Preview of the US without pensions

[Big_Hitter]

Merry Christmas everyone

https://www.washingtonpost.com/busi...55a220c8cbe_story.html?utm_term=.f0ab38e4e01d

"The way major U.S. companies provide for retiring workers has been shifting for about three decades, with more dropping traditional pensions every year. The first full generation of workers to retire since this turn offers a sobering preview of a labor force more and more dependent on their own savings for retirement."

 

[Dash man]

There’s a misperception that more people in the past received pensions than actually did. I don’t believe it’s ever been more than about 40% of workers ever received pensions. Before ERISA protections, many lost their pension if they didn’t complete thirty years and we at times fired before that so the company could avoid paying out the pension.
My grandparents never had a pension and lived off savings.

 

[Amethyst]

Also, many pensions were never inflation-indexed, so the recipients probably would have done better with 401Ks, had those existed. That was true of my Dad, who paid into a union pension for ~35 years, only to retire into the double-digit inflation of the early 1970s. His "generous" pension quickly shrank to a fraction of his SS benefit, and he ended up going back to work as a night manager at a condo. For me, as a teen, it was an early lesson in Beware.

There’s a misperception that more people in the past received pensions than actually did. I don’t believe it’s ever been more than about 40% of workers ever received pensions. Before ERISA protections, many lost their pension if they didn’t complete thirty years and we at times fired before that so the company could avoid paying out the pension.
My grandparents never had a pension and lived off savings.

 

[LOL!]

I've never had even a whiff of a pension and I am essentially retired and living off my IRA / 401k / taxable investments.

I've seen all the behavioral things that are required to nudge people to save for their retirement. IRAs have been around quite a long time ... since 1975. One didn't need any help from an employer to put money into an IRA. But the reality is that most folks didn't know about it. And even today many folks have no idea that they can save for retirement in an IRA.

So that's 37 years that IRAs have been available.

And they keep reinventing the wheel: MyIRA (now gone), the unnecessary OregonSaves, the Illinois Secure Choice Savings Program and so on. Low income folks will not need to save more than than $5500 / $6500 limits allowed for IRAs annually, but they will need to save.

 

[Just_Steve]

Well that was depressing.

 

[jim584672]

My Megacorp froze the pensions years ago. Nice to have one, even if it is small.

 

[MRG]

I never had a pension. Lucky for me Megacorp had profit sharing early on. By the time they introduced a 401k the benefits of savings was very visable.

I do recall having to do the rahrah speach every year to encourage people to save. Wow, I didn't know that many folks lived on the Nile.

 

[NYEXPAT]

My Father passed away this year at 99. He never had a pension, was always 90% stocks/10%cash. He died with millions in his taxable account and only $12,000 in his IRA.

 

[Midpack]

As I see it, Megacorp did me a favor by freezing pensions in 1994 when I was 40 yo ** and I still had time to plan to depend on our own resources entirely. I do feel some sympathy for those who were not able to plan for retirement without a pension, but some/many could have. And I don't feel much sympathy for those who still pine for pensions to return, that seems highly unlikely.

** And even back then I knew the demographics of Soc Sec weren't going to improve. So while we had decent savings at that point, we decided to plan as though we wouldn't have any pensions/annuities (I took a very small lump sum) and no Soc Sec (even though I realize there will be something, just not sure what, esp after taxes). So we saved & invested accordingly and reached FI by 2004 and I retired in 2011. Hopefully DW will retire one of these days, she's worried about HC.

 

[OldShooter]

While we're junking up Xmas eve with doom and gloom, so far the people with public employee pensions have not been mentioned. Chicago, California, Illinois and many other jurisdictions headed towards bankruptcy will, in bankruptcy, be cutting those pensions. For those who are already retired or near retirement, the necessary arithmetic will be very tough. And, worse, these will probably not be people like @midpack who are financially savvy enough to have planned for it.

 

[athena53]

Before ERISA protections, many lost their pension if they didn’t complete thirty years and we at times fired before that so the company could avoid paying out the pension.
My grandparents never had a pension and lived off savings.

One of my grandfathers lost his pension because the company went belly-up an apparently took the pension fund with it. DH's father's union pension got cut back because the funds were invested in Las Vegas real estate because, mysteriously, they lost money. And I certainly remember 10-year cliff vesting (you got zero if you lasted only 9.99 years).

There are two sad parts to this: one is that many companies that dumped pensions did nothing to compensate; they just pocketed what they used to pay into pensions. (Others provided a 401(k) match but still saved money because not everyone participated and it was less than the pension contribution.) The other is that some people lack the discipline to save and the smarts to manage investments. For them, the forced savings of a pension plan was a better fit.

