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PrintRetirement accounts have lost $2 trillion — so far
Tue Oct 7, 2008 1:47 PM EDT
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Americans' retirement plans have lost as much as $2 trillion in the past 15 months — about 20 percent of their value — Congress' top budget analyst estimated Tuesday as lawmakers began investigating how turmoil in the financial industry is whittling away workers' nest eggs.
The upheaval that has engulfed financial firms and sent the stock market plummeting is also devastating people's savings, forcing families to hold off on major purchases and even delay retirement, Peter Orszag, the head of the Congressional Budget Office, told the House Education and Labor Committee.
As Congress investigates the causes and effects of the meltdown, the panel pressed economists and other analysts on how the housing, credit and other financial troubles have battered pensions and other retirement funds, which are among the most common forms of savings in the United States.
"Unlike Wall Street executives, America's families don't have a golden parachute to fall back on," said Rep. George Miller, D-Calif., the panel chairman. "It's clear that their retirement security may be one of the greatest casualties of this financial crisis."
More than half the people surveyed in an Associated Press-GfK poll taken Sept. 27-30 said they worry they will have to work longer because the value of their retirement savings has declined.
Orszag indicated the fear is well-founded. Public and private pension funds and employees' private retirement savings accounts — like 401(k)'s — lost about 10 percent between the middle of 2007 and the middle of this year, and lost another 10 percent just in the past three months, he estimated.
Private retirement plans may have suffered slightly more because those holdings are more heavily skewed toward stocks, Orszag added.
"Some people will delay their retirement. In particular, those on the verge of retirement may decide they can no longer afford to retire and will continue working," Orszag said.
A new AARP study found that because of the economic downturn, one in five workers 45 and older has stopped putting money into a 401(k), IRA or other retirement savings account during the past year, and nearly one in four has increased the number of hours he works. More than one-third of these workers have considered delaying retirement, according to the study, which also found that more than half now find it difficult to pay for basic items such as food, gas and medicine.
The hearing came just as workers are receiving — or about to receive — their quarterly retirement savings account statements, which are likely to show disheartening drops in the value of holdings.
Jerry Bramlett, the head of BenefitStreet Inc., a retirement savings plan administration company, said there's a risk that people will overreact to the bad news by pulling their money out of the accounts, which could add to their potential losses.
"For participants with many years of retirement, a drastic abandonment of equity positions in their retirement account will only serve to lock in as-of-yet-unrealized losses. Markets do go up and down, and 401(k) participants must try to think long-term," Bramlett said.
Still, he said workers should do their best to diversify their retirement savings accounts and "perhaps consider less volatile investments."
On the heels of enacting a $700 billion market bailout, lawmakers are searching for ways to help workers who are feeling the ripple effects of the financial crisis.
"What should we be doing to try to find a way to salvage the retirement position of American workers?" said Rep. Dennis Kucinich, D-Ohio, an opponent of the government rescue plan. Congress, he added, "rushed to protect Wall Street in hopes that some benefits would trickle down to workers."
The massive losses have already reopened a bitter and long-running debate about what role — if any — the government should play in helping workers save for retirement.
Some experts argue that the hefty tax subsidies that Congress has put in place in recent decades for 401(k) and other worker-contribution accounts have made people's retirement income less secure by shifting risks, decisions and costs from employers to people who often know little about investing.
"They are fatally flawed," Teresa Ghilarducci, an economist at the New School for Social Research, said of the tax-advantaged plans. "They're too risky, and it's not good policy to have workers run their own retirement plan. They want government help."
Common mistakes workers make include overinvesting in a single stock — often their company's — and participating in funds that carry large fees or involve excessive risk, the witnesses said.
"You cannot tell the participants at the bottom of your fund prospectus, 'Warning: Your psychology may lead you to make irrational choices,'" said Christian E. Weller of the University of Massachusetts Boston.
The current market turmoil adds to an already difficult retirement savings picture for Americans, who are increasingly shouldering the burden of managing and funding their own company-sponsored retirement savings plans as firms eliminate traditional pensions.
Even before the recent downturn, older Americans were on track to continue working longer. Twenty-nine percent of people in their late 60s were working in 2006, up from 18 percent in 1985, according to the Bureau of Labor Statistics. Over the next decade, the number of workers who are 55 and older is expected to increase at more than five times the rate of the overall work force, the BLS reported.
Falling home values and now the decimation of much of their savings could plunge older Americans into period of austerity not seen in decades, Miller said: "The fear factor is huge, and they don't see the availability of resources to them to get well."
Orszag said the situation has little precedent in American history.
"The period that we're experiencing is arguably the greatest collapse in confidence that we've experienced since the Great Depression," he said.
