Are GICs in 401k's at Risk Because of MBIA's Credit Downgrade and Bank/Mortgage Problems?

Many 401k funds offer GICs (guaranteed investment contracts).

Are these likely to be at risk or affected because of the current problems banks are having with sub-prime mortgages?

Most likely "no." The word "guaranteed" is a bit of a misnomer because the GIC is backed by an insurance company (most times) and their enormous assets. When they place an interest rate on their GIC, they do it with full knowledge of their assets and liabilities and the fluctuating interest rates and how that impacts their assets. (hey, these guys aren't paid 6 figures for nothing.)

Two things you can do - look up the historical default rate on GICs (which will be very low, if it even is greater than 0), and see which carrier sold the GIC to your 401k. I think that either answer will be reassuring.

This article from NY Times 1990 stated that "no participant has ever lost a dime" but you probably want more recent research :)
http://query.nytimes.com/gst/fullpage.ht...

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