Get Ready for a Stock Market Crash Because the Feds Want Our Private Retirement Assets Converted into Government Annuities to Fund the National Debt

Wall Street will crash the stock market to destroy our private retirement assets so that we'll let the government confiscate them in exchange for a guaranteed lifetime annuity modeled on the Federal Employees Retirement System. But unlike federal employees, don't expect to be able to retire in your 50s with a generous pension. Once the feds get a hold of your individual private retirement assets they will be managed like Social Security and benefits will be paid out in the same way. In other words, you won't be able to retire until 67 or 70 (if they increase the retirement age as planned) and your annuity will be greatly reduced.

I believe Congress' next target for funding new spending is the trillions of dollars in private, individual retirement accounts. How would the U.S. government get away with this? It's diabolically simple. First, there will be some big unforeseen market event... another financial catastrophe similar to the market meltdown we saw in 2008 after Fannie and Freddie collapsed. This is when Congress will step in… citing its desire to “protect” the American people from future market shocks. Then politicians will mandate that a portion of all managed retirement funds be invested in the “safety and security” of U.S. Treasury bonds. - Urgent Warning -- How to protect yourself today from a desperate, bankrupt government, Sovereign Man, June 22, 2011

The Obama Administration is using the same tactics to pass a nationalized retirement plan as they did to pass the nationalized health care bill (connect the dots when you read the following articles). In other words, the federal government is going to takeover private retirements assets in the same way it is taking over private health care. These things were planned long ago, and now everything is accelerated under Obama. They have until until December 21, 2012 (if they're following the Mayan calender, as many believe) or January 20, 2013, when Obama's term ends (although he probably will be re-elected) to get the bills passed and signed into law.

Private sector defined benefit (DB) plans, private sector defined contribution (DC) plans, and state and local pension plans have all suffered declines of over 25 percent of their 2007 values, but that is simply another way of stating that the three types of plans (in aggregate) had basically the same portfolio composition at the end of 2007. The one exception is the federal government's civilian retirement plan, which (for the DB portion) is similar to Social Security insofar as the investments are completely in non-marketable government debt issues ... To date, the most immediate effects of the stock market crash have been on DC participants planning to retire in the next few years. However, all DC participants observe, when reading their quarterly statements or checking on-line balances, that they have incurred dramatic losses ... The extent to which the 2008 stock market crash affected pension participants obviously depends on the extent to which those participants were invested in the stock market before the crash. We use data from the Federal Reserve Board's Flow of Funds Accounts to measure the aggregate change in pension assets across the four broad categories of plans: private sector DB, private sector DC, state and local, and federal civilian. Of these, all but the federal civilian employee plan were greatly exposed to the drop in equity prices. This distinction is reflected in the approach to funding pensions before 2008; all but the federal civilian plan relied on equity exposure to achieve funding targets, which allowed lower contribution rates. - How will the stock market crash affect the choice of pension plans?, National Tax Journal, September 1, 2009

We suspect that when the Dow hits 4,000, the average pension fund will have assets to cover 30% to 40% of benefits. That said, they will probably cut payouts by some 50% or more. This should occur in a year or two. In two to three years, public pensions and Social Security will be cut an equal amount. As we have said previously, pull cash values out of life policies and terminate annuities. Many insurance companies will go under. We have listed several already near the edge. State insurance funds will be unable to cope with the losses as the financial edifice falls apart. - Bob Chapman, Crime, Corruption and Collapse on Wall Street, The International Forecaster, March 11, 2009

U.S. RETIREMENT ASSETS DECLINED IN 2008

Download an Excel file of this data.

The Government Wants Your 401(k) and Retirement Account

Compass Corporate Retirement Solutions
July 7, 2010

Hang onto your Individual Retirement Accounts and 401(k) plans because the Federal Government wants them. According to an article by Goldworth, Deputy Assistant Treasury Secretary Mark Iwry, and Assistant Labor Secretary Phyllis Borzi head an endeavor to have Americans convert their retirement accounts. The Government wants them converted into annuities and Treasury bills to fund the national debt. They need to sell $2 trillion dollars of bonds, and foreign countries aren’t buying like before. The world is concerned about the growing debt of the United States.

