Private Pension Issues
- Archives 2005 -
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the Year With a Warning: More to Come (December 26, 2005)
As the year 2005 came to a close, many are looking back at the issues that are still at hand. How will older persons get income support as they live out their retirement. Two-thirds of retirees depend on Social Security for more than half their income. Yet the Administration will wants private accounts which the majority of seniors strongly oppose. In the past 20 years, the number of companies that offered defined benefit plans decreased drastically from 114,000 to 32,500 leaving more than half of workers without a pension. And the number will rise. Nowadays, companies continue to shed their pension plans instead of enhancing them.
In Final Hours,
Big Pension Risk (December 21, 2005)
In the last hours of Monday's night unsuccessful negotiations between the
Metropolitan Transport Authority of New York and the workers union, the
authority changed its past "final" offer.
The authority dropped its demand for concessions on health benefits
and stopped calling for pushing up the retirement age from 62 to 65. The
MTA wanted new transit workers to increase their pension contribution from
the current 2% up to 6%. Now in its second day, it appears that the
sticking points are both wage levels and pensions. While MTA forecasts a
pension deficit in 2009, Roger Toussaint, the president of the union,
Local 100 of the Transport Workers Union, refused what would be wage cuts
for the workers and said he wouldn't sell out the "unborn,"
or new MTA
workers. Toussaint has suggested a special pension statute with higher
contributions for the new workers. The
MTA's cost for the pensions amounted to only $20 million in the first
year; losses to the City during the first two days of the strike far
surpass that amount.
Lost Pensions Can be a
Tough Case to Crack (December 18, 2005)
For senior citizens who have worked in many jobs or lost track of their
union benefits, it can be hard find the necessary information to claim
their pension that they have earned long ago. This article highlights the
difficulties of some retirees to recover their pensions and gives
practical guidelines to help senior citizens in such cases.
House Clears Bill to
Bolster Pensions (December 16, 2005)
In an effort to protect the private pension schemes among companies, the
House of Representatives passed legislation to reduce the deficit of the
federal government's pension insurer and force companies to fully pay
their retirement obligations. The Bill will require companies to fully
fund pension plans within 7 years. It
also raised the premiums paid to the Pension Benefit Guaranty Corp. (PBGC)
in order to narrow the rising deficit, now at $22.8 billion. While the
bill has not been finalized, the Bush administration expressed concern
that legislation will not put enough pressure on companies and firms to
keep their pension promises to their employees. Will the legislation
become law before April 15th when the next pension plan
contributions are due?
GM Freezes 401(k) Outlays for White Collar Staff (December 16, 2005)
Recently GM Corporation announced many changes in its pension plans for white collar workers. Critics have charged that GM protected white collar and upper executives while focusing deep cuts on blue collar workers. In a new move, the 401(k) contributions will be frozen along with reducing severance benefits for white collar workers in order to try to increase the company's business. The Detroit auto-maker will stop paying 20 cents for every dollar that salaried workers put into the company's savings plan. GM plans to reduce its workforce by 7% in 2005 and hopes to reduce North American structural costs by $7 billion starting next year. GM is taking this action in face of the $4.8 billion that the company lost in the first nine months of this year.
Protests Well Up as Delphi Workers Ponder Cuts (December 14, 2005)
Workers at the bankrupt auto part supplier, Delphi, planned on wearing red to work on Thursday, December 15, 2005. It will symbolize
the wages and benefits they say will "bleed away if the company wins its demand for sharply lower wages and benefits." The company will reduce wages down to $9.50 an hour from the $27 an hour that workers earn currently. One worker said he did not stay with Delphi this long because he liked his job; he worked for the retirement benefits in his future. While the workers' efforts may not affect the court's ruling, their protests have seared the consciousness of many workers across the country who see themselves threatened by highly-paid bosses who ignore any obligation to their employees. The union is keeping its options open for next steps.
M.T.A. and Union Clash on Pensions
as Deadline Closes In (December 7, 2005)
While the union contract deadline of December 16th is approaching quickly, talks of pension schemes are moving slowly. The New York Metropolitan Transportation Authority and the transit workers are still butting heads. The authority's chief negotiator argues that the pension plan is too generous pointing to the $453 million spent this year compared to the $143 million in 2002. Union officials say that accepting a cheaper pension system for future workers would be
"selling out our unborn." While public employees cannot strike, there may well be some job actions around pensions.
Verizon to Cut Manager Pensions (December 6, 2005)
Verizon Communications will cut their pension plans for their managers to save the company 3 billion dollars over the next 10 years. About 50, 000 managers will stop earning pension credits after June 30, 2006. Managers hired after this date will not receive any benefits. These changes will not affect current retirees who are already receiving their pension benefits. The company states that while they cut pension contributions, they will increase the payments that managers receive for their 401(k) plans. Verizon intends to use the savings to do a massive upgrade of its network.
