Most Americans unprepared for retirement

[growing_older]

I don't personally know anyone who has lost a corporate pension,

Maybe this depends on what you mean by lost. At one time I worked for a megacorp who decided to convert the pension plan to some kind of cash plan. With the right kind of assumptions, the generous future pension we thought we were getting turned into a very small cash balance that had no chance at all of growing into the formerly promised benefit. Our pension wasn't "lost", it was just "different"

And very much less valuable to me and all my coworkers.

 

[ejman]

Because you/me, and most folks on this board used our respective 401(k)/IRA's in the "proper manner" to prepare for retirement.

For most folks, the idea of making your own decisions for your financial future scares them, and rather than make a bad decision make none at all.

At least with a defined benefit plan (e.g. pension), all that decision making is done by another, with a proposed guaranteed benefit - all without not having to take a penny out of your paycheck.

Well, if so then I guess a "nanny" retirement system is the only answer for most people (Mods feel free to delete as appropriate) and then we as a society ought to quit pretending we can take care of ourselves in our old age and vote for a "nanny" caretaker one.

But I don't think so. I just cannot buy into the notion that most of the people in the "baby boomer" generation in this country will be totally unable to cope with retirement. Some will work longer and at lower wages, some will have a lower standard of living, some (maybe a lot) of bucket list items will not get crossed off the list but somehow the world will not come to an end.

 

[Ed_The_Gypsy]

Is retiring on mostly SS so bad? I'm not sure what the average payout would be for a couple but if it is $2 - $3k per month that's seems like quite a bit. I'm sure many on this board have lower expenses than that.

I HOPE it is not bad.

For several reasons, we are not in as good financial shape as we could be at this age.

In order to avoid disaster, I do have to eliminate all debt before we get there, though.

 

[Walt34]

I see it all over the map with family and some others. We will be fine with a DB COLA'd pension, health/prescription coverage, etc. but that's because I started with a govt. employer at age 22 and stayed for 29 years. The retirement plan I'm in is no longer offered and hasn't been for 20+ years now. But there's a bit of luck in that too, in that I didn't get sick or injured and my divorce was early enough that I had time to financially recover. And admittedly I didn't think much about retirement until I was in my mid 30's.

A couple of other family members will be fine for the same reason - govt. employment for a long time and starting early enough to get in the old DB plan. But all of us have also saved well over $100k.

Others will not fare so well. The BIL with the spendarina wife who can't save a dime will be working until he's physically unable to. She talks of living in Sarasota, FL, going out in their convertible and dining out frequently. DW and I think they'll be walking to the grocery and eating rice 'n beans flavored with Alpo. We'll know in about 10-15 years.

Another nephew of mine has been a fraternity boy since 1975 and he'll also be dining on rice 'n beans.

I see the reality of retirement changing. Boomer kids want and expect what their parents had but I think for most that's going to be the exception and not the rule.

 

[obgyn65]

+1

I see the reality of retirement changing. Boomer kids want and expect what their parents had but I think for most that's going to be the exception and not the rule.

 

[teejayevans]

Maybe this depends on what you mean by lost. At one time I worked for a megacorp who decided to convert the pension plan to some kind of cash plan. With the right kind of assumptions, the generous future pension we thought we were getting turned into a very small cash balance that had no chance at all of growing into the formerly promised benefit. Our pension wasn't "lost", it was just "different"

And very much less valuable to me and all my coworkers.

Ditto, but since I was laid off it work out. If it wasn't for the fact I was prepared for ER I would be in trouble.
TJ

 

[LRDave]

DW and I think they'll be walking to the grocery and eating rice 'n beans flavored with Alpo. We'll know in about 10-15 years.

Another nephew of mine has been a fraternity boy since 1975 and he'll also be dining on rice 'n beans.

Hey! I like rice and beans! (Of course, yummy sausage makes the dish!)

Actually, I suspect they will be taking the "2 big macs for $3" coupons to the clown house because so many don't have a clue how to cook economically - never mind nutritionally.

 

[MichaelB]

Hey! I like rice and beans! (Of course, yummy sausage makes the dish!)

Could be it's not the main dish but the preparation that counts.

DW and I think they'll be walking to the grocery and eating rice 'n beans flavored with Alpo. We'll know in about 10-15 years.

