If you pay any attention to the news, then you have probably been hearing a lot about our country’s skyrocketing national debt. In the last quarter of a century, the number has increased tenfold, going from roughly 2 trillion in 1990, to five trillion in 2000, to 13 trillion in 2010 — and today, in 2017, stands at nearly 20 trillion.
These numbers are so large that they can seem almost abstract. But rest assured that the national debt is capable of having some serious effects on your savings, your family, and your life. Just to throw one last number out there before we get into a breakdown of how this debt can affect you: per US citizen, the national debt equals about 56,000 dollars — which supersedes the per capita annual income!
So, with all those stats out there, here are a few concrete ways that the national debt could affect your retirement plans:
1. Inflation. The higher the national debt becomes, the quicker the government will have to print money in order to keep making payments on time. It doesn’t take a PhD in economics to realize that as the money supply increased, demand for the dollar will decrease — resulting in higher prices and a weaker dollar. The money you’ve put away for retirement simply won’t go as far as it did in the past.
2. Higher Interest Rates. With inflation comes higher interest rates: after all, lenders must ensure that they earn enough on their loans to counteract inflation. High interest can hurt you personally, but it also has a big effect on the economy as a whole — which brings us to our next point.
3. Slower Economic Growth. A combination of inflation and high interest slows economic growth and could even lead to a recession — and this is not good news for anyone, retired or not.
4. Higher Taxes. Printing money isn’t the only way Uncle Sam pays his debts: taxpayers must also share in the burden. The higher the debt becomes, the more income you will be paying to the federal government through a wide array of taxes.
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