More Firms Phase Out Pension Plans (December 5, 2005)
A disturbing trend is emerging: companies are either terminating, freezing, and or not offering pension plans to new employees. This practice is spreading even to firms that face no financial difficulties. Some, including Hewlett-Packard, has ended its pensions for new workers. Sears froze their pension accounts and will not permit employees to earn anymore toward
pension. Motorola has just stopped offering pensions as well. Of course, there's been no compensation for this loss of "deferred wages" for current workers. What will their retirement
Lawmakers Seek Inquiry on Pensions (December 1, 2005)
Members of Congress are concerned that current pension oversight does not have jurisdiction over financial consultants. As it stands, pensions are regulated by three government agencies that assure companies meet pension obligations to beneficiaries. However, financial consultants and brokers are monitored by the Securities and Exchange Commission (SEC). Employees seeking investigation of mishandled pension funds have a difficult time bringing potentially self-interested brokers to justice due to this division of authority. Is it finally time to restructure US pension oversight systems?
Join Employer Retirement Plans
(November 30, 2005)
Recent research has shown that Hispanics tend to participate much less in traditional pension programs than do other ethnicities. The 2004 study found that only 29% of Hispanics participated compared to 53% of whites and 46% of blacks. The study showed that first generation Hispanics are the least likely to save. Others explain that Hispanics tend to fill low wage jobs that makes any saving very difficult. Also, Hispanics often send part of their earnings to help support families in their home countries. They do not anticipate retiring in the US.
Congress Urged to Act on Pensions (November 29, 2005)
A group of financial service industry leaders urged Members of Congress to implement significant pension reforms in the immediate future. Steve Bartlett, the president of the Financial Services Roundtable, suggested automatic pension enrollment and access to investment education as possible reforms.
Pensions Stripped (November 29, 2005)
Most people buy their calendars for the upcoming year during the holiday season. This year, people will want to get the new "Stewardesses Stripped" 2006 calendar. This calendar features five current and former flight attendants of United Airlines that are 50 and over. This calendar is a cheeky way to protest their loss of a airline pension. While the stewardesses receive a reduced pension check from the Pension Benefit Guaranty Corporation, they fear that their checks will be reduced even further due to the high deficit of the PBGC. Their mission statement is "the naked truth that no retirement fund is completely secure." They point to three trends: Companies are closing down their pension systems and making retirees rely on their personal savings. Second, the improved health of many older people allows them to live longer lives which results in needing more savings for their retirement. And last, "ageism in the work place." Many older people are being forced to work longer in order to save for their retirement, but face age discrimination in getting hired. Companies want to hire someone who is younger.
Kmart Workers Reach $11.75M Pension Deal (November 29, 2005)
Kmart retirees were offered an $11.75 million settlement to a class action lawsuit filed over pension losses. Pension funds for former employees of the struggling Michigan-based discount retail chain suffered losses ranging from $28 million and $300 million between 1999 and 2003. The class action suit claimed that
Kmart executives mismanaged funds by investing pension funds in Kmart stock after the company filed for bankruptcy. Hopefully, retirees will find some justice in this settlement.
Will Retirement Be Golden for Boomers? (November 27, 2005)
The old adage, 'The grass is always greener on the other side of the fence,' seems to typify many boomers feelings about retirement. Some analysts call the current era the "Golden Age" for retirees but this just might be the tip of the iceberg. This article demonstrates that
boomers, both those retiring in the first and last stages, will be better off than
current retirees. Urban Institute researchers in Washington, DC, predict that median house income will increase and the poverty rate for those over 67 will decrease. These positive predictions come
at a time when traditional pension plans are disappearing. The author remains hopeful that the grass really will be greener on the other side of the fence for the boomer generation.
Pension Officers Putting Billions into Hedge Funds (November 27, 2005)
With the increasing number of retirees comes increased amount of pension payments.
Many pension officials are investing more money into hedge funds in the hopes of receiving high returns. Pension officials who have been in a deep hole see hedge fund's promise of richer and consistent returns. But many question arising whether it's a good idea for these companies to rely on such a risky investment. Pensioners want guaranteed payouts, whether the hedge fund investments increase or decrease.
Retirement on the Installment Plan: A Less-Risky Way to Buy Annuities (November 23, 2005)
A common concern for retirees is that their pension funds will not live
long enough to receive their retirement monies. Some turn to annuities. For those that are in bad health, buying into an annuity would be a bad idea.
For those in good health, it may be beneficial. Financial specialists advise retirees not to be discouraged because they know that many are hesitant to put their whole lump sum into an annuity. They encourage retirees to take a different approach by buying annuities in annual installments and listing possible scenarios.
Veto Threat as Senators Approve Pension Bill (November 17, 2005)
The Senate passed a bill on November 16, 2005, to improve the nation's troubled pension system. Once it was reviewed by the White House, they gave a warning saying that this bill was inadequate and President Bush will most likely veto it. The President believes that the bill gives companies too much time to change their pension systems. The bill required companies to fix the faults in the system but it gave most companies about seven years to make these changes; it gave airlines 20 years. The Pension Guaranty Corporation has been analyzing the different proposals and found that under the new bill, companies would contribute about 8% less over the next 10 years to their pension plans than they would if the system just stayed the way it
IS now. No agreement is in sight.
