Buddy, can you spare a 401(k) contribution?
Wake up and good morning. Be sure to get to your job on time today ... because you need to hold on to that paycheck longer than you think. The financial meltdown has demolished Americans' retirement savings, wiping out $2-trillion — or about 20 percent of its value — in the past 15 months. For those brave enough to have looked at their 401(k) statements lately, that may not be so surprising. The sharp drop in savings has led Americans to postpone contributing and, in some cases, delay retirement. A new study by the AARP found that one in five workers 45 and older have stopped putting money into a 401(k), IRA or other retirement savings account during the past year. Think that's scary? Try this: 13 percent of Americans 45 and older are tapping into their retirement accounts, or other investments, to cover day-to-day expenses. Here's the entire study.
There's a lot of sloganeering around the Treasury's $700-billion financial rescue package, the Federal Reserve's $900-billion-plus lending authority, plus whatever else happens in the days ahead. Taxpayers need some clarification, so they don't hate the rescue any more than is, well, reasonable. says Bloomberg News columnist Jane Bryant Quinn, who tries to offer a sharper explanation in this column of what's happening. For example: Is the U.S. taxpayer losing $700-billion? The ultimate cost to the taxpayer depends on when the bleeding in home values stops and these assets rise in price. Peter Orszag, director of the Congressional Budget Office, expects the cost to be "substantially less than $700-billion but more likely than not to be greater than zero." Well, glad the experts have narrowed that down.
NEWS! Maybe this will help.The Federal Reserve this morning just cut a key interest rate by half a percentage point to steady an economy teetering on the kind of financial collapse that the United States suffered in 1929. Read more here.
In Tampa, it's almost the one-year anniversary of the October raid on WellCare Health Plans by federal agents. After operating under that shadow ever since, is there light at the end of the tunnel? This week, a plea agreement by former WellCare employee and 50-year-old Tampa resident Gregory West -- here are the charges against him -- gave shares of the Medicaid managed-care company a modest lift as investors apparently saw the development as a reassuring sign about the federal probe of the company. According to the Dow Jones newswire, the plea agreement "supports our view that the scope of the investigation appears limited to Florida Medicaid behavioral health and that a settlement could fall at the lower end of the potential outcomes," said Goldman Sachs analyst Daryn Miller. West's guilty plea came two months after the government raid and was under seal until Monday night. Added Miller: "The announcement moves WellCare one step closer to settling this issue." As for West, he faces up to 10 years in prison and a $250,000 fine.
What's this? The Rock of Gibraltar -- Progress Energy, a big regulated utility -- feeling the economic squeeze? "We're not recession-proof, and we're not immune to these financial ills," says Progress Energy CEO Bill Johnson in the North Carolina company's hometown newspaper, Raleigh's News & Observer. To quote from the story:
"Progress Energy has virtually stopped growing in Florida and is cutting 300 positions in that state amid a backlog of vacant homes that are unsold or in foreclosure. The company could begin to see the same effects in this state as North Carolina's economy continues to slow. The company will provide a financial update when it releases earnings Oct. 31."
Before the credit crisis, Progress Energy took out short-term loans about once a week to cover its expenses. But as financial institutions grew more cautious, Progress Energy has been forced to borrow on a daily basis to make payroll and cover other expenses. The good news? The story says Progress Energy officials are relieved the economic crisis didn't erupt after the company had begun construction on multibillion-dollar nuclear plants -- including the one just north of the Tampa Bay area in Levy County.
Hmmm. Rough times everywhere. I'm sure there's some other good business news lurking out there. Give me a moment. I'll find some.
-- Robert Trigaux, Times Business Columnist