treasury Department spokesperson called the stalemate “a manufactured crisis for our economy.”
Look at your retirement account’s recent return history and get angry.
Gallup just released poll data showing many Americans are doubtful they will have a comfortable retirement. Just 43 percent of non-retired adults think they will have enough money to retire comfortably. That was the most pessimistic finding since 2012.
It’s all about the fear factor — 71 percent of non-retired adults are at least moderately worried about being able to fund their retirement. That figure included 42 percent who say they are very worried, according to Gallup. But 77 percent of retirees say they are living comfortably.
“Nonretirees’ outlook has been consistently lower and subject to swings based on the national economic climate,” Gallup said.
Yes, the government spends more than it takes in. Yes, we need deficit reduction, but at what cost to the financially fragile and people trying to glide into retirement with some assurance their investments won’t be derailed by political grandstanding?
This should be a period of relief. Inflation is coming down. Unemployment is low. And workplace retirement accounts have seen a decent surge in recent months.
Fidelity Investments, one of the largest managers of workplace retirement plans, reported that 401(k) and IRA balances climbed during the first quarter of 2023. It was the second quarter in a row of gains, because of “improving market conditions and an increase in contributions from employers,” Fidelity said.
The average 401(k) balance hit $108,200, up 4 percent from the preceding three months of 2022, while the average IRA balance climbed 5 percent to $109,000. For 403(b)s, the average account balance added 6 percent to $97,900.
Gen Z savers saw an even larger increase.
Part of the reason is that these younger adults tend to be heavily invested in target date funds, according to Michael Shamrell, vice president of thought leadership for Fidelity’s workplace investing. Most of these funds, which hold a mix of stocks, bonds and other investments, are designed to become more conservative as an investor gets closer to a particular retirement date. Target date funds are generally higher in equities for younger savers.
Average account balances for Gen Z swelled 17 percent — the highest of any group — compared with the last quarter of 2022. Their balances also spiked 34 percent year over year, making them the generation with the most account growth over the past year.
The first-quarter analysis also showed a nearly 14 percent jump in 401(k) millionaires from the previous quarter, to 340,000. The number of IRA millionaires rose 13 percent to 315,684. This a small group, but it gives a lot of hope to others who aspire to join the millionaire’s club.
But will this upswing be short-lived because of Republican tantrums over the debt ceiling and the coming battle over the budget?
“Only one extremist faction of one political party is holding the US and world economy hostage,” a Seattle reader wrote. “This has happened many times in my lifetime and there has been hardship and financial loss, even when it was eventually raised.”
Even with a last-minute reprieve, the political theatrics by the Republicans could reverse the positive retirement gains. We are, after all, headed into another storm when budget talks start.
And an agreement may not be enough to ward off the “substantial financial market distress” Treasury Secretary Janet L. Yellen warned about during a virtual discussion at a Wall Street Journal summit in London.
At this tenuous moment for the economy, we can’t afford to roll back the progress we’ve made. You scare people and they often retreat, failing to save because they don’t think it will matter. Or, they jump out of the stock market and don’t return. This is why it’s reckless to take the country to the brink of default.
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2023-05-26 11:00:24