The powers pushing this idea are the White House, Ford and Rockefeller Foundations, and Congressional activists. Theresa Ghijarducci, of the Swartz Center for Economic Policy Analysis, wants the Government to present the public a proposal of converting these accounts, as early as the middle of July. The announcement seeks to get America’s response to the idea.

The Goldworth article said the New York Times reported the United States would pay out more benefits this year than it takes in from payroll taxes. This deficit will grow, as over 78 million boomers retire and take money out of government coffers.

Last March, Business Week reported our Government wants the converted accounts placed in government-controlled institutions, such as AIG. What the Government seems to have in mind is another power grab, on the lines of the health care plan pushed down America’s collective throats. The national health care plan and the funding of the national debt through converted retirement accounts are brazen acts of Nationalization.

The route to Nationalization the United States is on is similar to the one Argentina took to their demise. In the 1990’s, Argentina had a vibrant economy but it eroded to the point it defaulted on $155 billion of public debt, in 2002. The erosion began when Argentina’s economy slowed, and they continued to spend and print money as a close-gap method to make ends meet. Their peso devalued until it was worthless, inflation set in and the languishing economy never picked up. Finally, with nothing to hold the economy up and their citizenry too broke to keep up with inflation, the economy collapsed. Since then Greece defaulted, for the same reasons, and Spain and others teeter.

Similarly, the United States has a large National Debt, $13 trillion, the interest on it $500 million per day, but the Government shows no sign of slowing entitlements. For example, the Congressional Budget Office predicts the recently passed health care will add $562 billion to the deficit over the next ten years. Our Government is printing money like it’s going out of style, tax rates are going up next year and inflation shows signs of beginning to rise. As a result, per-capita spending is slowing, which takes money out of the economy. The United States can only fund the present debt until 2020, then it engulfs our GNP. Washington DC must stop spending.

Goldworth: 401 (k)/ IRA Nationalization Quietly Moves Forward: goldworth.com

Could the Government Take Away Individual Control of 401(k) Savings?

NuWire Investor
January 13, 2010

A government proposal would take away some control of 401(k) by requiring retirees to convert some of their savings to annuities although 70% of US households oppose it. Whether this controversial plan would give retirees the hoped for security is however doubtful. See the following post from Expected Returns.

Our government is in the middle of a funding crisis that will be resolved as it always has: through the confiscation of citizens' hard-earned wealth. Judging by the way Americans are being conditioned to accept criminal behavior at the highest levels of government, this confiscation will probably be pretty explicit. I'm guessing we'll eventually see a FDR-style confiscation of gold and retirement accounts (401(k)'s).

From the following article in Businessweek, Americans Oppose Initiatives Limiting 401(k) Choices, ICI Says, it seems that day is quickly approaching.

U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said.

Seven in 10 U.S. households object to the idea of the government requiring retirees to convert part of their savings into annuities guaranteeing a steady payment for life, according to an institute-funded report today.

7 out of 10 Americans against government control of 401(k)'s? This probably means legislation is going to be shoved down our throats anyway. I mean, isn't this the new trend in our new "government-knows-best" style of government?

Annuity Conversion, aka Theft

The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.

The coming theft of retirement accounts is one of the most obvious trends for the next 20 years. I mean seriously, the American public stood shell-shocked like 5-year olds while getting looted to the tune of trillions of dollars--what makes you think the government isn't going to steal your retirement accounts?

The government is going to try to sell the move into annuities as a "safe" way to protect the public from the vagaries of the stock market. The truth is, the government is damn broke, which means they will have their hand in every person's pocket. The confiscation will function like this: American citizens will be forced to buy a worthless asset (in this case U.S. Treasuries) and receive a paltry return on capital. Factoring in inflation, returns are likely to be negative.

That the government has to resort to such measures indicates the severity of the current funding crisis. First, the insane monetization of debt. Now, Americans will be compelled to prop up the Treasury market. Five years ago you couldn't make this stuff up; today, it is a reality.

Stock Market Collapse + Retirement Hopes Destroyed

Ok. So the government is basically telling us they are going to confiscate 401(k)'s. Now think for a second what happens when massive forced inflows of capital into stocks turn into massive forced outflows. It doesn't take a genius to figure out stocks are going to crater, and with it, the retirement hopes of millions of Americans.

