Comments on: Even in this Economic Crisis and with Failing Companies Your Pension Should be Safe http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/ Helping a unique generation achieve financial independence. Fri, 20 Nov 2009 23:09:41 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: Holiday Travel, Shopping, and Your Retirement http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94578 Holiday Travel, Shopping, and Your Retirement Wed, 19 Nov 2008 14:51:02 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94578 [...] Even in this Economic Crisis and with Failing Companies Your Pension Should be Safe The PBGC insures your pension benefits up to certain limits. Although, they can make future changes to freeze your plan. [...] [...] Even in this Economic Crisis and with Failing Companies Your Pension Should be Safe The PBGC insures your pension benefits up to certain limits. Although, they can make future changes to freeze your plan. [...]

]]> By: Armen Shirvanian http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94466 Armen Shirvanian Tue, 18 Nov 2008 07:06:04 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94466 This information makes one feel a bit more secure about the returns individuals will get for the effort they put in. It still continues to make for less than positive news when companies find loopholes in order to provide a fraction of the amount that was set to be deposited into worker accounts during bankruptcy time. This information makes one feel a bit more secure about the returns individuals will get for the effort they put in. It still continues to make for less than positive news when companies find loopholes in order to provide a fraction of the amount that was set to be deposited into worker accounts during bankruptcy time.

]]> By: Financial Lessons » Even in this Economic Crisis and with Failing Companies Your Pension Should be Safe http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94417 Financial Lessons » Even in this Economic Crisis and with Failing Companies Your Pension Should be Safe Mon, 17 Nov 2008 19:23:23 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94417 [...] Heidi wrote an interesting post today onHere’s a quick excerpt [...] [...] Heidi wrote an interesting post today onHere’s a quick excerpt [...]

]]> By: Savings Account Strategies, Weight Loss and Healthy Recipes! http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94282 Savings Account Strategies, Weight Loss and Healthy Recipes! Sun, 16 Nov 2008 20:38:32 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-94282 [...] Gen X Finance: Even in this Economic Crisis and with Failing Companies Your Pension Should be Safe [...] [...] Gen X Finance: Even in this Economic Crisis and with Failing Companies Your Pension Should be Safe [...]

]]> By: Chad Westerbrook http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93905 Chad Westerbrook Fri, 14 Nov 2008 20:21:39 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93905 It's interesting to note that amidst the supposed financial crisis that an overwhelming majority of banks and pension funds are actually solvent. I put a lot more trust in the small- to mid-sized financial institutions. They're more apt to play the game conservatively because they know they're not getting a bailout. I handle my IT services 401(k) contribution through spinsurance.com They're solid, accesible and I think less centralized finance centers are the wave of the future unless the goverment keeps propping up the dinosaurs. It’s interesting to note that amidst the supposed financial crisis that an overwhelming majority of banks and pension funds are actually solvent. I put a lot more trust in the small- to mid-sized financial institutions. They’re more apt to play the game conservatively because they know they’re not getting a bailout. I handle my IT services 401(k) contribution through spinsurance.com They’re solid, accesible and I think less centralized finance centers are the wave of the future unless the goverment keeps propping up the dinosaurs.

]]> By: Financial Fellow http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93880 Financial Fellow Fri, 14 Nov 2008 16:30:53 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93880 Kelley - Excited to see someone arguing for DB plans. It makes a for a good discussion. I was thinking this would be a one sided discussion. I agree with a couple good points you made. 1) Private sector employees can be as lazy as public. (In some cases lazier). 2) Some people aren't as capable of making prudent 401k decisions so there is some benefit to taking it out of their hands. That said, I would rather have gov't employees eliminate DB plans and replace them with 401ks. In all honesty the cost of DB plans are staggering when compared to DC plans. When I look at my property tax bill literally 15-20% of it goes to pay for pensions of gov't employees. (I live in Chicago so admittedly the number of gov't employees is a bit bloated there.) But I'm sure it is very high in many other locals as well. Just look at what DB plans have done to the Big 3 automakers. They have been crushed over the years by their pension plan obligations. Admittedly they have other issues but it is hard to succeed when you start with that big of a hole... Kelley – Excited to see someone arguing for DB plans. It makes a for a good discussion. I was thinking this would be a one sided discussion. I agree with a couple good points you made. 1) Private sector employees can be as lazy as public. (In some cases lazier). 2) Some people aren’t as capable of making prudent 401k decisions so there is some benefit to taking it out of their hands.

