How is your Pension? $2 Trillion Lost In Pension Funds for rescuing the Financial Frauds

 

It’s something of a cliché, but bursting bubbles tend to splatter scorching red ink in all directions. This time is no different. Not only are investors and homeowners getting burned by the unfolding financial crisis, so are banks, businesses, schools, municipalities and charities. According to a Wall Street Journal report, “Workplace Retirement Plans Suffer $2 Trillion in Losses,” working Americans with self-directed retirement accounts are also feeling a lot of pain.

 

 

Americans have lost $2 trillion in their workplace retirement plans in the past 15 months, threatening the security of millions, according to government data.

The Congressional Budget Office disclosed the figures at a hearing by the House Education and Labor Committee, prompting some legislators to question whether retirement-savings plans are inherently too risky. The $2 trillion figure includes 401(k) plans — which have become the primary savings vehicle for 60% of workers — as well as traditional pension plans.

The 401(k) plans, which require workers to manage their own retirement savings, have been the hardest hit, according to the Congressional Budget Office.
 
While some 401 (k) participants are making unwise investment choices, the “exposure to broad market risk is unavoidable” for nearly all workers, said Peter Orszag, the Budget Office’s director. That’s partly because investment choices in the plans are weighed in favor of equities.

The losses, which are likely to force many people to delay retirement, are prompting some legislators to take a new look at the legislation that created 401(k)s and subsequent laws that have allowed investment companies to steer workers into riskier funds. Congress created the investment accounts about 25 years ago. Today, 401(k)s have largely replaced traditional defined-benefit pension plans.

Rep. George Miller (D., Calif.), committee chairman, said “evidence is starting to accumulate that this is an inadequate vehicle.”

Teresa Ghilarducci, a professor of economic policy at the New School for Social Research in New York, said Congress should let workers trade 401(k) assets to the government — perhaps valued at mid-August prices — for a retirement account composed of government bonds. She called the 401(k) a “failed experiment.”

 

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