Pension Measure Passes in Senate, But Hurdles Loom (November 17, 2005)
The Senate voted and agreed upon pension legislation that would help take the burden off the Pension Benefit Guaranty Corporation's increasing deficit by requiring companies to fully pay their pension plans within 7 years and increase premiums paid to the federal pension insurer. The White House feels that Congress's bill will not pressure companies enough to follow through with these changes. The reporter says that the Senate's plan of action has been slowed down by company's efforts to dilute the bill.
Pension Board Says Deficit Is Steady for Now (November 16, 2005)
The Pension Benefit Guaranty Corporation (PBGC) reports that its financial position stayed consistent this past year compared to the previous three years of continuous losses. The reason for this is not because companies have made changes to their system but because of timing of events. There is still great need to
the improve nation's pension guaranty system. The Pension Benefit Guaranty Corporation's financial position is not improving because many companies cannot afford to pay their retirees their promised pension funds. PBGC predicts their future losses will total about $108 billion compared to
$96 billion last year. As for the near future, Mr. Bradley Belt, the executive director of PBGC, says that they can continue to keep paying the retirees. If Congress does not make some changes to the system, the money will eventually run out. While there are several bills that are being reviewed, the progress is slow because of the difficulty in coming up with a compromise.
Senate Passes Bill to Shore Up Pensions (November 16, 2005)
Earlier this week the United States Senate passed legislation to require that companies live up to their agreements made on pension plans with their workers. The legislation comes as a relief to many because of the debt of the Pension Benefit Guaranty Corporation, the federal insurer, which is expected to rise in the coming years. Now the House of Representatives will take up the bill for its consideration.
Thorny Issue for Board: How to Value Pension Plans (November 11, 2005)
In an interesting development in pension reform, the board that writes the professional accounting rules for American businesses voted unanimously to require that businesses report their pension and retirement plans. The goal of the board was to force companies to express the true value of their retirement plans on their balance sheets. This first phase of reform is scheduled to be completed by the year's end. Some skeptics say these new rules will force companies that have positive equity to face facts and express their total economic value, which might cause some to show negative equity.
U.S. Inquiry Found Halliburton Mishandled Some Pension Funds (November 11, 2005)
The Labor Department found Halliburton violated three pension laws: self-dealing, using pension money for the benefit of the company, and not handling pension money with "care, prudence, and diligence." After these allegations were disclosed, it cost Halliburton $8.6 million to make the required corrections. Halliburton states, "[we] cooperated extensively with the Department of Labor to identify and successfully resolve these issues on a voluntary basis. As the letter indicates, these issues have all been fully resolved." An investigator from the Labor Department said that an initial investigation of pensions can reveal other violations, as happened here.
Happiness Is a Reliable Retirement (November 11, 2005)
What makes a happy retiree? A recent Boston College study concluded that retirees value retirement security over the amount of money received through pension benefits. Defined benefit pensions are more popular with retirees than defined contribution plans due to the level of risk associated with contribution-based systems. How a person retires also impacts happiness during retirement years. Individuals are more likely to be happy if retirement was voluntary rather than forced. Seniors tend to appreciate peace of mind and independence in their retirement years.
House Panel Passes Bill to Safeguard Pensions (November 10, 2005)
The House Ways and Means Committee approved pension reform legislation that is a mixed bag for retirees. The bill increases employer premium payments to the Pension Benefit Guarantee Corporation that insures pension benefits as well as requires employers with under funded pensions to meet obligations over five years starting in 2007. However, there is concern that increased costs could lead to employers terminating retirement plans or switching from defined benefit packages to riskier defined contribution schemes. In addition, the legislation creates tax incentives to automatically enroll employees in 401k plans. The biggest risk for workers lies in the "use-it-or-lose-it" provision that sets up tax free savings accounts for earnings to be used to pay health and child care costs not covered by traditional insurance. If the savings are not used by the end of the year, only $500 will be rolled over to the next year. Many are asking, "What is the point of a savings plan that does not allow one to accrue money over time?"
Finance Lessons Should Accompany Retirement (November 9, 2005)
Those that have a steady pension are lucky compared to others who need to rely on their Social Security for their financial stability. These retirees need to figure out how this money will last them for about the next 30 years before it runs out. There are options such as buying annuity or using your 401k plan if a person has one. Many scenarios must be taken into consideration: how long you are going to live, taxes, how many money withdrawals one takes. Analysts say that it is important for retirees to understand how inflation works and how to invest in stock because many invest in savings accounts or treasury bonds. The writer says that this is not the best way to make your money last. "If you lock up your savings in low-risk investments, you won't lose money, but you won't make any either." Investors just urge retirees to try to stay on top of things and be aware of the nation's financial situation.
Pension Inquiry Shines Spotlights on Assumptions: Small Changes in Calculations
At Companies Have a Big Effect On Retiree Liability -- and Profit (November 9, 2005)
Labor unions and the US government's Pension Benefit Guaranty Corporation have called attention to companies that offer pension plans to their current and past employees. They want to make sure that companies can afford to pay the pension policy holders the funds that they
owe or have been promised. The Securities and Exchange Commission (SEC) will investigate in several areas. There is evidence that some companies decide on the result they want, and then figure out a pension plan that will fulfill their desired future outcome. One strategy they use to appeal to employees is by offering discount rates. Other companies may use the term "expected rate of return" instead of "actual rate" for it to sell better in the market. This soon will be changed by the FASB who might start requiring companies to use the term "fair value." Another subject that the SEC will investigate is healthcare inflation. The SEC will find out if companies used an extremely high health-care liability figure and then later reduced it. Oddly enough, this action would have increased salary earnings. How can ordinary workers keep up with the shenanigans of companies intent on denying their workers every possible
penny of pension and healthcare?
