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Department of Labor official speaks on retirement worries in light of potential U.S. default

07/26/11

Amidst growing concern that the United States might default, Assistant Secretary of Labor Phyllis Borzi spoke at a Congressional hearing about why the prospect would have a ruinous impact on retirement savings.

Borzi said that the rate of savings in individual retirement accounts and 401(k)'s would suffer if there were a default. Investors, she said, would be much less inclined to put money into these accounts due to fear over not being able to easily access their funds

Speaking about the pension system, Borzi said "Nothing good could come from an American default." Many larger pension funds have investment policies requiring them to hold AAA bonds, and many of them possess U.S. Treasuries. These plans' fiduciaries would be forced to find out a way to avoid violating their current investment guidelines in U.S. Government bonds lost value.

The Investment Company Institute reports that as of March 31, 2011, total U.S. retirement assets were in excess of $18 trillion. By the end of the first quarter of the year, retirement savings encompassed 37 percent of all household finances across the country.

For those considering their financial retirement options, annuities offer a good opportunity to make yearly contributions without limitation.

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