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Week In Review


4,000 Could Lose Jobs at Fidelity

Fidelity Investments might lay off as much as 9%, or 4,000, of its 44,500 global workforce by early next year. That would be a considerable cut, on top of 1,000 who have been laid off in the past year through three rounds. Fidelity spokeswoman Anne Crowley dismissed the reports as mere "speculation" but said executives are assessing costs "to make sure they are correctly positioned for the future. Naturally, those reviews include an examination of all of our expenditures, as well as staffing."

As the stock markets have continued to tumble, mutual funds have been losing money rapidly, with all classes of mutual funds bleeding $104.4 billion in September, $19 billion of that from U.S. diversified equity funds.

Janus Capital is eliminating 9% of its workforce, which translates to 115 jobs, and AllianceBernstein said it also would be eliminating the largest number of jobs in the past 40 years, although it did not give out figures. This is in stark contrast to 2005 to 2007, when mutual fund companies expanded their payrolls by 21,000 workers, for a total of 168,000 people in the industry, according to the Investment Company Institute.

Bayou Swindler Israel To Undergo Evaluation

Before the court rules on whether or not Sam Israel is fit to stand trial for jumping bail, the former Bayou Capital hedge fund executive found guilty of swindling $450 million from investors will undergo up to 90 days of psychiatric evaluation.

U.S. White Plains District Court Judge Kenneth Karas has sent Israel to Butner North Carolina Federal Medical Center for a complete medical and psychological evaluation, which could take up to 90 days. The judge wants to determine whether Israel, who claims his mental capacity is operating at only 70% due to an addiction to painkillers, is competent to plead guilty to jumping bail. The next hearing will be held Feb. 27, 2009.

Israel faked his suicide at Bear Mountain Bridge on June 8, a day before he was scheduled to begin serving a 20-year sentence. After hiding out in a campground, Israel turned himself in to authorities at the urging of his mother. Because he failed to report to prison, the courts will not return the $500,000 bail to Israel and have added another 10 years to his sentence.

Half of Elderly Plan to Use Social Security ASAP

Nearly half of the senior citizens eligible for Social Security payments that begin at age 62 plan to begin drawing down those assets immediately, rather than prudently waiting for the higher payments that top off at age 66 for those born between 1943 and 1954, according to a survey of 600 Americans between the ages of 55 and 69 that Fidelity Investments sponsored.

Respondents said their primary reasons for going for the money so early were: immediate financial needs, healthcare concerns and longevity expectations, with this group saying Social Security will be paying for just about half of their retirement income. Seventy-seven percent of those who plan to begin drawing down the payments say they will use them for basic living expenses, such as food, utilities and mortgages.

However, only 22% knew exactly how much their check will be, 73% did not have a formal retirement income plan, 54% did not know that they need to file for their benefit three months in advance of the date they wish to start receiving payments, and 31% did not know that Social Security payments are taxable.

Another 12% did not know that working affects Social Security payments, and 72% were unaware that a non-working or lesser-earning spouse could be eligible for up to 50% of their spouse's Social Security, based on the spouse's income. Fifty-one percent also did not know that a surviving spouse is eligible for the larger of their two Social Security payments.

"Many Americans who are within one year of beginning to collect their Social Security retirement benefits may be planning to rely too much on it, considering Social Security only funds a little more than one-third, or 37%, or an average retiree's income," said Carolyn Clancy, executive vice president with Fidelity Investments Personal and Workplace Investing.

"Social Security-related decisions can be complex, and there can be tradeoffs associated with the various payment strategies," Clancy added. "But with some basic guidance and a lifetime retirement income plan, individuals may find it easier than they think to make an informed decision and get the most from their benefits."

Fidelity has set up a website, fidelity/socialsecurity.com, to provide people with comprehensive information on Social Security. Fidelity is also hosting seminars, in conjunction with the Social Security Administration, at its investor centers nationwide.

Many Firms to Discontinue Matching 401(k) Payments

General Motors recently announced it would stop matching employees' 401(k) contributions. Sadly, that's likely to become the norm at many companies, especially if the economic crisis deepens and lasts into next year or beyond.