A Pension Rule, Sometimes Murky, Is Under Pressure (November 8, 2005)
The Financial Accounting Standards Board is poised to make significant changes to pension accounting rules. Supporters of the change say more transparency and accountability are needed within pension accounting systems. Some companies, however, are concerned that a shift in accounting regulations could turn profits into losses. Currently, rules allow corporations to estimate pension fund earnings on an annual basis. This projected number is then factored into a company's bottom line regardless of the real earnings numbers. While corporations are supposed to administer pension funds only to benefit employees and retirees, some worry companies may exploit flimsy pension accounting regulations to increase financial performance. If pension accounting standards are not thoroughly reviewed and reformed, retirees' pension security could be at risk thanks to corporate manipulation.
Labor Secretary Warns of Pending Pension Trouble (October 27, 2005)
US Labor Secretary Elaine Chao calls for changes in the nation's private pension plans as the system is at a crossroads. Legislation regulating pension interest rates is set to expire at the end of 2005. Bills currently pending in Congress could increase pension insurance premiums for employers. At the same time, the Pension Benefit Guarantee Corporation, is not adequately funded to continue to meet growing pension liabilities. Current defined benefit pension plans that pay out a set amount per month to retirees could become extinct over time due to mounting costs for employers. Lawmakers and employers are in a balancing act to help reduce legacy costs and meet pension obligations. Will future retirees' pensions be sacrificed to increase the bottom line for corporations?
Preretirement Distributions: Can You Take Them with You? (October 24, 2005)
As younger generations of workers change employers more frequently throughout their careers, it is necessary to asses the impact of this trend on retirement savings. Most employees have access and control over retirement funds sponsored by their employer. Pre-retirement savings payout rules vary between employers and plans. Some employees are forced to forfeit their benefits while others are faced with difficult choices on how to spend or invest the funds. Employees traditionally have to decide to take current benefits in a lump sum, transfer the funds into a personal account such as an IRA or move the savings to a new employer's retirement plan. The Bureau of Labor Statistics concludes that when an employee changes jobs and gains access to pre-retirement savings, especially in a lump sum the funds are generally used for current consumption needs. Older workers typically continue to save pre-retirement funds rather than spend on today's personal needs. Younger workers need more incentive to save for retirement and policy makers will need to continue to develop more effective ways to encourage savings.
U.S. Senate Urged To Finish Pension Bill (October 24, 2005)
The American Benefits Council, a consortium of business leaders, is urging action on pension reform legislation currently pending in the Senate. The Benefits Council published a letter that they sent to all 100 Senators pressuring them to come to an agreement and pass the legislation before the year ends. Previously the council had held that the legislation was too tough on business but they have revised their comments recently and now support the bill. Action on the legislation is unlikely though, ".. it is most likely that there is no bill this year. Maybe a 20 percent chance," leaving many to wonder how stability can be maintained in the Pension Guarantee Benefits
Fundamentally Broken Pension System In 'Crying Need' Of A Fix (October 15, 2005)
Reforming the Pension Benefit Guaranty Corp, the federal insurer, continues to be a pressing
issue to thousands of Americans. With major airline corporations and other brand-name corporations going out of business and defaulting on pension obligations, the task of reform is even harder. Not all companies default on their obligations and leave their workers abandoned. AK Steel, a mid-size company from the steel belt, still recognizes pensions' importance. There are many other companies just like AK Steel that strive to meet their obligations. Sadly there are some others that abuse the system. Reform plans on the table now need to recognize these realities and make changes that recognize them.
Tax Relief Law Won't Aid Many Elderly in Philadelphia (October 11, 2005)
Philadelphia's Act 72 was supposed to take future revenues from slot machines and disperse it across the state to various school districts to reduce property taxes but instead they used the money to reduce taxes on wages. Using that money to cut the rising property tax would have helped many elderly, especially for those who are living under a fixed pension that makes it difficult to cope with the rising property taxes for their homes. Not only that, Philadelphia plans to overhaul how it assesses real estate properties which is most likely to increase tax bills.
Despair Over Pension Cuts (October 11, 2005)
Many elderly and war veterans are upset at Centrelink because their pensions are being cut after the value of second properties have gone up. Those that have saved and invested
in a second home or holiday home are being affected. Margaret (81) and her husband's pension combined are being cut by $200. Just living with a pension and their social security is hard as it is, and now they are reducing it further. There are many that believe that Centrelink is on a "greedy cash-grabbing spree" but Centrelink denies such accusations.
Chairmen Scrap For Upper Hand With Pension
Reform (October 5, 2005)
With Congress back in full swing this fall, the political jockeying on pension reform and Social Security is kicking back into high gear. Both the House and Senate are addressing the issue of pension reform, specifically for the major airline carriers now in bankruptcy court. The House Committee on Ways and Means has legislation that is expected to move sometime later this month. The chairman of the committee stated that Social Security would be pushed to the side for a quick deal on the airline pension reform, leading some to wonder what the real crisis is.
