The Effects of Recent Turmoil in Financial Markets on Retirement Security

The congressional testimony by Peter R. Orszag, Director of the Congressional Budget Office on The Effects of Recent Turmoil in Financial Markets on Retirement Security has been posted by the CBO. It is an understatement to say that his remarks were not upbeat. From the second quarter in 2007 to the second quarter in 2008 the value of assets in pension funds declined by 10% and there have been significant declines since then. He states that, "Those developments have probably left private-sector defined-benefit pension plans’ obligations exceeding their assets by a greater amount than last year." The state of defined contribution plans may be even worse since over two-thirds of assets in defined contribution plans are invested in equities. The share of retirement income coming from pensions is greater at the upper income levels.