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Impact of the Financial Crisis on Retirement Security in U.S: A Lesson to LearnEzry Fahmy Bin Eddy Yusof 0900278This project paper is a partial fulfillment of Module TK 1003 of Part I of Certified Islamic Finance Professional (CIFP)INCEIFJune 2009
 
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Impact of the Financial Crisis on Retirement Security in U.S: A Lesson to LearnEzry Fahmy Bin Eddy Yusof Abstract
There is no doubt the United States pensions industry has been badly bruised by the global financial crisis. These are tough times in the United States, but if the current crisiscontinues to spread, it will surely deteriorate the employee’s retirement income.Certainly the road ahead isn’t easy, but it’s not an impossible one, there are still many possible avenues for individuals to diversify their portfolios to make sure they could achieve their retirement goal. Therefore this paper will first explain the connection that relates subprime mortgage crisis towards the retirement plans in the United States. Furthermore explain how the financial crisis affecting one of the popular retirement  plans in United States, the 401(k) plan. Lastly, the author believes that some of the Islamic finance instruments could help the employees in achieving their retirement goal in the crucial time of crisis by exercising some important fundamental investment  principles.
 
 
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Impact of the Financial Crisis on Retirement Security in U.S: A Lesson to Learn
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Introduction
A crisis that affects the entire financial system began in the mortgage financing sector of the financial system of the United States and spread rapidly to the global financialsystem. As mentioned by Abbas (2009), since U.S financial system is the epicentre of thecrisis, therefore the analysis of recent crises has to start with the U.S. system’s financialstructure and the conditions that led to the crisis. According to Baker (2008) the centralelements that we call as the housing bubble lead the house prices peaked but began toturn down in the middle of 2006, this result a rapid rises in the default rates especially inthe subprime market.
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The world financial crisis
It is a worldwide financial fiasco involving the terms such as sub-prime mortgages,collateralized debt obligations (CDO), frozen credit markets and credit default swaps.First and foremost, it relates with two groups mainly the home owners and the investors;the home owners represent their mortgages while the investors represent their money. These mortgages represent houses and this money represents large institutions like pension funds, insurance companies, sovereign funds, mutual fundsand etcetera. Thefinancial system brought these people together, in addition with the banks and broker 
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