Is an employer sponsored pension part of your retirement plan? Perhaps you are lucky enough to work for a company that offers a pension. But counting on that pension is a risk. Don’t have a pension? You might be luckier than you think.
Even companies that seem very strong can be taken over by competitors who won’t honor the pension commitments of the original company. Or perhaps the company that is strong now becomes weak during your retirement, forcing them to shrink the health benefits and pension you are using.
More and more corporations are cutting back on pension benefits in an effort to help the bottom line. They rationalize it as necessary to be competitive. It’s a trend that is not likely to change for quite some time.
Pension plans invest in stocks and other investment vehicles to generate enough money to pay out. With low interest rates, the fund managers often take on riskier investments to get a higher rate of return. Some of those risks can turn out badly, forcing the fund to search for even more risky investment vehicles in order to increase the return on investment. I’d not count on the success of this sort of investment strategy.
There are some pension fund protections in place via the US government’s already strained Pension Benefit Guaranty Corp. Already that government safety net is running a deficit because of so many corporate bankruptcies.
Those who don’t have a pension could be luckier than those who do. After all, they already know not to count on a pension and they will plan accordingly. Those promised a pension might have a rude awakening when they find the pension they have been dreaming of has evaporated in the cold light of day.
The bottom line is to put more into your retirement savings account. Count on yourself, not the government, and definitely not your employer.