Comments on: Death of the Pension Plan

By: m s

m s — Wed, 06 Aug 2008 13:16:50 +0000

notice that Belt didn’t mention as one of the culprits corporate executives who chose to fund their plans at the minimum levels in order to show greater profits so that their bonus and option packages would increase in value. one of the key issues in the decline of the db plan is the fact that most of the retirement income for executives comes not from pension plans but from golden parachutes, termination packages and stock options.

By: Rosie

Rosie — Tue, 05 Aug 2008 23:36:14 +0000

GM’s union pensions are funded for years. They purchased bonds to fund the pension and they will not have to add additional money for years. The CEO and other higher up’s pensions are the ones that is in so much trouble.

By: Mary Jo

Mary Jo — Tue, 05 Aug 2008 19:17:23 +0000

Realistically, if the vast majority of Americans are to have adequate retirement income, the primary source of retirement savings must be income from work. Not every American can count on a generous inheritance.
Having said that, the shift from defined benefit plans to 401(k) type defined contribution plans has put many Americans at risk for falling short of having a comfortable retirement income.

Statistics show that individually managed portfolios will fall short of professionally managed portfolios by 1-2% per year. This means that even with the same employer contribution, employees could expect to receive less.

Comparing termination income from a 401(k) plan to termination income from a defined benefit plan ignores the value of the ancillary benefits often provided through a defined benefit plan such as disability retirement income.

Unlike DB Plans, 401(k) Plans allow employees to exercise their preference for immediate consumption, thus consuming their future retirement, often on wants, not real needs. It is easy to argue that each person is responsible for their own savings, but the fact is, Americans are not good savers. When the poor savers are old and need help, will we just tell them they should have saved more?

The ideal retirement income package has a defined benefit for a base annuity income that you can’t outlive, supplemented by a 401(k) plan to cover extaordinary expenses, health care cost increases and inflation.