Posted on 12/18/2008 3:16:12 PM PST by reaganaut1
The rapid decline in interest rates since the end of October is wreaking havoc on US corporate defined benefit (DB) plans. By our estimation, the funded status of the average S&P 500 DB pension fund has declined by 35.5% since the end of 2007, with 28% of this decline occurring after October 2008. In our previous analysis, which was published on November 20, we estimated the average US DB plan funded status to be 97% as of the end of October 2008. We now find that the funded status of the average US defined benefit pension plan has fallen to 69% as of December 17, 2008.
At the end of the 2007, the S&P corporate pension fund universe enjoyed an average funded ratio of 1.044,1 or approximately 104%. While US defined benefit (DB) plans certainly suffered from the deterioration of global stock markets this year, for most of 2008 they derived significant benefits from the widening of corporate spreads, which cheapened their liability valuation. The large decline in interest rates since the end of October is threatening to undo much of that benefit and open up a significant funding gap for the average US DB plan.
The broader problem is that the Federal Reserve keeping interest rates artificially low will make it very difficult for savers to reach their goals without taking substantial risk. You can't subsidize debtors without penalizing investors and/or taxpayers.
I recommend inflation-indexed Treasuries bonds and corporate bonds over 10-year Treasuries yielding 2.07%.
HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!!!!!!
Just took a look at my 401k (with Fidelity)and so far, year to date, I have lost less than 1% because I transferred my entire 401k into their money market fund in Jan.
Looking at the other options available for my plan every one of them has lost between 15-60% of value since Jan.
The reason I even looked is because I had been aware that many money market funds are not covered by FDIC.
Part of the current crisis is because of a lack of influx of cash into the financial market.
Ten years ago, a moderate-average money market rate of return was 8%. Today, one is lucky to find a money market that pays 3%. Even CDs have dropped to the mid-2% range.
I did the same thing with my 401K at Putnam in June. Actually made 1.5% since then.
I just checked my 401K. Surprisingly, I’m actually up 4.7% for the year. I have been in a stable fixed fund all year.
From my summary page:
Personal Rate of Return from 01/01/2008 to 12/17/2008 is 4.7%
Are those the same as Inflation Protected Securities?
Waite a damn minute, you know what is important here is that paulson and his friends get to keep their money and yours, so suck it up. Do it for the party!!!! LOL!!!!
Yes I do-I only switched my account in late Jan-the losses came from other investments I had before the switch. BTW: I see now that Fidelity is participating in the U.S. Treasury Department Temporary Guarantee Program for Money Market Funds until April 30, 2009
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