© 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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 | Retirement accounts have lost $2 trillion | Breitbart | Wed Oct 8 | 3 |
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{"commentId":3357928,"authorDomain":"jbk99"}
And the fat cats like walk away with cash compensations of about $60 million and he received about $250 million in other benefits and options since 2000. Its despicable and criminal. Bush keeps saying be patient....I say it is time to revolt against the stinking corrupt system. Most peoples' number one worry today isn't about freeing up the credit to businesses or bailing out big business, it is how are we going to pay our bills. How we are going to hang on to our home's equity and retire without living on the street and eating catfood. For those of us who were responsible and saved our money, got fixed mortgages and kept our debt down are the one's who are going to pay for this. We did nothing wrong. We didn't sign on the dotted line for a $400k house when we knew we couldn't afford it, nor did we take out all of the equity and go on vacation. We didn't run up our credit cards or buy the Hummers - we just did what our parents told us to do. Go to work, pay your bills, sock away your savings, participate in your 401K and most importantly, live within our means! Our reward is a national debt in excess of $10.2 Trillion that we have to pay back. Thanks Bush/McCain for the lack of oversight on our financial institutions. You think with McCain being a reformer and all, he would have learned from his Keating 5 ordeal that this is what happens when there is no regulation. Can you say Deja Vu?
{"commentId":3357928,"threadId":"381521","contentId":"1963962","authorDomain":"jbk99"}
- 1 vote
#1 - Tue Oct 7, 2008 2:31 PM EDT{"commentId":3360660,"authorDomain":"incredulous"}
Thanks Bush/McCain for the lack of oversight on our financial institutions.
wow, someone has been feeding you a pile of steaming bull.
You have a few minutes? Watch it.
http://www.youtube.com/watch?v=_MGT_cSi7Rs&feature=related
{"commentId":3360660,"threadId":"381521","contentId":"1963962","authorDomain":"incredulous"}
- 1 vote
{"commentId":3358019,"authorDomain":"GrabanIdiot"}
Some people, due to illness cannot delay retirement. I feel for them.
{"commentId":3358019,"threadId":"381521","contentId":"1963962","authorDomain":"GrabanIdiot"}
- 1 vote
#2 - Tue Oct 7, 2008 2:35 PM EDT{"commentId":3358064,"authorDomain":"jazzman646"}
The top congressional budget analyst says pension plans have lost as much as $2 trillion in the past 15 months.
...and no one has done more to contribute to that than Congress...
{"commentId":3358064,"threadId":"381521","contentId":"1963962","authorDomain":"jazzman646"}
#3 - Tue Oct 7, 2008 2:37 PM EDT{"commentId":3361217,"authorDomain":"gabby3239"}
except the Republican Party with their fiscally irresponsible policy of tax cuts for the rich and the wealthy
{"commentId":3361217,"threadId":"381521","contentId":"1963962","authorDomain":"gabby3239"}
{"commentId":3358817,"authorDomain":"snotrag-dave"}
Public and private pension funds and employees' private retirement savings accounts — like 401(k)'s — have lost some 20 percent overall since mid-2007, he estimated. Private retirement plans may have suffered slightly more because those holdings are more heavily skewed toward stocks, Orszag added.
... and John McCain wants to continue blowing smoke up our skirts instead of focusing on the issues that truly concern Americans.
{"commentId":3358817,"threadId":"381521","contentId":"1963962","authorDomain":"snotrag-dave"}
- 3 votes
#4 - Tue Oct 7, 2008 3:11 PM EDT{"commentId":3359395,"authorDomain":"sgreenway"}
Indeed, 401k statements have recently been delivered. I'm enjoying a -22% rate of return this year. Not exactly what I was expecting coming out of college. Good thing I have a good 20 years to wait this thing out. I feel for those who don't, however.
{"commentId":3359395,"threadId":"381521","contentId":"1963962","authorDomain":"sgreenway"}
#5 - Tue Oct 7, 2008 3:35 PM EDT{"commentId":3361255,"authorDomain":"gabby3239"}
We can listen to the Republicans again about strong conservative leadership but no farmer ever lets the fox guard the hen house. George Bush and the Republican Party has led America to the poor house for real
{"commentId":3361255,"threadId":"381521","contentId":"1963962","authorDomain":"gabby3239"}
#6 - Tue Oct 7, 2008 4:57 PM EDT{"commentId":3362147,"authorDomain":"jazzman646"}
#6 comment is Total BS!!!
{"commentId":3362147,"threadId":"381521","contentId":"1963962","authorDomain":"jazzman646"}
{"commentId":3362493,"authorDomain":"dreamaq2"}
This was e mailed to me by a friend and I though it was interesting.
Refresher course in history……Your Social Security
Just in case some of you young whippersnappers (& some older ones too) weren't taught or just didn't know this.
