Are you doing anything to protect yourself from the effects of a federal default?

We’re hearing from listeners that they’re worried about the effects on their own financial health of a failure to raise the federal debt limit. Today’s Question: Are you doing anything to protect yourself from the effects of a federal default?

  • Hiram

    I am selling all the stocks I own. And I am thinking about leaving the United States.

  • Josh D.

    Retirement savings are staying put, 401(k)’s are meant to swing up and down for the long haul. But we’re saving for the down payment on a new house and had that money in conservative mutual funds, I sold them all 2 weeks ago. After watching the MN government shutdown , I knew I couldn’t trust the elected officials to do their job and I couldn’t risk loosing our savings. When things settle down I may re-invest, but its hard to trust the market when you can’t trust the government to do what needs to be done.

  • Garyf

    Checking portfolio and 401K twice a year. Diversification. Bought gold and silver two years ago.

    Yes, the current situation is a crisis, but being on the back end of the baby boom I saw this coming years ago.

    Anyone born after the baby boom has been screwed by the baby boomer’s need to live beyond their means.

  • Paula

    Very concerned for this country and everyone’s finances. My only question at this point is, if the politicians can’t come to some sort of agreement before the deadline, will their paycheck be effected by a shut down? I hope so.

  • Hiram

    Josh, I don’t think the country will recover from this one. What we are seeing is the culmination of a long process, quite literally the failure of America and it’s institutions.

  • John

    I moved all of my 401k to a self managed account 2 years ago when I saw this coming. I recently sold all of my stock positions. I bought physical gold and silver two years ago.

    I got my conceal and carry, bought lots of ammunition for my guns. We have enough food for months and don’t forget lots of toilet paper.

    I’m voting for Ron Paul, and I hope that Israel doesn’t drag us into a war this fall with Iran.

  • J Dre

    Paula, don’t think so small, these people work for power not pay, my question is ‘ who benefits from disrupting the economy in this huge way?’

    My financial advisors say don’t worry but I think they simply can’t imagine politicians being this weird. I have diversified IRA’s, not much to be done with them.

  • James

    Buying more precious metal,,, lead, brass and steel.

    DTOM

  • Hiram

    At some time during the last ten or fifteen years America died. Future historians will argue about the specific date, but they won’t argue about the fact that death occurred. We have become a nation of deceit, default and dishonor, and there is just no coming back from that.

  • Bruce

    Just have to ride out the storm. What else can I do!

  • linda

    There is nothing I can do. I have very little savings and depend on social security. If it doesn’t come, I will be in a very difficult place. I don’t know how understanding the utility companies will be with me, or the bank or…..

  • Lance

    Everyone is throwing out the term ‘default.’ Even if the debt ceiling isn’t raised, that doesn’t mean we have defaulted on our debt. There’s plenty of money coming in to pay interest on the debt and social security and military pay and many, many other things.

    Not raising the debt ceiling would force congress to make hard choices on where the money that does come in actually gets spent, but I thought that was what they were supposed to be doing.

    Now, legislators and/or the president may choose to make social security recipients and military families be pawns in their little game of budget chicken, but that’s not the only way out of this mess.

    Personally, I think we have no choice but to temporarily raise the debt ceiling, BUT only while making IMMEDIATE spending cuts – REAL CUTS, not phony ones like a budget that was supposed to increase by 5% but only increased 3%, so it’s reported as a 2% cut. That’s not a 2% cut. It’s a 3% increase.

    We need to adjust course back toward living within our means.

  • Larry M.

    My IRAs are in an international fund, however if the U.S. defaults it will have impact on all markets. It’s a 40/60 fund so the bonds should dampen the impact. The markets already have begun to go down, so I’ll just stick it out and hope for the best and rely on dollar cost averaging and keep with my current buying pattern and maybe get some deals.

  • Glenn

    I’ve taken care of this years ago.

    6 months prior to when George Jr. was elected I bought oil stocks- I got in at $14.30 a barrel.

    Do the math

    Glenn

  • LS

    I’m rolling my eyes with incredulity…what foolishness!

  • Philip

    My wife and I at the beginning of the year decided to undertake the Crown Financial Ministries program. It was one of the smartest things we could have done. We now have NO more credit card debt, have established a savings account with three months living expenses, are on our way to pay off our consumer debt (auto & school loans), and then we tackle the mortgage. It is a liberating feeling being out from under the thumbs of the credit card companies and you really do a lot of self reflection about priorities. Being in debt really is tantamount to being a slave.