When a critical mass of the population realizes this, then you will really know what a panic is.

401(k)’s were always structurally deficient products. The standard line is that with tax benefits and company matches, nothing can possibly go wrong! 401(k)'s are for the "wise" investor who is in it for the mythical "long-term". Whenever I hear this ridiculous line from someone, I know the person hasn't looked at a single "long-term" chart in his life. Sorry to ruin the party, but in the "long-term" (at least for Baby Boomers) stocks are going to go down in real terms and taxes are going to rise. And oh yea, you're getting taxed on earned income, which means if your 401(k) is actually worth something, the only person who will be celebrating is Uncle Sam. This is a disaster in the making for the disappearing middle class in America.

2010-2020: Major Paradigm Shifts Coming

These are interesting times. I can tell you this much: a lot of paradigms are about to change in the next 10 years. Most people are already skeptical of our government, which is clearly evidenced by the plunging approval ratings of both Congress and President Obama. However, most people are ignorant about the lengths governments always go to in order to prevent insolvency.

The current forced bond purchase scheme by our government reminds me a lot of what happened in France during the French Revolution, when church property was confiscated in return for assignats--which functioned as bonds. It didn't take long for those assignats to be worthless in value. I expect the same thing to happen eventually with U.S. Treasuries.

There will be a crisis of sorts in the near future. This is just one of the many reasons I am extremely bullish on gold.

This post was republished from Moses Kim's blog, Expected Returns.

Retirement Overhaul: 401(k)s May Not be the Answer Now

USA TODAY
Originally Published on October 23, 2009

When Vise-Grip closed its plant last year in DeWitt, Neb., and moved it to China, Anita Oltmans lost her job. With no job, federal law prevented her from continuing to contribute to her 401(k) plan. She watched her account spiral down as the stock market crashed.

"They closed the doors on Halloween of last year," says Oltmans, 40, who worked in assembly at the plant and is now in college. "Before that happened, I was happy with what I had saved for retirement. But now, it's very scary."

Congress created the 401(k) in 1980 to supplement company pension plans. But with pension plans no longer offered to all workers or frozen, millions of Americans, such as Oltmans, have been relying solely on 401(k) plans to fund retirement. Others — nearly one-third of American households — don't have any retirement savings, according to a McKinsey & Co. report. And only 4% of middle-income married couples who don't have a pension and are nearing retirement are likely to have enough money to last their lifetime, according to a new report by Ernst & Young.

America faces a retirement crisis, says an influential group of organizations that have started a new retirement initiative called Retirement USA. Wednesday, the group meets in Washington, D.C., to begin searching for solutions.

Retirement USA was launched last March by the Economic Policy Institute, the National Committee to Preserve Social Security and Medicare, the Service Employees International Union and the Pension Rights Center. The coalition has grown since, adding the AFL-CIO, the National Caucus and Center on Black Aged and the National Consumers League, among others. The group's goal is to create a new retirement system that works in conjunction with Social Security and existing plans.

"We're not under an illusion that this will happen overnight," says Karen Friedman, policy director of the Pension Rights Center. When the group comes up with a retirement proposal, it will need congressional support.

Members agree that the retirement system must be universal, secure and able to ensure that all will have a reasonable standard of living after they stop working. The current system does not meet those basic needs, they say.

Millions of retirees are barely surviving financially, says Retirement USA. Nearly 24% of Americans older than 65 have incomes below the poverty threshold, according to the Organisation for Economic Co-operation and Development. And the United States, Ireland, South Korea and Mexico have the highest old-age poverty rates among the 30 OECD countries.

"I feel we're watching a slow-motion train wreck," says Steve Bartlett, president of the Financial Services Roundtable, which represents large institutions, such as Citigroup, Allstate and Fidelity. "It's pretty clear that with the current trend, the country's Baby Boomers and the next generation will not have enough money to retire."

O(k), or not O(k)

The 401(k) is clearly the center of the retirement storm. Some consumer advocates say the 401(k) is a failure that should end. Others, especially financial industry representatives, think 401(k) plans are still the best retirement option and they simply need shoring up. Retirement USA wants to keep the best parts of the current system and add to it.

