The next big crisis: Retirement Funds
So do you think that if we can just get this banking crisis behind us all will be well again? Think again! Oh I know you are thinking about the rising Unemployment rate and the number of foreclosures which are tied into the banking problems also as important, and I agree. But what has not been discussed much of late is what has happened to the Pension Funds for retirees and the Agency which Insures them, the Pension Benefit Guaranty Corp.. Here straight from their website is a description of who they are.
"PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of nearly 44 million American workers and retirees in more than 29,000 private single-employer and multi-employer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans."
What I have seen in the news these past few months should raise the alarm bells. Here's a sampling:
April 9, 2009 The Exxon Mobil pension fund has filed a lawsuit against its custodian Northern Trust for breaching its fiduciary responsibilities. The corporate fund is claiming that the funds garnered from the lending out of shares has been invested in risky assets by Northern Trust. These assets are alleged to have included highly-leveraged assets, mortgage-backed securities and collateralized debt obligations. It is alleged that these investments effectively generated losses for the Exxon Mobil pension fund.
April 16, 2009 A special pension fund for railroad workers that was given permission during the Bush administration to invest its assets in the stock market lost more than a third of its value during a recent 18-month period, a loss that could influence an ongoing debate about how to keep government-affiliated retirement programs solvent.
March 1, 2009 Questions arise from GM's use of pension for buyouts, VEBA trust. Details are emerging about how General Motors Corp.'s U.S. pension funds went from a $20-billion surplus at the end of 2007 to a $12.4-billion deficit 12 months later. Newly released numbers show that the funds, which help support more than 650,000 Americans, were tapped for billions of dollars over the past year for employee buyout programs, benefit increases and as part of the UAW's retiree health care trust deal.
February 2009 The Next Catastrophe: Think Fannie Mae and Freddie Mac were a politicized financial disaster? Just wait until pension funds implode. Funds worth trillions of dollars start to plummet in value. Political pressure to be “socially responsible” distorts the market decisions of government-related enterprises, leading to risky investments. Investors who once considered their retirements safely protected wake up to a sinking feeling of uncertainty and gloom. Sound like the great mortgage-fueled financial crisis of 2008? Sure. But it also describes a calamity likely to hit as soon as 2009. State, local, and private pension plans covering millions of government employees and union workers with “defined benefit” accounts are teetering on the brink of implosion, victims of both a sinking stock market and investment strategies influenced by political considerations.
There are serious faults cracking the very foundation and well being of our elder population, as it approaches retirement. The near term focus has been on the immediate Financial system recovery, which is where it should be focused, but behind that curtain is a very large problem with cataclysmic repercussions for all our soon to be retired Baby Boomers. The current Financial crisis has many related and interconnected parts and this one will play a prominent role as a new President thinks of dealing with Social Security policy changes, or should I say Social Insecurity changes as a part of reform.
Under President Bush he attempted to get Americans to take a part of their Social Security retirement Funds and to consider investing them in the stock market. If that had been done by many Americans the current situation would have been worse than it is. The problem is that the Social Security Funds were not in the Lock Box as Gore had promised should he have been elected, but were used by the Government to pay for other things, and now in the Lock Box is a big IOU with no real hope of doing anything to solve it except print more paper money. Eventually citizens are going to wake up that paper isn't really worth anything and they want real assets in exchange for goods and services. God help everyone when that happens! It is called bartering. Get used to it.
"PBGC is a federal corporation created by the Employee Retirement Income Security Act of 1974. It currently protects the pensions of nearly 44 million American workers and retirees in more than 29,000 private single-employer and multi-employer defined benefit pension plans. PBGC receives no funds from general tax revenues. Operations are financed by insurance premiums set by Congress and paid by sponsors of defined benefit plans, investment income, assets from pension plans trusteed by PBGC, and recoveries from the companies formerly responsible for the plans."
What I have seen in the news these past few months should raise the alarm bells. Here's a sampling:
April 9, 2009 The Exxon Mobil pension fund has filed a lawsuit against its custodian Northern Trust for breaching its fiduciary responsibilities. The corporate fund is claiming that the funds garnered from the lending out of shares has been invested in risky assets by Northern Trust. These assets are alleged to have included highly-leveraged assets, mortgage-backed securities and collateralized debt obligations. It is alleged that these investments effectively generated losses for the Exxon Mobil pension fund.
April 16, 2009 A special pension fund for railroad workers that was given permission during the Bush administration to invest its assets in the stock market lost more than a third of its value during a recent 18-month period, a loss that could influence an ongoing debate about how to keep government-affiliated retirement programs solvent.
March 1, 2009 Questions arise from GM's use of pension for buyouts, VEBA trust. Details are emerging about how General Motors Corp.'s U.S. pension funds went from a $20-billion surplus at the end of 2007 to a $12.4-billion deficit 12 months later. Newly released numbers show that the funds, which help support more than 650,000 Americans, were tapped for billions of dollars over the past year for employee buyout programs, benefit increases and as part of the UAW's retiree health care trust deal.
February 2009 The Next Catastrophe: Think Fannie Mae and Freddie Mac were a politicized financial disaster? Just wait until pension funds implode. Funds worth trillions of dollars start to plummet in value. Political pressure to be “socially responsible” distorts the market decisions of government-related enterprises, leading to risky investments. Investors who once considered their retirements safely protected wake up to a sinking feeling of uncertainty and gloom. Sound like the great mortgage-fueled financial crisis of 2008? Sure. But it also describes a calamity likely to hit as soon as 2009. State, local, and private pension plans covering millions of government employees and union workers with “defined benefit” accounts are teetering on the brink of implosion, victims of both a sinking stock market and investment strategies influenced by political considerations.
There are serious faults cracking the very foundation and well being of our elder population, as it approaches retirement. The near term focus has been on the immediate Financial system recovery, which is where it should be focused, but behind that curtain is a very large problem with cataclysmic repercussions for all our soon to be retired Baby Boomers. The current Financial crisis has many related and interconnected parts and this one will play a prominent role as a new President thinks of dealing with Social Security policy changes, or should I say Social Insecurity changes as a part of reform.
Under President Bush he attempted to get Americans to take a part of their Social Security retirement Funds and to consider investing them in the stock market. If that had been done by many Americans the current situation would have been worse than it is. The problem is that the Social Security Funds were not in the Lock Box as Gore had promised should he have been elected, but were used by the Government to pay for other things, and now in the Lock Box is a big IOU with no real hope of doing anything to solve it except print more paper money. Eventually citizens are going to wake up that paper isn't really worth anything and they want real assets in exchange for goods and services. God help everyone when that happens! It is called bartering. Get used to it.
Labels: Baby Boomers, Gore, government, lock box, PBGC, Pension Benefit Guaranty Corp., President Bush, retirement income, Social Security
posted by Charles Amico at 6:24 PM
1 Comments:
I have this same fear.. Not just for myself but for my family as well. My mom's retiring soon, and in about 30 years so will my siblings, then me a decade more after that. I'm just scared that if this financial crisis doesn't end soon, our family's savings won't be enough to get us through retirement.
Post a Comment
<< Home