  • Duane

    As a retiree about 50% of my monthly income comes from Social Security. Since Social Security revenue is collected separate from the general fund, I would hold the President and his advisers criminally responsible if they attempt to DEVERT Social Security revenue to some other place than where the FICA income is supposed to go. If Social Security checks fail to be mailed it will be a black mark on this president and his administration. The Republican legislators have passed two budget bill and sent to the Senate, but Harry Reed has failed to allow them to be considered.

  • Hiram

    “Everyone is throwing out the term ‘default.’ Even if the debt ceiling isn’t raised, that doesn’t mean we have defaulted on our debt.”

    Yes it does. Failure to pay any debt, not just on the bonds would constitute technical default.

  • Neil C.

    Boehner’s plan is to cut about $1 trillion of spending over 10 years to justify raising the debt limit about $1 trillion, which we will use up in about 1 year.

    It is so meek that I suspect it, or something very similar, will pass in time to avert Tuesday’s crisis (probably with Democratic support). Stocks will rebound. The media will start reporting on NFL training camps, or some other critical issue.

    However, it highlights how big the problem really is. Washington is really broke. To get this debt and deficit problem under control, very soon we will need to really cut and really tax. It will be painful and I fear the good times are over for America for quite a while.

    I’m not too worried about Tuesday. I believe some lame legislation will pass.

    Just in case they don’t work it out, I have postponed buying even a really cheap house, as the future is too cloudy.

    I am really worried about the longer term and wish I had done more to protect myself from a $US decline. It’s down a lot already over the last few years. It seems to have a lot farther to go.

    BTW, others may be being more cautious than me. My capital goods business has been having a great summer but orders are really off this week. A coincidence? I’m not sure.

  • Lee

    Simultaneously selling mutual funds and buying individual stocks for the past 3 years. Want to start a revolution? Boycott the Money Market Mutual Funds and keep your money FDIC insured.

  • Kevin VC

    I am so against the wall as it was….

    What can one do to prepare when you have nothing to prepare with?

    If this happens, and mind you Bachmann is a moron. Then the US is pretty much screwed.

    You are talking about 100 billion in charges right up front plus out of control interest rates.

    Maybe the Plutocrats/TeaParty/Rich BOZOS have not idea what the rest of us go through when facing interest rates around 25%!!!

    Maybe be they been living in the land of OZ too long!!!

    Time that DOROTHY see reality…

    For me its throwing up my arms and just contemplating when the civil war begins… And what will happen then…

  • Lance

    Philip,

    That’s fantastic. What you are doing personally is exactly what the country needs to be doing as a whole, individually and at the various levels of government.

    Hiram,

    If we don’t give $3 Billion to Pakistan, that’s not defaulting on a debt, it’s a change in foreign policy priorities. If we withdraw troops from Iraq and Afghanistan, that’s not a debt default. If we stop building a jet engine the military doesn’t even want, that’s not a debt default. It’s not a default if we reduce or even eliminate the Department of Energy (whose sole purpose when established was to reduce dependence on foreign energy – how’s that working out?) The list goes on.

  • Carrie

    Not much I can do right now. I’m going to ride it out like most people. It’s just a horrible thing for our country. The sad thing is that it was totally of our own making. Stupid Bush tax cuts, 2 unpaid for wars and a hugely expensive Medicare Part D. All done during the Bush years. The other sad thing is that we could avoid the default just by raising the debt ceiling. It’s pretty obvious that many people commenting today still don’t understand what a default means. Truly discouraging.

  • Greg

    Holding existing stocks. Building cash reserve and waiting to buy stocks when everyone else bails. They’ll be cheap and they will bounce back from this artificially induced slump. For everyone holding gold – good choice – for anyone not holding gold – its at a pretty high price – the percentage gain from now on will be limited. Should have bought 2 years ago.

  • bsimon

    sit tight.

  • Peter

    Selling some ETF’s, rasing some cash, looking to buy back at discount. Majority of holdings are just sitting tight. There will likely be some hysterical selling at some point (not neccisarily on August 2nd). I think a credit downgrade is already baked in the cake. Don’t need to catch the bottom, just want to buy in lower than a sold, and have positions for the snap back rally that follows hysterical selling. I am concnerned about about any extended period of time of social secuirty/Medicare/Medicade payments not going out, that will hurt. Also, can’t piss off the Chinese too much. Higher borrowing costs for gov’t will filter down and hurt the consumer/economy.

    Feel sorry for anyone exposed to varible interest rates on debt or dependant on gov’t payout. They will get hurt if we don’t get a deal promptly. In the end, we may all get hurt.

  • Steve the Cynic

    I’m not worried. It’s only money, not something really important. If Congress crashes the economy and throws the country (and the world) into another full-blown depression, maybe more people will realize that money isn’t all it’s cracked up to be and start paying attention to more important things, like family and friends, promoting the common good, and pulling together in a time of crisis. It’s what happened during the Great Depression, and maybe we need it to happen again.

