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U.S. Pension Fallout from the World Financial Crisis

January 26, 2009

By Mark Poerio and Kristin Chapman

This article first appeared in the IPEBLA International Journal.

The collapse, takeover, or bailout of such Wall Street heavyweights as AIG, Bear Stearns, Fannie Mae, Freddie Mac, Lehman Brothers, and Merrill Lynch has caused a loss of confidence that has affected Wall Street executives and American families alike. According to the Congressional Budget Office, U.S. pension plans have lost as much as $2 trillion in the current volatile market. The majority of pension assets are held in equities; thus, falling stock prices negatively affect pension plans. Worse, the last 20 years have seen the risk of loss from pension investments pass mostly through the popularity of 401(k) plans from employers to employees and retirees.