Be sure and show it to your kids. They need a little history lesson on what's what.
And it doesn't matter whether you are Democrat of Republican. Facts are facts!!!
Our Social Security
Franklin Roosevelt, a Democrat, introduced the Social Security (FICA) Program. He promised:
1.) That participation in the Program would be completely voluntary.
2.) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the Program,
3.) That the money the participants elected to put into the Program would be deductible from their income for tax purposes each year,
4.) That the money the participants put into the Independent 'Trust Fund' rather than into the General Operating Fund, and therefore, would only be used to fund the Social Security Retirement Program, and no other government program, AND ,
5.) That the annuity payments to the retirees would never be taxed as income.
Since many of us have paid into FICA for years and are now receiving a Social Security check every month -- and then finding that we are getting taxed on 85% of the money we paid to the federal government to 'put away', you may be interested in the following:
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q: Which political party took Social Security from the Independent 'Trust Fund' and put it in to the General Fund so that Congress could spend it?
A: It was Lyndon Johnson and the Democratically - controlled House and Senate.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q: Which political party eliminated the income tax deduction for Social Security (FICA) withholding?
A: The Democratic Party.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Q: Which political party started taxing Social Security annuities?
A: The Democratic Party, with Al Gore casting the 'tie-breaking' deciding vote as President of the Senate, while he was Vice President of the U.S.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
AND MY FAVORITE:
Q: Which political party decided to start giving annuity payments to immigrants?
A: That's right! Jimmy Carter and the Democratic Party. Immigrants moved into this country and, at age 65, they began to receive Social Security payments! The Democratic Party gave these payments to them even though they never paid a dime into it!
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Then, after violating the original contract (FICA), the Democrats turn around and tell you that the Republicans want to take your Social Security away!
And the worst part about it is, uninformed citizens believe it!
If enough people receive this, maybe a seed of awareness will be planted and maybe changes will evolve. Maybe not, some Democrats are awfully sure of what isn't so.
But it's worth a try. How many people can YOU send this to? ** Actions speak louder than bumper stickers.
AND CONGRESS GIVES THEMSELVES 100% RETIREMENT FOR ONLY SERVING ONE TERM!!!
"A government big enough to give you everything you want, is strong enough to take everything you have."
-
-Thomas Jefferson
Speaking of retirement, most people don't have pensions and 401k's, they depend on social security.
{"commentId":3362493,"threadId":"381521","contentId":"1963962","authorDomain":"dreamaq2"}
#7 - Tue Oct 7, 2008 5:55 PM EDT{"commentId":3363819,"authorDomain":"lpwillham"}
What we are seeing with the market is sane people changing the allocation mix of their 401K from 80/20 stock/bonds to 20/80 stock bonds.If you look at bond purchases they are up. Also at the "low end' of the housing market (foreclosures) you are seeing an up-tick in sales. people are looking for "safety" right now. They would rather spend 10-15K on a foreclosed 'fixer' than in the market.Eventually that may be a good thing if the housing market picks up.
I have sideline business in investment antique lithographs and rare historical documents and my business as increased 250 percent in the last 90 days.People are investing in things with real term value. They no longer believe those analysts saying 'sit tight' in stocks and are throwing their money into bonds. I think they will be back in the market but it wont be till mid 2009.
When I said last year that the market would hit bottom at 8500-9000 all my friends thought I was crazy. I actually think "real bottom' will be 8200. After that the volatility will be in play for at least 3-6 months after that before any real stability. Personally I don't have the stomach for 500 point daily swings and apparently many feel the same way. If the market goes below 8000? I am glad my house is almost paid for, we own both our cars. No credit card debt. We just bought a foreclosure as second home investment (paid cash).
Everyones goal needs to be zero debt right now.I just wish the government was the same way!
{"commentId":3363819,"threadId":"381521","contentId":"1963962","authorDomain":"lpwillham"}
- 1 vote
#8 - Tue Oct 7, 2008 7:22 PM EDT{"commentId":3378385,"authorDomain":"travelbizcash"}
NOT to fear SENIORS! Obama will protect social security and will lower taxes for seniors earning less than $50,000 a year which could mean a savings of about $5k a yr!
Guess those wealthy seniors who cared less about SS and Medicare will now have to side with Dems to PROTECT IT!!
{"commentId":3378385,"threadId":"381521","contentId":"1963962","authorDomain":"travelbizcash"}
#9 - Wed Oct 8, 2008 11:05 AM EDT{"commentId":3441829,"authorDomain":"dreamaq2"}
Dan, Dems to protect it! Are you kidding me? Please see post #7.
{"commentId":3441829,"threadId":"381521","contentId":"1963962","authorDomain":"dreamaq2"}
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