By Robert E. Quittner, Jr. CFP® & CMFC™
Investment Advisor Representative
[email protected]
Last Wednesday was another typical outcome in Washington as Democrats and Republicans couldn’t agree on the topic at hand. This time it was on a new budget and therefore the government shut down. With government shutdowns becoming more frequent and lasting longer, it’s natural to wonder how these events might affect your retirement income or investments. Before we get to that, let’s look at the history. The chart below highlights every U.S. government shutdown since 1976, showing both when they occurred and how long each one lasted.
Source: US House of Representatives
Note: Data includes funding gaps that have lasted for at least one full day. Some finding gaps after 1982 either occurred over a weekend or were too short for affected agencies to begin shutdown procedures before Congress restored funding.
Most shutdowns haven’t lasted that long, often lasting only a few days. Only a few extended beyond two weeks, with the longest—the most recent one which began in December 2018—lasted 34 days and carried into 2019. Despite the headlines these events generate, markets and essential programs have remained remarkably resilient and the shutdown had little lasting impact on retirees’ financial stability. In fact:
- Social Security, Medicare, and federal pensions continued uninterrupted.
- The federal workforce eventually received back pay.
- The stock market typically rebounded quickly, often posting gains within months after a shutdown ended. In fact the S&P 500 has risen 55% of the time during shutdowns.
- Markets were higher 86% of the time one year after shutdowns ended.
- Private-sector employment typically remains unaffected.
In other words, history shows that while shutdowns can cause short-term noise, they have not derailed retirement income or long-term investment outcomes. That said, if you’re getting ready to retire in the near future or have just retired, the fear-mongering and instability can feel extra nauseating.
What Should You Do Now?
While shutdowns can dominate the headlines and stir up uncertainty, market volatility tied to these events has historically been short-lived. Your financial strategy was designed to withstand short-term disruptions like these and remain focused on your long-term goals.
That said, if recent events have you rethinking how much risk you’re comfortable with or if you simply want a quick review of your plan we’re here to help.
You can use the links below if you want to grab a time on our calendar, and you’re always welcome to call in and work with Dave to schedule a visit.
Enjoy your weekend!
Rob