G.M. and a U.S. Agency See Pensions in Different Lights (October 3, 2005)
After the recent bankruptcies by airline companies, the Pension Benefit Guaranty Corporation (PBGC) believes it is a good idea for companies like General Motors (GM) to start reporting their termination basis which is the amount of money that GM would owe its workers if they were to terminate their pension plan immediately. Not to suggest that they are going to file for bankruptcy, but considering that they have had difficulties in several areas recently, the PBGC would like to be aware of the situation and take necessary precautions. GM argues that reporting these numbers will worry the GM workers. G.M believes that the termination basis is unrealistic and unreliable predictor of whether or not GM can provide its workers with their retirement benefits. Is this GM putting the workers or their profits first?
Accounts Increase in
2004 (September 29, 2005)
A study from the Employee Benefit Research Institute and Investment Company Institute discovered an increase in US retirement accounts for the second straight year. Most accounts increased an average of 15% in 2004, with the average account topping off at around $91,042. The study also notes that the amount of younger workers enrolling in pension plans is decreasing, while participation by those in their thirties and forties has increased. The study was based on information received from nearly half of all people enrolled in pension plans in the United States.
Pension Proposal Irks
Continental (September 29, 2005)
Reforming pension obligations and rules for the airline industry is a major priority of the Senate and House this fall but one carrier feels current proposals decrease their competitive edge. The Houston based carrier, Continental, disagrees with the proposal currently in the Senate because it feels it gives Northwest and Delta a competitive edge and less responsibility. The reform issue is urgent now due to the bankruptcies of three major carriers in a row. All signs point to each airline dumping their pension obligations for a federal bailout. As Ned Walker, Senior Vice President for Communications at Continental, says, "In essence, this proposal punishes a carrier like Continental that is committed to pay for its employees' retirement".
Whoops! There Goes Another Pension Plan: Retiree Benefits Turn Into Gold for Wall Street (September 18, 2005)
Companies that get in financial trouble often dump their pensions, health programs and other obligations to their retirees. This favorite strategy of bankruptcy specialists turns a poor company into a very attractive bargain for capitalists. In GAA's view this is theft at the highest level-stealing the money designated to pay pensions. Also, what protects retirees from this high crime? In many cases it's the Pension Benefit Guarantee Corporation that often cannot match the company's pension level. If there is a shortfall and no recourse, taxpayers must pick up the tab. What will happen to taxpayers in the future? One year ago, there was a shortfall of $23 billion in the pension funds. The Congressional Budget office estimates that the deficit will be up to $86.7 billion by 2015 and $141.9 billion by 2025.
Read this revealing account of how bankruptcy specialists make big profits while throwing off the pension and health obligations-deferred workers' wages-of the people whose labor created the wealth! This legal theft of pensioners and the public must stop.
$11B More for Pension Agency?
If Northwest and Delta Dump Their Obligations on Federal Insurer, Agency May Face Serious Shortfall (September 16, 2005)
Now that Delta and Northwest Airlines have filed for bankruptcy, many
question the pension plans that were promised to the workers and the
retirees who have already been receiving their pension funds. The two
airlines have announced that they will not be contributing anymore to
their pension plans but also will not terminate it. This is bad timing for
the Pension Agency because they are already short on funds by $23.3
billion that was caused by the United Airlines and US Airways ending their
pension benefits in 2004. Delta Airways will be short $10.6 billion; of
which $8.4 billion would have to be covered by the Pension Agency and
Northwest Airways would be short $5.6 billion; of which $.2 8 billion will
need to be funded by the Pension Agency as well. The Pension Agency has
stated that they would be able to pay workers and retirees their benefits
they have been promised until 2022 at the most, but after that, it will be
the taxpayers that will be paying a considerable amount to support these
people. The agency faces a bad future seeing that it will be short $86.7
billion in the next 10 years.
Airline Banks on Pension Plan Reform (September 15, 2005)
As the giants of the Airline industry continue to fall, the issue for millions is the ability of their companies to pay their pension benefits in full. As Northwest works through their Chapter 11 filing, many financial analysts worry that they will default on their pension obligations. These analysts believe that if Northwest defaults the already cash strapped federal insurer, the Pension Benefit Guaranty Corporation, will be unable to meet the minimum benefit it guarantee's workers. Douglas Elliott, president of the Center on Federal Financial Institutions, says concerning who will pay the bill, "It will either be the taxpayers, the companies, the employees or Santa Claus.. there isn't anybody else."
Airlines may Speed Pension
Aid (September 15, 2005)
Corporate pension plans are something that millions of Americans depend on
to secure their retirement future but with both Delta and Northwest
Airlines filing for Chapter 11 bankruptcy in the same week, those futures
are now in danger. Though neither airline has yet asked for their pension
responsibilities to be dumped onto the Pension Benefit Guarantee Corp, the
federal insurer will most likely take responsibility for a major portion
of their plans. In total Delta and Northwest have unfunded pension
liabilities totally 14.4 billion dollars, a major portion of which they
will most likely default on the already cash trapped Pension Benefit
Guarantee Corp, leaving millions unsure about their futures.