Bartlett says 401(k) plans are now the retirement reality and should be quickly strengthened. The Roundtable is not part of Retirement USA, but it has recommended a number of improvements, including increasing access to retirement savings plans for small-business employers.

"Every day that we delay makes it harder," he says.

Proponents say 401(k)s are good because they're easy to contribute to, they provide tax breaks, and they are portable from job to job. And if an employer offers a company match to an employee's contributions, even better, says Jane White, author of America, Welcome to the Poorhouse.

Many workers who have stayed at one job for years and consistently contributed to 401(k) plans have been able to build decent nest eggs. To urge more workers to start saving for retirement, about half of midsize-to-large employers provide automatic enrollment to 401(k) plans, up from 44% in 2008, according to a 2009 Hewitt Associates survey.

But companies have cut costs due to the recession and have not spared 401(k) plans, often slashing or eliminating contribution matches and not offering automatic enrollments.

Not a panacea

Statistics also show that 401(k) plans don't serve everyone well, and that those who use them often make big investing mistakes, including cashing them out early.

Many workers — especially women, Hispanics and African Americans — don't contribute to a 401(k) plan at all. Only 41% of Hispanic workers say they save money for retirement, and only 25.6% are covered by employer-sponsored retirement plans, according to a new study by the Hispanic Institute, a non-profit organization.

"It's a grim reality," says Dr. Yanira Cruz, president of the National Hispanic Council on Aging.

Women also face an obstacle men do not. They need to replace more of their final pay for retirement — 2% more than the average male — because they live longer, Hewitt says. Women, however, typically save less than men and invest less aggressively.

Not all 401(k) plans provide good options. Although they are voluntary savings plans, employers choose the menu of investment vehicles.

Teresa Ghilarducci, professor of economics at the New School for Social Research in New York, says the Enron debacle, where workers had far too much of their retirement portfolios wrapped up in company stock that became worthless, is a perfect illustration of a broken system. Workers also pay high investment fees, and employers can shift administrative costs to workers without detection, she says.

Those who do contribute to such plans often get subpar investment returns and make bad decisions.

Marshall Goldsmith, 41, a customer care representative for American Hotel Register in Las Vegas, says he stopped contributing to his 401(k) plan and instead contributes to an IRA.

One reason: "Not one of the funds is in positive numbers, even since the market improved in the last couple of months," he says. His company also has dropped its matching contribution.

Many workers agree with Goldsmith: A recent AARP survey found that 29% of workers ages 45 to 64 had stopped making retirement contributions. About 18% of workers in the same age group have withdrawn funds from their 401(k) plans in the past year, either taking loans or cashing out.

Sandy Shore, senior credit counselor at Novadebt, in Freehold, N.J., says she understands the dilemma facing folks, but draining retirement funds to pay off credit card debt or medical bills is a losing proposition.

"They think it will solve their problem, but when the underlying problem doesn't go away they end up not paying back the 401(k) loan and taking the tax penalty," she says.

A change of perspective

For many people, trying to determine when they might be able to retire and how much they will need is simply a vexing question.

Throw in rising unemployment, the stock market meltdown and the drop in some company matches, and it becomes all the more confusing.

Mark Heup, a commodity manager in Baltimore, doesn't have an overall retirement strategy. He lost his job in February, and his wife, Julie, a structural engineer, lost her job last November. They are both 41 and have a son, Matthew, who is 4.

Although they started new jobs in June, albeit in different cities, they're worried about their retirement future. Before they lost their jobs, they had not been contributing the maximum amount to their 401(k) plans.

"We were just buying things or spending money on our house," says Heup, who now works for Black & Decker. "I guess that being out of a job" has made the couple focus on retirement saving, he says.

It's a rougher road because Heup's company has put a freeze on its company match. Some 26% of companies say they are reducting their 401(k) matching contributions, according to a new Grant Thornton survey. Still, Heup is making the maximum contribution.

People who have worked for 20 to 30 years will need to have 10 times their final pay banked to retire securely, says author Jane White. And not many people are that fortunate.

To come close to that, they need to start contributing at age 25 and keep contributing for 50 years, so they have the benefit of compound interest, she says. And they need to have a company match and avoid cashing out any of the savings until retirement, she says.