 

[travelover]

I think that pensions should only be for people that really need them, like Jack Welsh, for example.

 

[mistermike40]

Good riddance. Why should people like me have to have more than five years salary stolen from us to subsidize other people's luxurious pensions? The time when this injustice is permanently in the past can't come a moment too soon.

Why should people who spent 30+ years working towards their pension (by subsidizing prior workers' pensions) lose out? That doesn't seem fair or just either, does it?

 

[Dash man]

Well, the folks on this forum are truly Blessed, whether by self discipline to save and LBYM, or to have the good fortune to have a pension and other means to be comfortable. Merry Christmas to everyone!
Remember, if you care to and are able, to remember those less fortunate and perhaps give a gift through your favorite charity this Christmas.

 

[RobbieB]

I had 8 jobs in my after school career spanning 36 years. Not one company had a pension plan. They all had profit sharing / 401K.

I'm glad that none of them had a pension plan or I might be seriously lacking for dough -

 

[jim584672]

Having or not having a pension would make no difference to me. I still would have done the same amount of saving.

 

[tinlizzy]

Having a pension in a fund that was always red zoned made me save for my own retirement.

 

[NW-Bound]

I think that pensions should only be for people that really need them, like Jack Welsh, for example.

That's why upper management of any company does not have to work for 30 years until they are at least 55 to retire, like the workers of McDonnell Douglas in the story. It's all based on needs.

 

[W2R]

I try to prepare for the worst, because during some parts of my life that seemed to be what would happen. Along those lines I still assume that both my tiny pension and SS could fall through. If they did, I would cut back and could still survive.

I think the people that got it the worst, were those who worked for companies for years and then were blindsided by being in the first wave of pension freezes or failures or whatever. Thank goodness I am not in that group.

 

[NW-Bound]

My wife's megacorp canceled their pension plan some time in the early 80s, and gave employees the cash value at that point.

She put the max in her 401k, and although she always had a much lower income than I did, her 401k at the present time was not that much lower than mine. The reason: the 401k limit was $10K/year, and I could not put more in mine although I wanted to.

Having some savings outside of deferred accounts turned out to be a good thing later, as we could draw on it while waiting for 59-1/2 to get access to the retirement accounts. It all worked out, but then it is easier with dual incomes. Families with a single income may not have that much headroom to save.

 

[GalaxyBoy]

DF had a pension that was still paying in 2017 as the day he retired in 1986. He cleaned up on company profit sharing, though, especially the company stock (which he thankfully sold many years ago). DM even got a pension from his megacorp just for being a spouse. I still recall when she became eligible and DF had no say on HER money for the very first time in her life.

I never had a DB pension so I always socked as much away in both IRAs and 401(k)s. One place I worked had a nice old engineer who’d been there forever and I asked someone why. He said that the company gave everyone the cash value of the old DB plan and switched to a 401k, and most of the old hands were shocked at how little it was and had to keep plugging along. Yikes!

The takeaway I got from this article and other similar ones is that it isn’t very fair to have promised employees a pension for decades and then pull the rug out, but hey, that’s the way it is thesse days. A recent “Hi, I am...” post from a young dreamer mentioned a pension and I thought to myself that he shouldn’t count on that being there in 20-30 years.

 

[scrabbler1]

For me, my pension is one of 3 "reinforcements" waiting for me as I near and enter my 60s, just about 5 years from now. It's a frozen pension, as my of company froze their pensions in late 2001 and began a crummy cash-balance program in its place.


I had begun working part-time in mid-2001, so my pay was greatly reduced compared to what is was in my 16 full-time years the pension was based on. Freezing my pension also reduced any incentive to keep working, not that there was a lot of incentive to begin with throughout the 2000s.

 

[Bamaman]

My mega megacorp recognized halfway thru my career that they couldn't sustain the union workforce's defined pension program out of a cyclable business' roller coaster profitability.

The good news was the pension fund investment ROE was about as as good as any other US megacorporation. And it was nice to have top benefits, a defined pension, a 401k and personal IRAs going into FIDO monthly.

And then everyone 55 years old or older in 2008 was sent "to the house permanently.". Thank you!

I would hate to be 25 years old today beginning building a retirement portfolio with the stock market at an all time high--with interest rates at an all time low.

 

[LOL!]

And the kids cannot inherit the pensions such as they were from their parents. However, money left in an IRA or 401(k) can be passed down to heirs.

 

[gerntz]

To the extent that long-time government workers increase as a percent of the workforce, the numbers with pensions grow.