  • Rich in Duluth

    Yes, but we started preparing for it 40 years ago.

    We’ve always been financially conservative: No credit card debt, used cars paid for with cash, no expensive toys we couldn’t pay for with cash, a home purchased to live in and not as an investment, etc.

    Still, after a lifetime of making the median income, it’s been hard to save enough for retirement, hopefully, in a year or so. We’re counting on Social Security for half of our retirement income.

    We sat tight with about 50% stock mutual funds in the recession. When the DOW hit about 12,000, we moved everything to mutual funds invested in Treasury Inflation Protected Securities. That’s where it’s going to stay. We’re still betting the U.S. government (you and me) will keep its promise to pay us back at a rate that will about match inflation.

    Our real concerns are with the tea-baggers who want to take away our Social Security and Medicare. They don’t seem to realize the value that Social Security and Medicare can add to the lives of the citizen with median or below income. Things of value are worth paying for.

    Taxes are not too high; wars and tax breaks for the rich are too many.

  • Robin

    If something really bad did happen, we would all have to be working together and helping each other out. Those who have stockpiles of food and toilet paper and ammo will be sharing with everyone else – that is the reason that you stockpile those things, so that you will be able to help others. Otherwise, you won’t even be able to help yourself. (I am assuming that all of us do that already) – hopefully there won’t be a big crisis!

  • Curt

    Not to worry. If anything drastic happens, I’ll just ask Michele Bachmann for some financial help. She’s assured everyone that nothing will happen, and she’s getting so much govt. money through her farm subsidies and payments to her husband’s business, I’m sure she’d be more than willing to help anyone out.

  • miriam

    I’m somewhat in Duane’s position, but would not put the blame only on the President if our social security checks don’t come. Any rational human (not many in Congress!) knows we must cut expenses AND raise revenue. When will we learn that corporate America and the wealthy who rule this country? fail to understand that the struggling middle class and retirees are the ones who keep this economy moving (buy stuff!). What can I do…eat less, drive less, look for ways to earn some cash, buy nothing…. hope, pray and wish I lived in Canada. Sadly, the Greedy Old Party only marches to the party line and isn’t literate enough to think on its own or look at the economic research.

  • suzie

    What can we really do????? Members of the past and present congress and the past presidents got us into this mess by over spending on everything – much of that spending to buy votes. Now we are to suffer for their mistakes. Social Security was robbed blind years ago and they now say there isn’t enough money in that account. Medicare? How many of their rich friends have ripped off that fund?

    We are going to suffer no matter what we do, But I don’t think any member of congress (past and present) will loose in the stock market. And retirement funds? – ha, they have a fine lavish pension plan which will not loose anything either. Congress members are exempt from Social Security – so what do they care?????

  • KC

    I agreed with Carrie’s July 28 post. I would like to add a few more perspective of mine:

    1. race discrimination is deeper than we all believe – the republicans are all out to get Obama and they will absolutely not going to work with the President.

    2. Why didn’t anyone (MEDIA in particular) remind the public (mostly have senior moments) that the debt starting with Bush. The stimulus money was used in the U.S. and the money spent on the wars keep a few very rich such as Channey’s friends!!!

    3. I had voted republicans in the past. No way I can vote for these red-necks in the future.

    4. There is nothing I can do with my finance. But we can ask the congress especially the republicans to starting cutting their spending. They forget they are spending OUR tax money. I would propose 20% salary cut on every congressman, there are 432 of them, 30% cut on their health benefit (we have to pay for some of our benefit, why shouldn’t they?), eliminate their pension plan (apparently their pension plan is not in danger like the social security) and ask them to invest on 401k with a max. of 10% match (first 5% is 1 to 1, second 5% is 1% of our tax money to 2% of their money), and cut their staff by 50%. We all get lay off. Companies do more with less people. Do the congressman really need that many staffers? May be with less staffers, they actually know what’s going on in the district, learn to do the e-mails, really learn some of the issues, and do research on them, and SERVE US instead of campaigning. Campaigning is only B.S. They are paid to serve not to campaign. Imagine what would happen to you if you do what those politicans do in your job – you will be fired.

    5. I am disappointed in the media for not reminding all of us how much money the last administration spent and borrowed to pay their rich friends (Channey’s former company and friends in 2 wars, bail out Paulson’s buddies in Goldman Sach and wall street).

    6. What I will do is remember all these on election day.

    7. TEA PARTY is a disguise of even more greedy red necks. They don’t want to pay tax for the service the government provides. But they want the service. They make thieves look good.