The Retirement USA members see the difficulties, confusion and current economic circumstances as catalysts for a new system. The group doesn't want to derail the current system so much as improve it and come up with a new plan that provides security for all Americans.

Some longtime supporters of 401(k) plans agree it may be time for a change.

"Now, we're in a different world," says Ted Benna, a retirement consultant who created the first 401(k) plan in 1980 and is semi-retired. "How are we going to move forward from here? It will be interesting to see. And I am not going to lose any sleep if 401(k) doesn't survive."

Retirement’s Future: Pension vs. 401(k)

CalPensions.com
Originally Published on June 15, 2009

About a dozen chief executive officers of public employee pension funds met in Chicago last month to get acquainted and discuss ways to defend the traditional pension model.

It was an unprecedented gathering called by the new CEO of CalPERS, Anne Stausboll, who in January became the first woman to hold the top job at the nation’s largest public pension fund.

After an historic market crash last fall erased a third of the value of many pension funds, the CEOs might have talked about adjusting investment portfolios or “smoothing” techniques that could avoid contribution rate shocks for state and local governments.

But professional staffs can present those options to decision makers on pension boards. What the CEOs did was compare notes on handling a public discussion about retirement security that may be pushed by the Obama administration and others.

“I’m anticipating that when that discussion heats up, they will be coming to the public pension funds to talk about the defined benefit model, how has it worked historically,” said Stausboll. “So it’s a good opportunity for us to be giving some messages about the relevance of the defined benefit design.”

A “defined benefit” is the monthly payment guaranteed for life in a traditional pension. It’s opposite is the “defined contribution,” a 401(k)-style plan that puts money into a tax-deferred individual investment plan that can rise and fall with the market.

The “defined benefit” is the standard retirement plan for government employees. Critics contend that powerful public employee unions have negotiated generous retirement plans that are straining government budgets and may be unsustainable.

Businesses that offer retirement plans (about half of U.S. workers only have Social Security) are moving toward 401(k)-style plans, avoiding the potential for a massive pension debt that has hurt the auto industry and other old-line corporations.

The 401(k)-style plan is portable, moving with workers as they go from job to job in the new economy, where career-long employment with one firm is said to be increasingly less likely.

But critics say the 401(k)-style plan was only intended to be a supplement, and the stock market crash dramatically revealed its shortcomings, devastating the holdings of older persons who cannot wait for investment earnings to rebuild their retirement funds.

So, if it’s “defined benefit” versus “defined contribution,” who’s winning? Both sides sound as if they are feeling a little besieged.

“In addition to talking about the national discussion, we did talk about the negative focus that we have seen in the media and various forums around defined benefit plans,” Stausboll said of the Chicago meeting.

“We talked about what we could do to balance those negative stories,” said the new CEO of the California Public Employees Retirement System. “But again, in an educating kind of way based on our experience.”

The Profit Sharing/401k Council of America shares Stausboll’s view about a coming national discussion of retirement, calling on its website for a stronger voice because “the future of the 401(k) system” may be determined by the current Congress.

“Not only have investment returns recently been poor, but the media has piled on with story after story about how 401(k) itself is the problem,” David Wray, the council president wrote on his web log. “However, the real story is that 401(k) participants continue to save and invest in their plans even in what some term the worst of times.”

The debate over retirement models, with its subtext of government versus private-sector control, takes a number of forms.

A CEO who attended the one-day Chicago meeting on May 4 in an airport hotel, Chris DeRose of the Ohio Public Employees Retirement System, said in recent years he has discussed retirement issues with the Legislature, Congress and system members.

“We have reached out to all of our stakeholders in helping them to understand that there is this challenge and there are people who want to change our plan, whether they want to change how we invest our money or whether they think a mandatory defined contribution plan is the way to go,” DeRose said.

Comment on Calpensions posts from “Bull,” often denunciations of government pensions with words in all-cap letters, are e-mail that can be traced to a large financial firm in New York that sells retirement products.

A new group, Retirement USA, which includes the Service Employees International Union and several think tank-like organizations, launched a drive earlier this year for a new plan to supplement Social Security.

The new group, seeking ideas to be considered at a conference this fall, has proposed a framework that combines traditional pensions and 401(k) plans (with perhaps some new wrinkles) that would be supported by employers, workers and the government.

