Do you have pensions? Is it safe?

kaismomFebruary 27, 2007

I think the elimination of so many pension plans of large corporation will have a profound impact on the financial security of millions of middle class Americans.

My husband and I have very secure pensions as of today. In equivalent dollars, we would have to have a raise of 20 to 30 percent to make up for it if we lost our pensions. My husband works for a top Fortune 50 company. He will get about 1/3 of his pay in pension at retirement given his years of service. Many of the younger people that started 10 years after he did will not have the same level of pension compensation. I get equivalent of 10 percent of my pay deferred to the pension account that invests tax deferred.

We also qualify for 401k, which is NOT the same as company paid pension. 401K is from your salary and you have the option to save or not. Many companies will match the employee contribution of 401k. However, this is only for the moderately well paid or the well paid employee. If you are barely getting by, then there is no extra money to go to the 401k. The company HAS to put money in your pension whether the employee saves or not. This is a safety net that many companies have taken away from their not-so-well-off employees.

We both have 6 figure incomes. We consider ourselves upper middle class not wealthy, since our wealth is tied to our income and not to "accumulated wealth" as is for the real wealthy. The very wealthy is driving this corporate squeeze as they want more return on their investment at the expense of their middle class employees.

I wanted to take a pole on what your pension plans are and how safe it is.

If you have lost your pension plan in the past few years, do you think your company compensated for it adequately for the loss?

And if you have lost it or don't have one, how are you making up for it to save for the retirement?

Did the pension plan affect your decision to take a job?

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Another question ...

... if you have a pension plan, does your company manage it, or is it managed by an outside carrier?

For example, should your company go broke and the pension is in-house ... employees left without work may find that they're left without a pension, into the bargain. Remember Enron?

In some cases, the employees have helped fund it, but in many, the total contribution comes from the employer.

This is more likely if it's a defined benefit plan (i.e. you have a certain guaranteed amount that you'll be paid in retirement).

Defined contribution plans, where a specified amount is invested, by either the company or the employee or both, and the employee manages it him/herself, so does not have a guaranteed amount of payout, quite often such programs are carried by an outside agency - so if your company were to get into financial trouble, they couldn't raid the pension plan.

It may be a good idea to find out which type of system yours is.

If your company manages your pension, it may be wise to try to get it moved to outside management ... just in case.

That'll be a very hard sell, though, I'll bet.

I hope that you all have good ones.

Have a happy week.

ole joyful

    Bookmark   February 27, 2007 at 6:25PM
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DH is a federal employee, I did 16 years civil service with local government.

Pensions were absolutely a factor in our job decisions. Drove my separation date (needed 15 to qualify). Plus we earned maybe 60% of what the private sector paid for the same work.

I am counting on ours, at least on DH's. Social security, who knows? We're saving plenty ourselves (1/3 savings, 1/3 taxes, 1/3 spent on living expenses)- but it won't be pretty if that is all we have to work with.

And if the federal government does go down, guess we all got bigger problems.

    Bookmark   February 27, 2007 at 6:52PM
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I'm retired on a defined pension. I honestly don't know whether it's managed by the company or an outside company. The deposit is made by another company, but I don't know whether that means they also manage it.

I hope it's secure; one never really knows. What does concern me is that when DH retires, he'll be retiring from the same company, so if the company did go belly up it would affect both our pensions....

It's not a huge amount, and there's no inflation factored in, but still..... I'd hate to have to do without it.

    Bookmark   February 27, 2007 at 7:38PM
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I feel as secure about my pension as one can be; it's adequately funded and held/managed by an outside company. A failsafe against corporate raiding, I suppose. However, like anything else, all companies reserve the right to modify or eliminate "promised" benefits at their discretion. I worked for a well established, well respected, internationally known company for my entire working career - retiring 5 years ago at age 55.

Never being one to put all eggs in one basket, if the pension somehow disappeared, I'd do just fine.

    Bookmark   February 27, 2007 at 8:03PM
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I actually was surprised to get letters from 2 former employers when I turned 55. I had vested with both (7 yrs with each of them) and had modest 401k accts, so I thought that was all there was. We were recovering from a personal bankruptcy so I had never been able to save much in personal contributions.

However, both employers purchase annuities for employees that are vested. Now, annuities by definition mean that you are dependent on the life insurance company holding that annuity to stay in business! My FIL, for example, worked for Mead Paper Corp. for decades, and lost his entire pension when Mead was purchased and the insurance company subsequently went bankrupt.

