"The World is a Ghetto": Capital Market's Decline Tarnishes Golden Nest Eggs
Posted: Saturday, October 25, 2008
by Walter Rhett
Charleston Perlo
The global credit crunch and capital market collapse drained over 2 trillion dollars of value from this year from American markets has also hit home for retired workers. Many retirees fear the loss of pension benefits as many public systems and private companies have seen significant declines in pension funds, in some cases, by billions of dollars.
Are pensions in immediate danger? No. But the decisions and strategies used by states and municipalities should be watched closely. Monitoring the investment changes in pension portfolios is a prudent course for citizens with a vested stake or an eye toward public fiscal responsibility.
Tight credit and falling values have created a new environment for pension fund directors to operate in, and it is important to know how your state and local managers are adapting their allocations and investments to the new market realities. Public pension funds have information or public affairs telephone numbers to answer inquiries.
Here are several examples of loses recently suffered as the markets plunged.
The federal agency that guarantees pensions (similar to the way Fannie Mae guaranteed mortgages), US Pension Benefit Guaranty Corp lost more than 3 billion dollars.
The Pennsylvania State Employees' Retirement System was down a billion dollars last June.
Allegheny County, Pa's 738 million pension fund down was recently down 5 percent.
Iowa's Public Employee Retirement system faces a short fall of 2 billion (the present market value of it fund is 22.4 billion).
In Wisconsin, the state pension dipped 3 billion. (current value, 80 billion).
In Georgia, the state employees pension fund for public employee and teachers lost more than 11 billion dollars in under four months.
A Texas fund dropped one billion dollars.
Mississippi Public Employees Retirement System has lost more than 10 percent of its value-more than 2.1 billion dollars-recently (17.6 billion, current value).
A 300 point drop in the Dow Jones Industrial Average stock index represents a loss of 450 million for the
Alabama Retirement Systems, an average of 1.5 million dollars per point.
Florida's public pension fund has been hit hard. It lost six percent in three months.
Some state see the current troubles as an investment opportunity. South Carolina, from February, can invest up to 45 percent of its 29 billion pension fund in hedge funds, real estate, and set aside 100 million dollars for purchases of sub prime mortgages! The state had no investments of this type a year and a half ago. One percent of the pension fund has also been set aside for invests in commercial real estate, to be resold as the market recovers. The state's treasurer has said these investment represent acceptable risks, and should benefit the state.
Check your state's fiscal health, especially its public pensions. Participation in a democracy requires each of us to be vigilant as citizens!
(also by the author, Walter Rhett, . . "Wading in the Water": Who Will Present the Better Plan for...). Thanks for reading!
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Top-level comments on this article: (4 total)Walter, Excellent article with very practical tips for all of us. I agree with you about checking on our own state's fiscal health and it's a great opportunity for us to participate in our democracy--which we sometimes may take for granted. Thank you. Warmly, Barbara
Excellent information but many who won't know it until they open their statement.
hi walter,i think we should begin seeing people walking around, looking at the sky, saying, "the sky is falling." very disheartening. this was a well written and interesting article,thank you for sharing,best regards,sue thom
Walter, thanks for an excellent article -- I am a caretaker for my 84 year-old-father and should be better informed regarding his pension - Thanks again!
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