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.
Maggie@SquarePennies says
101, I hope you get it, but so much can happen even after you are retired. Good to plan without it.
101 Centavos says
Our company offers a pension, but like Social Security, I’m not counting on it. The company leadership could change, and then change their mind. Oops…
Maggie says
MC, I totally agree. 401Ks are the way employers try to make you feel better that they don’t offer a pension. And with so few choices of funds within the 401K it’s enough to make you start biting your fingernails if you think about it too much.
We could easily end up with 401Ks being decimated in the whipsaw of the markets. We are able to take ours out soon because of my husband’s age. We’ll have to make some decisions and take more responsibility with our investments. At least we’ll have the chance & flexibility to do that.
Bottom line for all of us: we have to plan for ourselves because others’ plans for us do not necessarily have our best interests in mind.
MoneyCone says
Not pension, but speaking on 401Ks, I loathe the idea that I have little choice on where I can park my money.
All the funds have high ERs and poor performance. Who knows, the fund managers could run wild with the deposits leaving you with little to nothing!
Would’ve been nice if 401Ks worked like an IRA.
Some lobbyist somewhere must be laughing his way to the bank for this dumb arrangement our lawmakers setup as 401Ks.
Maggie@SquarePennies says
Miss T, I hope your pension is there for you when you need it. The best thing we can all do is save as much as we can for retirement.
Miss T @ Prairie Eco-Thrifter says
Our CCP, the Canadian version is having it’s own set of issues. There is question of whether it will even last a few more generations. Thank goodness we are saving and have our employee pensions to use. Our employee pension is guaranteed thank goodness.
Maggie@SquarePennies says
Totally true. With congressional budget cutting coming up the outlook for funding the PBCG is not good.
Hunter says
The PBCG is sadly inderfunded, and what’s even more scary is that they have a cap on the maximum benefit they will pay any participant. If you employer based pension is taken over due to bankruptcy, you may receive less each month than you were expecting.