That said, I would rather have gov’t employees eliminate DB plans and replace them with 401ks. In all honesty the cost of DB plans are staggering when compared to DC plans. When I look at my property tax bill literally 15-20% of it goes to pay for pensions of gov’t employees. (I live in Chicago so admittedly the number of gov’t employees is a bit bloated there.) But I’m sure it is very high in many other locals as well. Just look at what DB plans have done to the Big 3 automakers. They have been crushed over the years by their pension plan obligations. Admittedly they have other issues but it is hard to succeed when you start with that big of a hole…

]]> By: Kelley http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93853 Kelley Fri, 14 Nov 2008 12:41:30 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93853 I made an error in my post above. The second paragraph should be: Who benefits when an employer switches to a DC plan? The EMPLOYER. Who loses? The employee. I made an error in my post above. The second paragraph should be:

Who benefits when an employer switches to a DC plan? The EMPLOYER. Who loses? The employee.

]]> By: Kelley http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93852 Kelley Fri, 14 Nov 2008 12:40:09 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93852 I take exception at your categorization of DB plans as "more expensive." If employee recruitment, retention and security are not important to you, then you probably will argue against DB plans. Who benefits when an employer switches to a DB plan? The EMPLOYER. Who loses? The employee. As a govt employee, my DB plan is a big light at the end of the career tunnel. (I also contribute to a 457 Plan.) I earn less salary than I would in the private sector and am constantly fighting stereotypes that govt workers are lazy and inefficient. Workers in ANY industry/field can be lazy and inefficent. Yes, I could make more if I went to work in the private sector, but there is not an equal job in the private sector plus I find my govt/nonprofit jobs very rewarding because I am improving/giving back to my community. Please also consider the current market situation and how that affects workers with DC plans. This quote from Employee Benefit News sums it up: "The current environment underscores some latent employer risks with 401(k) plans," says Alan Glickstein, a senior retirement consultant at Watson Wyatt. "For example, they make it harder for companies to predict who will retire and when. Employees who mostly rely on 401(k)s are also more likely to worry about their financial security, creating an additional drain on morale and productivity during turbulent times." There is more research defending the value and true expense of DB plans, but I don't have them at my fingertips. I take exception at your categorization of DB plans as “more expensive.” If employee recruitment, retention and security are not important to you, then you probably will argue against DB plans.

Who benefits when an employer switches to a DB plan? The EMPLOYER. Who loses? The employee.

As a govt employee, my DB plan is a big light at the end of the career tunnel. (I also contribute to a 457 Plan.) I earn less salary than I would in the private sector and am constantly fighting stereotypes that govt workers are lazy and inefficient. Workers in ANY industry/field can be lazy and inefficent. Yes, I could make more if I went to work in the private sector, but there is not an equal job in the private sector plus I find my govt/nonprofit jobs very rewarding because I am improving/giving back to my community.

Please also consider the current market situation and how that affects workers with DC plans. This quote from Employee Benefit News sums it up: “The current environment underscores some latent employer risks with 401(k) plans,” says Alan Glickstein, a senior retirement consultant at Watson Wyatt. “For example, they make it harder for companies to predict who will retire and when. Employees who mostly rely on 401(k)s are also more likely to worry about their financial security, creating an additional drain on morale and productivity during turbulent times.”

There is more research defending the value and true expense of DB plans, but I don’t have them at my fingertips.

