Wednesday, May 18, 2005

Why pensions are becoming even scarcer - More old-line industries may follow United Airline's move to default on pension obligations

I was invited to an African conference recently and one of the speakers was giving financial advice about retirement plans. The speaker suggested that everyone should consider max-ing out your 401K plan as one of the best ways to prepare for your retirement. Being the skeptic that I am, I was thinking this is not a good idea. I can't believe the various corporations are going to pay out all those millions of dollars when it is time for people to retire. If you look at what happened to the employees of International Harvester, The Steele industry and recently Fannie Mae Candies, one can then begin to get a clearer picture of what could happen to you if you trust your financial security to the company you are working for.

Someone once told me, you can never go wrong if you invest your money in real estate, as this is the safest industry. They said - if you look at all the wealthy individuals, you will notice that they all own real estate. I guess this was sound advice after all if you compare it with the way peoples' pension plan is disappearing.

Excerpt

More than three-quarters of the nation's traditional private pension plans are underfunded - which means they currently don't have enough assets to cover the benefits already promised to their workers and current retirees.

And the Pension Benefit Guaranty Corp. (PBGC), the government insurer that is supposed to guarantee workers some protections if companies go under, is facing a deficit of almost $30 billion.

For millions of retirees, like former United pilot Bill Muller, the holes in the current system have already taken a toll. He retired in 2002, expecting to live comfortably on the six-figure pension he'd been accruing since he first went to work for United in 1969. Instead, he expects to lose 75 percent of that, even if the company successfully emerges from bankruptcy
posted by Cynthia   Permalink| Comments(1)|

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