Retirement pension plans – remember them? They used to be a system where in return for hard you worked your whole life and saved diligently, you’d get a monthly pension check every month once you retired. And you could count on it your whole life.
My, how times have changed. Not only to people who never stayed with one company for more than a couple of years, companies are struggling to even stay afloat. They just can’t afford retirement pension plans anymore. Those relics of another century have just died out and been replaced by the 401(k) and other contribution plans – a retirement plan built by employees themselves.
Are you skeptical that traditional retirement pension plans really are dead?
Well, about 35 years ago, two out of three Americans had a proper pension plan. Today, we are down to about 1 in 20. So is that such a bad thing? If we have 401(k)s, doesn’t that give us all the security we want? Of course, it doesn’t. If it did, would we keep hearing all these stories to do with how people have lost their retirement funds in the stock market crash?
However, even when you do have retirement pension plans in places, those still aren’t really very good. The managers who keep track of and manage your pension funds are tasked with investing the money in the market. Usually, they like hedge funds. And they usually bet the farm on their stock market picks.
They have to try to do this, because pension plan assets have fallen ever since the economic downturn began. And you have to do something to keep its value up. What are they investing in? How about dot-com investments like Groupon? Do they know what they are getting themselves into investing in this way?
The thing about retirement pension plans, even when your company does have one, is that it’s up to the company what you’ll get. They can just get up one day and completely change everything without a word to anyone. And usually, they do do it without a word to anyone. Some major companies for instance, have changed their pension plans overnight into plans that will only pay whatever they make on the markets.
Surprisingly enough, you have a better guarantee of getting your regular pension if you’ve been working for the private sector. The government has rules governing how private companies handle their pension funds. There’s nothing like that for state government retirees. When a town, city or state declares bankruptcy, there’s nothing left to protect you.
You need to ensure that you have a good pension plan to enable you to live a rewarding life, take part in hobbies and even provide for your elderly at home care requirements.