]]> By: Jeremy http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93640 Jeremy Thu, 13 Nov 2008 00:03:03 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93640 I hear you Financial Fellow. I wish more public sector employers would do that as well. At the very least, they should do what my wife's plan does. She works for a local government, and her defined benefit plan is more or less a hybrid. It's a defined benefit that is guaranteed and is based on length of service, pay grade, and all of that, but each employee is required to contribute 3% of their pay towards it. This reduces some of the burden placed on taxpayers for funding these accounts. The bad news is that you can sort of view it like Social Security, since you're just being forced to put money into something that you have no control over. I guess as long as things work out and you get what you're owed, it's fine. But at the same time, I think we could do better with that 3% on our own. All things considered, they also offer a 457 plan, so you can at least control most of your employer-sponsored retirement benefits. And if the mandatory 3% that you have to put in guarantees a reasonable pension without having to significantly generate funding through taxes, it's not so bad. I guess the same thing could be said for a lot of unionized labor such as the big three automakers that provide ridiculous retiree benefits (in relative standards). These very generous pension plans and retiree health benefits are unsustainable, and it's becoming obvious that they are at a tremendous competitive disadvantage having to fund these programs. Great for employees, and a noble concept on paper, but companies can't be in the business of completely funding the now 25+ years of retirement that many people are enjoying. I hear you Financial Fellow. I wish more public sector employers would do that as well. At the very least, they should do what my wife’s plan does. She works for a local government, and her defined benefit plan is more or less a hybrid. It’s a defined benefit that is guaranteed and is based on length of service, pay grade, and all of that, but each employee is required to contribute 3% of their pay towards it. This reduces some of the burden placed on taxpayers for funding these accounts.

The bad news is that you can sort of view it like Social Security, since you’re just being forced to put money into something that you have no control over. I guess as long as things work out and you get what you’re owed, it’s fine. But at the same time, I think we could do better with that 3% on our own.

All things considered, they also offer a 457 plan, so you can at least control most of your employer-sponsored retirement benefits. And if the mandatory 3% that you have to put in guarantees a reasonable pension without having to significantly generate funding through taxes, it’s not so bad.

I guess the same thing could be said for a lot of unionized labor such as the big three automakers that provide ridiculous retiree benefits (in relative standards). These very generous pension plans and retiree health benefits are unsustainable, and it’s becoming obvious that they are at a tremendous competitive disadvantage having to fund these programs. Great for employees, and a noble concept on paper, but companies can’t be in the business of completely funding the now 25+ years of retirement that many people are enjoying.

]]> By: Financial Fellow http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93629 Financial Fellow Wed, 12 Nov 2008 22:25:50 +0000 http://genxfinance.com/2008/11/12/even-in-this-economic-crisis-and-with-failing-companies-your-pension-should-be-safe/#comment-93629 Nice article, Jeremy. Pension plans for public employees is a real sore spot for me. Pension plans are hugely expensive. Which makes it understandable that private corporations have overwhelmingly dumped them in favor of defined contribution, 401k plans. Where I get sore over pension plans is when we look at public employees. Looking at my property tax bill it becomes immediately apparent that a significant portion of my property taxes go to pay for public employee pension plans. It is somehow deemed acceptable for government to continue offering employees these ridiculous pension plans at the expense of the taxpayer. The public sector needs to follow the private sectors lead and phase them out with 401k plans. Cutting back my taxes by putting public employees in sensible, fair retirement plans is the best economic stimulus plan that I can think of. Nice article, Jeremy.

Pension plans for public employees is a real sore spot for me. Pension plans are hugely expensive. Which makes it understandable that private corporations have overwhelmingly dumped them in favor of defined contribution, 401k plans. Where I get sore over pension plans is when we look at public employees. Looking at my property tax bill it becomes immediately apparent that a significant portion of my property taxes go to pay for public employee pension plans. It is somehow deemed acceptable for government to continue offering employees these ridiculous pension plans at the expense of the taxpayer. The public sector needs to follow the private sectors lead and phase them out with 401k plans. Cutting back my taxes by putting public employees in sensible, fair retirement plans is the best economic stimulus plan that I can think of.

]]>