A Guide to Understand the Pension Benefit Guaranty
Corporation (September 2005)
The Congressional Budget Office recently released a guide to understand the role of the Pension Benefit Guaranty Corporation, or PBGC, in the retirement security of US citizens. The guide outlines the job of the PBGC to provide retirement security for both individual's and multiemployer retirement plans. In the news recently, this federally run organization has recently bailed out large corporations who default on their pension obligations to employees. Specifically, the PBGC may help Delta and Northwest airlines if they default on their pension plans during bankruptcy. This guide offers an insightful look into the role of an essential organization in US retirement security.
Finding an Annuity
That's Right For You (August 21, 2005)
Many people do not understand the complexities of annuities or if it is
the right investment for them. They have the choice between deferred and
immediate annuities. Deferred annuities are best for those who are at
least ten years away from retirement. Immediate annuities, however, are a
better idea for those already in retirement who need funds immediately
that they will not outlive. Keep in mind that these accounts are not
tax-sheltered. One will eventually have to pay taxes on earnings or upon
withdrawal with either deferred or immediate annuities. Annuities are not
for everyone. Sadly, too many annuitants realize that the annuity they
bought is inappropriate only after they have bought it.
How to Bridge the
Retirement-Income Gap (August 21, 2005)
How will you bridge the gap between the amount of
retirement savings you have versus what you really want? Flexibility could
be the key to your retirement dream come true. The truth is that most
people entering into retirement will have to live on less money than they
did when they worked full time. That is a reality of retirement. Still,
there are ways to stretch and get more money for your golden years. One
way to garner more income is to use your home equity to your advantage.
Downsizing to cheaper accommodations can save you plenty on taxes and give
you more spending money. Working part-time in retirement is another
helpful way to earn a little more money. Read more for what you can do to
bridge the gap in your retirement savings.
More Americans' Nest Eggs
Going Into Mutual Funds (August 19, 2005)
Based on a survey by the Investment Company
Institute, Americans are putting more retirement money into mutual funds
than ever before. The ICI survey used data from the US Department of
Labor, Federal Reserve, IRS, and other trade organizations. They found
that mutual funds have increased to over 3 trillion dollars by the end of
2004, 1 percent higher than the year before. These funds are gaining in
popularity among retirement minded adults who want to add to their 401(k)
with additional funds.
Selling Short in Your 401(k)
(August 17, 2005)
Hedged mutual funds act like hedge funds in that they sell short on
their stocks, hence, they make bets that stocks will decline. These funds
have traditionally targeted individual investors.
With 1.6 trillion dollars in mutual fund assets available in defined
contribution plans, small hedge mutual funds are looking to dip
into the 401(k) pool. Some companies do
not want to participate in hedge-like investment strategies because of the
difficulty in explaining to workers what is happening to their money.
Alternative investments also pose a liability risk to large companies. Proponents
recommend hedged mutual funds as way to diversify investment portfolios.
Meet 401(k) (August 15, 2005)
With more and more companies
dissolving their traditional pension plans, insurance companies are trying
to lure employees with annuities, in order to compliment their 401(k)
plans. There are two types of annuities: deferred and immediate. People
with deferred annuities have stashed money into accounts for a set period
of time. They can withdraw their money after the set period of time has
passed without any penalty. Those who prefer immediate annuities are
instantly paid the money they invest over their lifetime without having to
wait. A number of people choose to buy annuities because they want to have
a reliable flow of income that they are confident they won't outlive.
The Parent Trap (August
Many aging parents may not want to admit it, but
they need the help of their children when it comes to financial and
medical decisions. Parents often don't want to relinquish control of
their assets. In addition, they want to keep the amount of their wealth
private. Nevertheless, as one's aging parent's capacity to make sound
decisions dwindle, families must take steps to facilitate the transfer of
assets and ensure medical care. The number one mistake that people make is
to wait too long organize end of life financial issues. If you do it in
advance, it would be a simple precautionary measure instead of a
heart-breaking necessity of circumstance.
Going Solo to Build Up Your
Retirement Savings (August 8, 2005)
A growing trend among the successfully self-employed is the creation
of solo pension plans in preparation for retirement. In this type of plan,
high income earners devote large sums of money to their defined benefit
plans, for a shorter period of time than traditional company pension
schemes. Solo pension plans are not for
everyone. There are fees associated with these accounts that often
include an account set-up fee, an annual fee to
pay an actuary to re-evaluate the account each year, and an annual account
maintenance fee. Combined, these fees can reach over 1500 dollars. Even
though solo pension plans reduce taxable income at a greater rate than
other plans, SEP individual retirement accounts, Simple IRAs, and Solo
401(k)s would be a better option for those who cannot afford to create
their own account.
Acting Like There's
No Tomorrow When There May Be Many Tomorrows Left (August 8, 2005)
Have you ever thought about how many years you have left to live? Not many
people enjoy thinking about death but estimating your expected life span
can help with your financial planning for retirement and beyond. Studies
show that women tend to underestimate their expected life span while men
overestimate. This has a direct effect on their finally planning because
people tend to make bad financial decisions when they matter the most. It
will be beneficial to spend time thinking about your expected life span
and plan for it now while you have the chance. Waiting until the last
minute or until a crisis occurs can impair your rational decision making
capabilities and lead to financial trouble.
