401(k) could suffer in U.S. debt debate

Potential economic meltdown in the U.S. looms, as Congress creeps closer to a crucial financial deadline of Aug. 2. With no deal in sight, President Barack Obama urged lawmakers on Friday to raise taxes on the wealthy, reform social programs, and increase the nation's borrowing limit.

Check out this interactive feature to find out how your taxes, Social Security, and Medicare come into play in this debate.

That limit also called the debt ceiling is set right now at $14.3 trillion. If Congress does not raise that amount or find a way to get more money, the nation will not be able to pay its bills.

So, by the first part of August, experts predict you could see the job sector halting, credit tightening, and stocks plunging.

"I'm a little nervous about it. I have 401(k)s.” said Carol Lewis on vacation in Austin from Florida.

"They went down pretty bad,” said her friend, Glenn Trojnar. “I pretty much left them there, so they came up after the crash."

Financial experts and many lawmakers predict if the debt ceiling debate is not over by the end of next week, stocks will tumble. Then by the first part of August, interest rates will go up. By mid-August, the recovery we have seen since 2008 could be erased.

"Yeah, things don't look good,” said Trojnar. “Thank God I got a job."

"Guess I'll have to move in with my children," Lewis added.

The Center for American Progress says nearly 60% of 401(k) money is invested in stocks. That means a 20% market drop would cost the average person more than $7,900. A 30% percent drop would cost nearly $12,000.

Without that money to fall back on, many Americans will have to seek other sources, turning to loans or credit cards. If the nation has a bad credit rating - which is already a threat - consumers could see dramatic increases in their future interest rates, too.

"The availability to the average consumer of credit is going to get tighter,” said Sally Borie or Consumer Credit Counseling Service in Austin. “They're going to have to pay more for it."

Borie said it is time for the government to make some tough decisions to stay afloat just like she tells her clients.

The president has said he expects Democrats and Republicans to consult over the weekend with their respective caucuses and find an agreement on how to proceed.