The California Assembly passed a bill this month authorizing CalPERS to handle the investments for a new savings retirement plan for workers who do not have an employer-sponsored plan.

AB 125 by Assemblyman Kevin De Leon, D-Los Angeles, would allow automatic deductions from paychecks, an option regarded as a key to getting people to save. A similar bill, also opposed by the financial industry, cleared the Assembly last year and died in the Senate.

U.S. Treasury Secretary Timothy Geithner said last month that his office wants to work with Congress “to flesh out the initiatives” in the president’s budget to help the half of working Americans who only have Social Security.

“These proposals would make it easier for people to save for their own retirement, either through their workplaces or on their own, and would move us toward universal retirement savings coverage,” he told the House appropriations committee on May 21.

A hybrid plan that would use an annuity to convert part of a 401(k) savings account into guaranteed monthly income is being discussed by a Geithner assistant, Mark Iwry, who formerly was with the Brookings Institution.

“It’s in the early stages, but there has been a fair amount of interest in our ideas and the core concepts so far,” Iwry told Investment News last month.

A legal affairs newsletter said the appointment of Iwry in late April signals that retirement has become a higher priority in the Obama administration’s Treasury department.

“Policy issues Iwry will be working on include a possible overhaul of rules for private defined contribution plans, funding relief for defined benefit plans, a direct-deposit IRA program for employers that don’t offer retirement plans, and expansion of the saver’s tax credit,” said the CCH Financial Crisis News Center newsletter.

That would be a sweeping agenda. And as with the current health care debate, there would be plenty of room for political conflict over whether retirement programs should be run mainly by the government or by the private sector.

The Treasury Is Soliciting Your Feedback Regarding the Proposed Annuitization of 401(k)

Zero Hedge
February 1, 2010

Yes, slowly but surely it is happening. In a federal notice filed earlier, the DOL and Treasury are soliciting a response on what has been on many investors' mind, namely the process of converting 401(k)s into annuity-like products. To wit:

The Department of Labor and the Department of the Treasury (the "Agencies") are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement. The purpose of this request for information is to solicit views, suggestions and comments from plan participants, employers and other plan sponsors, plan service providers, and members of the financial community, as well as the general public, on this important issue.

Full Notice here.

A cursory read of the document does not seem to ask about a flat out regulatory requirement for annuitization. We point your attention to item 13:

13. Should some form of lifetime income distribution option be required for defined contribution plans (in addition to money purchase pension plans)? If so, should that option be the default distribution option, and should it apply to the entire account balance? To what extent would such a requirement encourage or discourage plan sponsorship?

For readers who feel compelled to respond to this increasignly socialistic and ludicrous development, we suggest you voice your anger at the following address:

* e-ORI@dol.gov. Include RIN 1210-AB33 in the subject line of the message

Pension Insurer Shifted to Stocks

Concern increases as losses mount; Failing plans could overwhelm agency

The Boston Globe
Originally Published on March 30, 2009

Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent -- and all of its stock-related investments were down 23 percent -- as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.

No statistics on the fund's subsequent performance were released.

Nonetheless, analysts expressed concern that large portions of the trust fund might have been lost at a time when many private pension plans are suffering major losses. The guarantee fund would be the only way to cover the plans if their companies go into bankruptcy.

"The truth is, this could be huge," said Zvi Bodie, a Boston University finance professor who in 2002 advised the agency to rely almost entirely on bonds. "This has the potential to be another several hundred billion dollars. If the auto companies go under, they have huge unfunded liabilities" in pension plans that would be passed on to the agency ...

In addition, Peter Orszag, head of the White House Office of Management and Budget, has "serious concerns" about the agency, according to an Obama administration spokesman.

Last year, as director of the Congressional Budget Office, Orszag expressed alarm that the agency was "investing a greater share of its assets in risky securities," which he said would make it "more likely to experience a decline in the value of its portfolio during an economic downturn the point at which it is most likely to have to assume responsibility for a larger number of underfunded pension plans" ...

