With Congress focused on tomorrow’s elections, little tangible progress has been made toward averting the so-called “fiscal cliff,” a dire economic predicament set to befall the nation early next year if new legislation does not address the scheduled expiration of tax cuts and enforcement of mandatory government spending cuts.
Economists have predicted severe consequences if Congress and the administration fail to address the situation.
Among other things, retirement savings would likely suffer. A survey by the Insured Retirement institute (IRI) found that three out of ten Baby Boomers stopped contributing to retirement plans over the past twelve months, while 16 percent prematurely withdrew retirement funds.
This situation, which IRI attributes to the economy, would likely grow worse if the economy turned downward because of fiscal cliff issues.
The IRI study also found that expiration of tax breaks would decrease consumers’ ability to save for retirement.
More than half of the baby Boomers surveyed said they would be less likely to save for retirement if their federal income taxes increased. Smaller percentages said they would be less likely to save for retirement if Social Security taxes (36 percent) or capital gains taxes (39 percent) increased.
These statistics only reinforce NAIFA’s call for Congress and the administration to act this year to address the tax and spending issues to avoid the fiscal cliff scenario.