I’ve been wondering why the impact of the financial crisis on the overall retirement “system” hasn’t gotten more attention in the media. We already knew the system was in bad shape before September 2008. According to the Fed’s Survey of Consumer Finances, in 2007, only 60.9% of households where the head of household was age 55-64 had retirement accounts . . . and their median retirement balance was $98,000. Given that the stock market has fallen by over 50% from its October 2007 peak – and that, for decades, the standard investment advice has been that stocks do better than any other asset class in the long term – we would be lucky if that median balance were more than $70,000 today.

The Bloomberg article linked to above describes the fragile state of state and local pension systems. These systems suffer from two major problems today. One is that even if they had been managed in a reasonable way, the fall in asset prices over the last year would have blown a huge hole in their long-term solvency.

via The Biggest Story of the Week « The Baseline Scenario.

Over a year ago I began to tell the folks in my office to move their money out of the stock funds and get them into interest accounts…No body listened. For the last year all of the investment advice I have seen has been to stay put in your stock funds…Oh and keep putting your new contributions there also. People get paid well to be so wrong…Thank god I didn’t listen. Thank god the country didn’t listen while George W spent his “political capital” pushing the privatization of social security. Thank god I got out of the market in December of 2007…It wasn’t much, but if I’d stayed put, it’d be a lot less and I wont be adding to it any time soon…