Personal Saving Rate
Drops to Zero Percent (August 7, 2005)
savings rate dropped to zero percent in June, the lowest rating second
only to the Great Depression. In a culture of rampant and short-sighted
consumerism, too many Americans are spending more than they make, buying
things on credit and racking up debt at an alarming rate. The Federal
Reserve data shows that consumer debt has grown twice as fast as personal
income in the past five years. One rationalization for this situation
argues that low interest rates have made saving undesirable in comparison
to borrowing. With higher interest rates on the horizon, will Americans
increase their savings? Read more to hear what top economists have to say.
Rule Keeps Returns Low for
Some in 401(k) (August 4, 2005)
If employees don't specify where they want their money invested, most
employers chose to put their money in low-yielding money-market funds
(accounts). What makes these accounts so attractive to law-suit adverse
employers is that although the returns (gains) are low, the money invested
remains secure. Nevertheless, money-market funds will not make nearly
enough to serve as a retirement package in the long run. Advice for
employers and employees alike for better retirement investments options?
All money should not be put in any one account according to experts.
Rather, they say, it should be diversified with a mix of stocks and
bonds and very few money-market accounts to avoid great losses and yield
the highest returns.
Sales Face Crackdown By Regulators (August 4, 2005)
Legislators are beginning to
come down hard on annuity sales to protect seniors. Many financial
institutions have targeted seniors for annuity sales, giving them
incorrect or inadequate information and putting seniors' life savings in
tremendous risk. A common practice aimed at seniors is often financial
advice to switch from one annuity to another, thus costing the consumer
heavily while making money for the financial institution . The National
Association of Securities Dealers has proposed changes to annuity
regulation that would require financial organizations to clearly state how
their annuities work.
Greatest Generation Shares the Wealth (August 1, 2005)
Baby boomers and their parents don't talk about
legacies as much as they should. Inheritances and wills are sensitive
topics that people are often very hesitant to talk about. However, assets
and wealth can lead to division among family members when a head family
member dies without a will. This is why it is very important to have a
will that specifies one's wishes concerning financial and other material
assets, instead of letting loved ones try to figure it out themselves. The
parents of baby boomers find it more important than their children to pass
on their wealth and assets. Studies show that the inheritance left to baby
boomers will be the biggest transition of wealth ever, estimated to be
about 25 trillion dollars.
More American Retirees
Seek Havens Abroad (July 30, 2005)
A growing number of retirees are moving abroad to spend their golden
years. Some go back to their
native countries while others decide to retire in
. The most common reason for moving abroad is the lack of adequate
retirement income. Many facing retirement have realized that their Social
Security and pension are not enough for them to live comfortably in the
so they pack up and move to a country where the living expenses are
cheaper. Keep in mind that there are downsides to moving abroad. One must
consider potentially high crime rates, corruption, and weak governments
and political systems.
Bush Pension Plan
"Job Killer" (July 29, 2005)
The new rules proposed by President Bush concerning pension funding for
businesses are tougher than before. The proposal entails a 75% increase in
pension funding contributions by businesses during the next six years.
California's Democratic Representative, George Miller, has called the plan
a "job killer," arguing that with such a plan, many companies would
rather opt out of the pension system than pay such high rates. As a
result, the Pension Benefit Guaranty Corp. would be forced to foot the
bill. Miller also maintains
that the Bush administration is concealing the real costs associated with
his pension plan.
Diversify Your Bind Holdings (July 29, 2005)
It is important to diversify your bond holdings, especially as you reach
retirement. Bonds are loans that you give to companies to help with their
business so there's always a risk of loss. However, if you choose
wisely, when your bond matures, you'll receive the money you invested
plus the interest you've earned over the years. The more risk you take,
the higher the potential yield. However, low-risk, low yield bonds are
most popular among seniors because of their security. Here are some bond
guidelines to help with your bond investment search.
Secret to a Happier Retire
ment (July 27, 2005)
Baby boomers are about to hit the
retirement scene where dreams of leisure times and endless vacation often
cross many people's mind. The truth is that retirement is not always a
picnic if not planned well in advance. Retirement is the time for retirees
to enjoy life so don't let retirement come upon you unexpectedly and
unprepared. Economists who have conducted happiness research suggest seven
ideas to retiring happy.
Senate Panel Approves
Pension Funding Bill (July 27, 2005)
The Senate Finance Committee has approved
legislation overhauling pension funding. Under the terms of the bill,
companies would have to fully fund their defined-benefit pension plans,
which guarantees set retirement payments based on years of service. The
reason for the bill is that the Pension Benefit Guaranty Corp, the
organization which insures defined-benefit pension plans, has been
overburdened with an increase in failed pension plans, costing more than
23 billion dollars. The Senate wants to strengthen pension plans with this
bill. Many companies are underfunding their pension plans, and the bill
obliges companies with underfunded plans to fully fund them within seven
years. The bill contains special timetables help the ailing airline
industry to fund its pension plans.
