For Americans struggling to cope with falling home values and rising job insecurity, a shrinking pension plan is the “last straw”. But cashing in your retirement plan now is the worst thing you can do. Mike Caggeso looks at the three best ways to rescue your 401(k).
Credit Crisis Claims $1 Trillion; Dollar Falls Hard; Gold and Silver Rally; Honda Slashes Profit Outlook; Motorola Cuts Costs; Valeo Cuts 5,000 Jobs; Woolworths Closing Its 807 Stores in Jan.; E-Trade Growing and Shrinking
There is a way to join a company’s long-term employee benefit program without lifting a finger, says Jim Nelson. Some firms offer Dividend Retirement Plans (DRIPs), which allow you to both receive regular dividend checks and reinvest earnings in discounted stock. And as long as dividend payments keep coming, there is no need to worry about a volatile share price.
Last week, we looked at the problem looming in many established blue-chip companies that pay dividends now and may not later. They have heavy pension obligations bearing down on them.
These problems should be stated in financial reports. But sometimes they are hidden in plain sight. A bit of dubious padding in pension plan earnings projections can neatly camouflage millions in shortfall.
By the way—even if you are not buying dozens of stocks for their dividends, this is something good to know. It will help you evaluate those slick plans that brokers, bankers and insurance salesmen hold out to you when you take out life insurance, buy an annuity, set up a 401(k) or do any long-term planning yourself.
Let’s start…
DR readers might have been alarmed to read Dan Amoss‘ warning in yesterday’s edition that, “Some in Congress are floating a proposal to steal your 401(k), sell the proceeds, and invest in ‘government-guaranteed’ retirement accounts.” Alarming especially to folks reading about it for the first time. So let’s go into a little more depth.
Lynn Carpenter says pension fund deficits could be a major threat to dividend payments. Legislation forces companies to keep private pension plans well funded, meaning some will have to raise large sums of cash at short notice. Lynn picks 9 firms that could soon be forced into making big dividend cuts.
Corporate pension plans have been pummeled by the broad slump in equity and commodity markets. After ending 2007 will a surplus of $60 billion, S&P500 companies now have a combined deficit of around $300 billion.
This from the Guardian (UK):
Investors should start seeing the effect on year-end balance sheets, and reforms under the Pension Protection Act of 2006 are likely to complicate matters by forcing companies to spend cash to shore up their plans.“If your pension plan was invested mainly in equities and equities are off 20 percent, all of a sudden you have a 20 percent shortfall,” William Hernandez, chief financial officer of paint maker PPG Industries Inc , told Reuters in an interview earlier this month.“It is going to…
Public pension funds are some of the biggest casualties of this market slump. The New York state pension fund has lost 20% of its value since April. This is more bad news for baby boomers, says Bill Bonner. This generation is already “woefully ill-prepared for retirement” and could end up causing the “fiscal meltdown of this nation”.