5 ways your finances could be impacted now that the U.S. hit the debt ceiling

The Treasury Department started taking “extraordinary measures” on Thursday after the debt ceiling was breached.

Lawmakers continue to quibble about raising the federal borrowing limit, or the debt ceiling, which allows the U.S. government to make good on its financial obligations. That ceiling, or the amount the government can borrow, stands at $31.4 trillion.

Treasury Secretary Janet Yellen said in a letter to lawmakers that “the period of time that extraordinary measures may last is subject to considerable uncertainty.” At which point the Treasury will have to pay its bills late and the United States could default on its debt – something that has never happened.

So far the extraordinary measures the Treasury Department took include suspending new investments and cashing in prior investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund.

What’s more, it could be the final blow that puts the fragile economy in a recession, Yellen said in a letter last week.

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Debt ceiling explainer: U.S. Treasury Department to take ‘extraordinary measures’ as government nears debt ceiling

Prolonged inaction on raising the debt ceiling would also jeopardize several government programs.

Here is what’s at stake:

Will the debt ceiling affect Social Security?

Social Security could be impacted regardless of whether the debt limit is raised in time. That’s because some Republican lawmakers have signaled they won’t raise the debt limit unless it comes with a Social Security funding cut, among other spending cuts.

Not all Republican lawmakers are on board for Social Security cuts and Democrats have signaled they aren’t willing to compromise on that front.

But if the government defaults on its debt, there could be a lapse in the $90 billion monthly Social Security payments made to 65 million recipients, according to the National Committee to Preserve Social Security and Medicare.

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“The Treasury may not have enough incoming revenue to make those payments without the authority to cash in … securities,” the Committee said in an online post, referring to Treasury securities such as bonds that the Social Security trust fund invests in. “It is more likely than in the past that Social Security beneficiaries will feel the full impact of a default,” the post stated.

The Committee also said that Medicare and Medicaid payments could be delayed if an agreement isn’t reached. That could affect the care Medicare and Medicaid policyholders receive since medical centers would not get timely reimbursements.

The federal debt limit, also known as the "debt ceiling," is the amount the government is allowed to spend beyond tax income.

The federal debt limit, also known as the “debt ceiling,” is the amount the government is allowed to spend beyond tax income.

Tax refunds

The Internal Revenue Service will begin accepting and processing tax returns on Jan. 23. The IRS said people who electronically file their returns should receive a refund, they’re eligible for one, within 21 days.

But it could take a lot longer if the debt ceiling isn’t raised, Yellen hinted at in her letter.

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401(k) impact

If the debt ceiling is triggered and a timely resolution isn’t reached, it could lead to instability in financial markets.

Markets however relatively unfazed Thursday after the limit was breached.

Long-term investors should stay the course and not let short-term events dictate their investment decisions, according to Michael Sheldon, chief investment officer and executive director at investment advisor RDM Financial Group at Hightower.

“Like many of these crises in Washington over the past several years, calmer heads will likely prevail at the last minute,” Sheldon said. “For investors thinking long term, who are putting away money for retirement, this will probably be short lived, so you want to continue to focus on your long-term investment objectives.”

Contributing: Jessica Menton

This article originally appeared on USA TODAY: What happens to Social Security if we hit the debt ceiling?

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