 

[brogan007]

THIS is part of the problem

This is the 800 lb whatever in the room, that nobody wants to admit.
These government COLA pensions.....who agreed to it? Not the tax payer...but the crooked, union bullied, politician...to get re-elected. These pensions are bankrupting the local systems.. What would it cost to purchase this benefit in the open market? Do private firms offer this? Why not? Major issue in the next 10-20 yrs....how to fund these rich pension obligations made by corrked politicians.

I see it all over the map with family and some others. We will be fine with a DB COLA'd pension, health/prescription coverage, etc. but that's because I started with a govt. employer at age 22 and stayed for 29 years. The retirement plan I'm in is no longer offered and hasn't been for 20+ years now. But there's a bit of luck in that too, in that I didn't get sick or injured and my divorce was early enough that I had time to financially recover. And admittedly I didn't think much about retirement until I was in my mid 30's.

A couple of other family members will be fine for the same reason - govt. employment for a long time and starting early enough to get in the old DB plan. But all of us have also saved well over $100k.

Others will not fare so well. The BIL with the spendarina wife who can't save a dime will be working until he's physically unable to. She talks of living in Sarasota, FL, going out in their convertible and dining out frequently. DW and I think they'll be walking to the grocery and eating rice 'n beans flavored with Alpo. We'll know in about 10-15 years.

Another nephew of mine has been a fraternity boy since 1975 and he'll also be dining on rice 'n beans.

I see the reality of retirement changing. Boomer kids want and expect what their parents had but I think for most that's going to be the exception and not the rule.

 

[arebelspy]

This is the 800 lb whatever in the room, that nobody wants to admit.
These government COLA pensions.....who agreed to it? Not the tax payer...but the crooked, union bullied, politician...to get re-elected. These pensions are bankrupting the local systems.. What would it cost to purchase this benefit in the open market? Do private firms offer this? Why not? Major issue in the next 10-20 yrs....how to fund these rich pension obligations made by corrked politicians.

And you think these pensions are frequent enough and widespread enough that they'll bankrupt the country? Or is it more likely they may get trimmed back?

 

[brogan007]

Where's the money?

Where's the money coming from to pay for these Govt COLA defined benefit plans?
Assumptions of 8% return?......ah ha ha.
Where are the politicians with the balls to tell everyone..."your pension was promised by a crook, we cant's afford them now... they're going to be renegotiated...down. By a lot."
WE...the public...are the employers...how are we going to pay the taxes required to fund these rediculous govt pension obligations?
Where is the outrage?

 

[brogan007]

And you think these pensions are frequent enough and widespread enough that they'll bankrupt the country? Or is it more likely they may get trimmed back?

Not bankrupt the country...just the city you live in. Which will then get bailed out by the state...which will then get....
I think it's clear who pays for it all in the end.
Why should we?

 

[arebelspy]

Not bankrupt the country...just the city you live in. Which will then get bailed out by the state...which will then get....
I think it's clear who pays for it all in the end.
Why should we?

So the city, then bailed out by the state, then bailed out by the country. So back to my question: do you think they are enough to bankrupt the country?

 

[MichaelB]

Where's the money coming from to pay for these Govt COLA defined benefit plans?
Assumptions of 8% return?......ah ha ha.
Where are the politicians with the balls to tell everyone..."your pension was promised by a crook, we cant's afford them now... they're going to be renegotiated...down. By a lot."
WE...the public...are the employers...how are we going to pay the taxes required to fund these rediculous govt pension obligations?
Where is the outrage?

Outrage doesn't help. Calm, rational discussion does, which is why we prefer it here.

 

[Mulligan]

Where's the money coming from to pay for these Govt COLA defined benefit plans?
Assumptions of 8% return?......ah ha ha.
Where are the politicians with the balls to tell everyone..."your pension was promised by a crook, we cant's afford them now... they're going to be renegotiated...down. By a lot."
WE...the public...are the employers...how are we going to pay the taxes required to fund these rediculous govt pension obligations?
Where is the outrage?

There are as many types of pension plans, with various funding obligations owed as a dog has fleas, so it is very hard to lump them all together and generalize. However, the 8% assumed rate of return does concern me as a pensioner. Most funds have to keep a certain percentage in bonds and also cash for distributions. We all know what rate of return those have now. So does that mean that stocks have to return annual double digit returns to make up for that? That is why I continue to save in retirement, to prepare for a cut that may happen down the road. Some systems have started dropping assumed returns under 8% which I feel is a prudent thing to do.

