Posted by Brittany Stepniak - Monday, October 3rd, 2011

As of right now, if you're planning to retire in the near future, you have two options: you can cut your current spending dramatically and negatively affect your style of living OR you can “increase the rate at which you spend down your savings” – which could mean you run out of money more quickly than anticipated.

When you pick the lesser of these two evils, you can go ahead and blame the Federal Reserve while you're doing it...and be prepared to deal with it until at least 2013.

“Operation Twist” will affect many aspects of one's retirement investment portfolio and pension funds.

Take a look at these four potential effects of this $400 billion plan; compiled by Financial Sense.

1. Reducing the standard of living for tens of millions of current and future retirees;

2. Reducing long-term earnings growth rates for stocks, with a potentially major and long-term reduction in fundamental stock values;

3. Setting off feedback loops that will further reduce both retiree lifestyles and stock valuations; and

4. Increasing the chances of insolvency for state and local governments, as well as many major corporations.

All of this stems back to the Fed's decision to sell $400 billion short-term treasuries in order to purchase $400 billion in long-term treasuries. The Fed is desperately trying to avoid default and hyperinflation. Instead, there are instituting this plan of Financial Repression – much to the dismay of retirees.

Unfortunately, it won't only be retirees that suffer this blow. This single action, along with numerous other related Fed activities, will trickle down throughout the entire economic playing field, affecting each in every one of us in some manner as individuals have less disposable income. Especially since 70 percent of our economy is related to consumer spending...

To understand the full-effect of this trickle-down theory read the complete analysis here.