| | DOW | 8979.26 |  | 401.35 | +4.68% | | | NASDAQ | 1717.71 | | 89.38 | +5.49% | | S&P | 946.43 | | 38.59 | +4.25% | | | | | |  | Scott Cohn, CNBC Senior Correspondant
Pension tension?
As if you don't have enough to worry about these days, you may want to take a look at your company's pension plan. Millions of Americans are covered by these so-called "defined benefit" retirement plans, which--unlike a 401k plan that depends on what you invest in it--are supposed to pay out a guaranteed benefit when you retire.
Corporate pension plan managers—like any good investor—seek out the best return. So going into this year, according Citigroup's Jeffrey Sprague, a "significant" number of companies had the majority of their pension plan assets invested in stock. And like many of us, they assumed they would earn great returns that way. We know how that turned out.
So now, under federal law, many of these companies will have to make up the difference—to make certain their pension plans are fully funded. That means for many companies, something will have to give. Some will have to take some of their profits—such as they are—and put them into their pension plans. That's a drag on earnings. But others could take a different course that could affect your nest egg.
The shortfalls could also accelerate a trend we first reported on in 2005: Companies "freezing" their pension plans. If you're vested and your plan is frozen, you will get the benefits you have accrued to that point, but your benefit will stop growing—meaning less of a payout than you may have expected at retirement.
What if your company doesn't survive this crisis? The federal Pension Benefit Guarantee Corporation guarantees private pension plans, and most workers can expect to receive their full pensions even if the PBGC takes over the plan. But a PBGC study this year found 16% of workers in plans assumed by the PBGC saw their benefits reduced under federal rules. The average benefit reduction: 28%. Ouch.
Unfortunately, there isn't much you can do about any of this, except to stay vigilant. Most companies will meet their pension obligations. But don't put all your nest egg in that basket.
| |
| | Safe Plays for a Dangerous Market
Despite the high level of volatility, MarkTravis, of Intrepid Capital Funds, sees opportunities in this market environment. He advises investors to look for businesses with no financing risk. ...read more | | |
| | Sector Plays Amid the Market Volatility
Dean Barber, chief investment officer at the Barber Financial Group, says we have entered a long-term secular bear market, and he's remaining cautious."If we're going to buy anything right now, it's going to be consumer staples," he said. "If people are going to stay in this market, they better have plenty of Dramamine, because the volatility is going to continue...read more | | |
| | 3. Assessing Google's Results 
Instant analysis on Google's quarterly results, with Larry Haverty, Gabelli Global Multimedia Trust and CNBC's Maria Bartiromo. | | |
| | 4. Dow, AEX to Fall 27 Percent: Analyst
The 2008 chart of the DJIA closely reflects the 1929 chart of the index, Edward Loef from Theodoor Gilissen Bankiers noted. Loef expects the Dow to bottom next week, where it will lose a further 27% from the recent bailout bounce. | | |
| | CNBC.com BLOG OF THE DAY | |  |
 | (c) 2008 CNBC, Inc. All Rights Reserved | | |
To unsubscribe to this email click here
If this e-mail was forwarded to you and you would like to subscribe to CNBC.com's News Now mailing, please click here