 

[M Paquette]

So the city, then bailed out by the state, then bailed out by the country. So back to my question: do you think they are enough to bankrupt the country?

In the case of an employer that actually properly banked and invested both the employee and employer contributions, in a sound actuarial manner, the risk of bankruptcy is quire low. In agreeing to a pension plan, it is the responsibility of the agreeing parties and their selected pension plan management to properly fund and manage such a plan so as to meet the agreed upon goals of the plan.

If a plan is at risk of bankruptcy, there is almost certainly some irresponsible behavior at the core of the problem.

 

[nun]

The problem with may state pension plans is that they have not been fully funded for many years. Also the funding sources vary widely form zero employee contributions to the situation in MA where the state pays in 5% and the employee pays a mandatory 9% or 11% depending on salary. To write off all state pensions as unsustainable or outrageously generous completely ignores the differences between plans.

 

[Danmar]

What is interesting about the article is the belief that pensions are inherently better. I do not think this is true. Considering how many pensions get clobbered when the firm in question goes belly up. I dont have a pension at all, and Im very glad that I dont. I do not trust corporations to be there when I need them.

Steel

Most pensions pay out as expected. Pensions are really good to have in retirement as they mitigate your longevity risk and allow you to be more aggressive in your AA thus earning higher(hopefully) returns. i am very happy have a pension. Maybe you are making a virtue out of a necessity?

 

[Chuckanut]

Maybe this depends on what you mean by lost. At one time I worked for a megacorp who decided to convert the pension plan to some kind of cash plan. With the right kind of assumptions, the generous future pension we thought we were getting turned into a very small cash balance that had no chance at all of growing into the formerly promised benefit. Our pension wasn't "lost", it was just "different"

And very much less valuable to me and all my coworkers.

The book Retirement Heist gives a good picture of how this was done.

 

[haha]

What is interesting about the article is the belief that pensions are inherently better. I do not think this is true. Considering how many pensions get clobbered when the firm in question goes belly up. I dont have a pension at all, and Im very glad that I dont. I do not trust corporations to be there when I need them.

Steel

As I have said before, everyone should work for the government. Why limit the bounties of government employment to 20-25% of the population, when we could all enjoy it? Just look out for the traffic jams at 5.

 

[youbet]

I agree ha. Why should the majority of American workers have to toil under the whip of private enterprise when there is room at the gov't table for all?

 

[Chuckanut]

I agree ha. Why should the majority of American workers have to toil under the whip of private enterprise when there is room at the gov't table for all?

I worked in private industry for 1/2 my life. I never saw a whip. One of the reasons I can retire a bit early is that I rolled over my 401K and some vested pension money into an IRA that has doubled at least twice. That is hardly mistreatment by private enterprise.

Oh, government jobs have been going down for years, especially at the local and state levels. This is what many people have wanted to see and it is coming about. So, there won't be room at that table for everybody. In fact, a number of people have had the chair pulled out from under them over the past few years.

 

[Steel Rain]

Most pensions pay out as expected. Pensions are really good to have in retirement as they mitigate your longevity risk and allow you to be more aggressive in your AA thus earning higher(hopefully) returns. i am very happy have a pension. Maybe you are making a virtue out of a necessity?

Not really, I can 'buy' my own pension if/when the time comes. Now, if someone said they were going to provide a pension, and it was not paid for by lowering my income, i would be all for it, but i would not trust it. If you have one, outstanding, but my generation almost never works at the same employer for long enought to make it matter.

Steel

 

[youbet]

my generation almost never works at the same employer for long enought to make it matter.

Steel

I agree with this very much. Whatever retirement "help" looks like going forward, it must be portable. Golden handcuffs that tie workers to jobs long after they've discovered they're either burned out, better at doing something else, or whatever, lead to great inefficiencies in our economic system.

Public pensions are notorious for causing folks who would rather cut off their hand than continue at their current job to "retire on the job," just languishing and doing the minimum, because they have so much invested in the seniority-based pension they plan to collect. Private sector pensions used to do that too.......

I vote for 401k's and SS for everyone with no other pension system. Folks should work where they want based on current compensation and their own current career preferences and not because they already have many years invested in "the pension."

 

[brett]

I am thrilled to have a DB pension, even though it is not indexed. It is one leg of our retirement plan-the other two legs being personal savings and SS.

Best decision I made was to not accept my employers offer to migrate from the DB plan to the new DC plan in 2000. I remained in the now closed DB for another 10 years.