Federal Employees Retirement System (FERS)

According to the Bureau of Economic Analysis for 2008, the average federal employee made $79,197 [the average private sector employee made $49,935]. The pension for the average employee can be calculated as follows:

$79,197 x 30 Years x 1% = $23,759
$79,197 x 40 Years x 1% = $31,678

Understanding the FERS Retirement

When we talk about your FERS Retirement, we're really talking about several different benefits. FERS (Federal Employees Retirement System) has three main components:

1. Basic FERS Pension
2. Social Security
3. Thrift Savings Plan (TSP)

Your FERS pension and Social Security will be fixed dollar amounts. But the money you get from your TSP will depend on how much you contributed and how well you managed the money.

As a FERS, you have a chance to take a more active role in managing your own retirement than CSRS do. But, that means you need to stay up-to-date on your benefits.

Here are some important things you need to know about each part of your FERS retirement...

Reductions to Your FERS Pension

There are some choices you can make that will reduce the amount of your FERS pension:

• Retiring Before Age 62 with MRA+10

  If you retire before age 62 on an Early FERS Retirement (MRA+10), your pension will be reduced. Your FERS pension will be PERMANENTLY reduced by 5% for every year you are under age 62. Click here to see an example of this reduction and how it might affect you

• Survivor Benefits

  Your FERS Pension could also be reduced if you choose survivor benefits. Will my survivor still get my pension when I die?

Thrift Savings Plan for FERS

The Thrift Savings Plan (TSP) is a special account for Federal Employees. The TSP was created as part of the Federal Employees Retirement System in 1986. Most government employees (FERS and CSRS) are eligible for the TSP — even those hired before it was created.

The TSP allows you to save pre-tax dollars in a special personal account. You can choose how to invest those dollars — although your choices are limited.

With your FERS retirement pension and Social Security, you will receive fixed amounts. But with your TSP, the amount you receive depends on how much you put in and how well you managed the money.

Your TSP contributions are optional and separate from your FERS pension.

You may also be able to get your Federal Agency [taxpayers] to contribute money to your TSP. Click here to learn more about the match the government gives FERS employees.

Social Security for FERS

Employees covered under the Federal Employee Retirement System (FERS) are typically eligible to receive Social Security benefits when they retire. Every pay period, the Federal Government takes out 6.2% of your basic pay to put towards Social Security. But just like your FERS pension, your Social Security benefit is not based on your contributions - it is based on other factors.

According to the U.S. Social Security Administration, the Social Security taxes you and other workers pay into the system are used to pay for Social Security benefits.

You pay Social Security taxes on your earnings up to a certain amount. That amount increases each year to keep pace with wages. In 2011, that amount is $106,800.

You pay Medicare taxes on all of your wages or net earnings from self-employment. These taxes are used for Medicare coverage.

If you work for someone else	2011 Social Security tax	Medicare tax
You pay	4.2%*	1.45%
Your employer pays	6.2%	1.45%
If you are self-employed
You pay	10.4%	2.9%

Currently, U.S. citizens cannot collect Social Security benefits until age 62 (lawmakers are considering raising this age to 67 or 70). The maximum Social Security benefit at age 62 is $21,636 per individual.

* The employee contribution was temporary lowered from 6.2% to 4.2% on January 1, 2011.

Government-sponsored speculation and the housing market crash
The housing bubble and the financial crisis
States Budgets Blow as Housing and Credit Markets Crash
Household Wealth in Freefall
The Housing Crash and the Retirement Prospects of Late Baby Boomers
Housing crash will leave millions of homeowners dependent on Social Security in retirement
Boomers, Housing and Retirement: A Symbiotic Relationship Unravels
Defined Contribution Plans May Skip 2009 Minimum Required Distributions
Rollover Rip-off: How the Government Steals Millions from the Unemployed
2009 Global Pension Assets Study
Top 1,000 funds' asset decline slows
The Decline of Defined Benefit Retirement Plans and Asset Flows
Financial Crisis Pulls Billions From Pension Plans, Crimping Consumers' Dreams and Corporate Profits
Will the markets crash as baby boomers retire?
As Baby Boomers Spend Their Savings, Will the Stock Market Decline?
Retirement Assets Drop - How Will Baby Boomers Ever Retire?
Pension Plans Decline in June 2010, No Relief in Sight
Significant Market Volatility Prompts Decline in Global Pension
Five years of pension gains wiped out in 2008