So I'm not counting absolutely on them, but it's a nice little "boost" if it comes to me.

My husband is a state employee and his pension is pretty safe. The agency agreed, at the last union contract, to start funding the pension obligations at a rate double what they were doing before. This will put them as one of the few public agencies to be on a sound basis, actuarially speaking, for their retired workers.

His 401k is with PERS, the largest pension fund in the US. An extremely well managed, influential, and progressive pension fund, it is also one of the very few government funds at any level to completely forbid any financial contributions of any sort being accepted by the treasury managers. If you want to know why that's important, you can see the current issue of Forbes magazine for a very enlightening article on how North Carolina's pension manager pays high fund fees, receives substantial contributions from fund companies, yet produces extremely poor investment results for the state employees.

    Bookmark   February 27, 2007 at 8:17PM
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I worked for a company from 1978 (just after college) to 1994 and I have a pension from them. I'm comfortable that it's adequately managed and that the company will still be around when I retire...and that it will not support me in full. From 1994 until now I have not worked for companies that offer pension plans. DH doesn't have a pension plan either. So, we have been very diligently contributing the max to 401k plans and saving elsewhere in addition. We also have no debt except for our mortgage. Because of not having had pension plans available for over 10 years now, we've made a point of trying to protect our futures. Once the paychecks come, we pay ourselves first, then the bills. We're doing ok and are ahead of our targets...and we are lucky that we both have pretty ok paying jobs.

    Bookmark   February 27, 2007 at 8:21PM
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Defined benefit pension plans are guaranteed by the PBGC. So, in that regards, your accrued benefit is "safe", if your company goes bankrupt. (There are limits, but they don't effect the average person.)

That said, I work on pension plan terminations every day. Most are companies that are in financial trouble. A lot of it happened with the stock market plunged in beginning of the decade and their required contributions to the plan spiked. I've seen even the best companies reduce their defined benefit plans, but at the same time increasing 401(k) matches to employees.

Finally, collective bargaining employees have about the "safest" pension plans in terms of terminations. They won't be going away anytime soon. I work on a bunch of union plans. I call it job security.

    Bookmark   February 28, 2007 at 10:31AM
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DH feels his pension is safe.... very conservatively managed and over funded.
But, we aren't relying just on that. We have IRAs, 401(k), 403(b), mutual funds, stocks, CDs, etc. No sense having all the eggs in one basket!

    Bookmark   February 28, 2007 at 11:29AM
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DH's are safe -- military and federal civilian retiree. Mine? I'm not counting on much. I work for a large international insurance company with a "cash balance plan" quasi pension. I believe something like 3% of my income is invested (and controlled by the company). I'm not counting on much, even though I am vested now after five years of service.

What I AM doing is busting it with Roths for DH and me and funding my 401K at 15% -- I'll probably bump the 401K percentage by the approx 3-4% raise I get in April.

    Bookmark   February 28, 2007 at 11:33PM
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I don't have one and have never had one - I've worked for more start up companies that just don't do that. (Fortunately I have benefitted significantly from very generous stock options). DH stayed at one company long enough to qualify for a partial pension payment when he retires. Now he also works for a small company so no pension. I used to wish I had one but now that they're dropping by the wayside I'm glad all of my retirement funds are completely under my control.

    Bookmark   February 28, 2007 at 11:45PM
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Many employees pay little attention to various issues regarding their pension plans.

Not a good procedure - best get full information on its operations.

And if you've made contributions ... what might be the possibility that, were the company in desperate straits in future ... it might disappear into thin air?

Yes, the company would have done you dirt.

And, yes, you could probably sue them.

And if, after major expenditure, you were to win - what would you get?

Half a dozen peanuts, maybe ... if you were lucky?

ole joyful

P.S. Canadian? Earning employment income? Then you and employer both contribute to Canada Pension Plan on your behalf.

Get a report of your status, at least every few years - some advise every year.

If there may be errors - time to fix it as soon as possible. Your annual report of earnings for Income Tax purposes will show what contribution was deducted from your income and made to C.P.P. each year.

o j

    Bookmark   March 2, 2007 at 1:55PM
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Neither I, nor my DH have one. We are both already retired, doing fine on our own investments.

    Bookmark   March 3, 2007 at 9:46AM
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