Companies Lock Younger Workers Out of Pensions
(July 26, 2005)
Companies are halting their defined benefit pension plans for those
under 40 at an increasing rate. Thus younger workers are being blocked
from pension plans. In place of pension plans, companies are,
instead, offering increased company matched benefits for their 401(k)
plans. Employees get to keep what money they've earned so far in their
frozen pension plan but they lose out on future benefits. Younger workers
usually have no problem with this since the portability of 401(k) plans
appeals to many of them; they can move it from job to job. But those
workers under 40 who have been on the job for a significant amount of time
at one company would rather have the security of a defined pension plan.
Freezing out young workers from company pension is expected to increase.
Benefits to Leaving
401(k) Be (July 26, 2005)
To cash or not to cash? That's the question many workers ask themselves
once they leave a job and think about their 401(k) plan. The 401(k) plans
are more versatile and mobile than traditional pension plans, especially
for young workers who move from job to job. According to a new study of
large-company plans by Hewitt Associates, 45 percent of workers are taking
a 401(k) cash payout when they leave a job instead of leaving it or
transferring it to another plan. Liquidating your 401(K) into cash instead
of keeping the money in a tax-free account will cost you potential money
in the long run. Your best bet is to leave your 401(k) money where it is
or roll it over into your new employer's account so that it can continue
to earn money. And hey, it's tax free.
(July 25, 2005)
It's retirement. Do you know where your pension
is? You must be informed, stay abreast of your pension plan. The company
will not go out of its way to help you to your pension. If they lose your
paper work, you must have yours. Take full advantage of your options.
Companies have lawyers on their side to look after their best interests!
Are you looking after yours? There are pro bono centers across the
that help workers traverse through the maze to get the pensions they've
rightfully earned. Read more for resources to help you make the most out
of your pension.
Live It Up in Retirement
(July 24, 2005)
Need more money for retirement? Many cash-strapped
individuals are looking for ways increase their retirement savings, but
they don't know how. Here
are three strategies on how to boost your income in retirement. The secret
lies in collecting annuities, delaying Social Security benefits, and, if
you really need it, a reverse mortgage. Be forewarned: these tactics are
not for the faint of heart. They all involve risks such as dying early and
losing benefits, or leaving nothing for your children to inherit. If
you're up for the gamble, be sure to do your homework and have a happy
Greenspan Says US
Private Savings Should Rise (July 20, 2005)
The Chairman of the Federal Reserve Board, Alan Greenspan, notes that
Social Security currently pays for 40 percent of many workers' income
after retirement. In the not too distant future, Greenspan predicts that
Americans will need to save privately at least 80 percent of their
retirement funds that Social Security and pensions will not cover.
Forget the Rule of Thumb:
Saving 10 Percent of Your Salary is No Longer Enough (July 20, 2005)
Are you saving enough for retirement? If you're like most Americans,
the answer is no. Most Americans today are saving less then they did
twenty or thirty years ago. Because of declining stock returns and
vanishing company pension plans, saving ten percent of your pre-tax income
is no longer enough to sustain a comfortable retirement. People are living
longer, thus they have longer retirements. It's often difficult to do
but financial experts advise saving 15 or even 20 percent of your income
to live happily in your old age.
Trying to Challenge A Benefits Decision (July 19, 2005)
Who knew being a retiree would be so stressful? Retirement is supposed
to be a time of peace and tranquility, but these days, seniors have to
fight for what is already rightfully theirs: namely, their pension.
Companies can miscalculate your benefits to your detriment and their gain.
These disputes cost seniors a great deal of time, money, and energy that
could be better spent enjoying retirement. It can happen to anyone so
don't let yourself be cheated out of your hard earned money. There are
federal laws protecting your right to inquiry and information.
If you are not observant and inquisitive, you may lose out. Read
one man's story involving the trials and tribulations of his legal fight
over his pension.
Retire in Style (July
Have you caught yourself daydreaming of retirement during the long boring
hours of your 9-5? Do thoughts of leisure days and nights in your golden
years often cross your mind? Unfortunately, those days may be farther
ahead than many people think. Nearly one third of Americans today have not
saved anything for retirement and can expect to keep working into their
70s. How much have you saved for retirement?
Grandparents Help Keep Families Afloat Too (July 14, 2005)
culture of longer, more expensive educations, it is taking longer for
young adults to become self sufficient. And since older generations are
often more financially secure than their younger counterparts, current
trends see more parents assisting their children financially instead of
children helping their aging parents. Parents, of course want to help
their financially strapped children if they can. Those who are able help
their adult children achieve an affluent lifestyle with private schooling,
extra loans, and luxury cars and homes. However, living the good life all
their lives without hard work is leading to increased dependency of some
adult children on their parents. Is substantial parental financial support
helping the younger generation to be more responsible?
Or is this phenomenon helping to feed young adults' feelings of
Nest Egg Decision Time
for Boomers (July 10, 2005)
If you're 59 ½, there's good news: now is the time that you can start
withdrawing from your tax deferred retirement accounts without penalty.
BUT it isn't always a wise idea to start taking money out of your
retirement funds before retirement, or you run the risk of running low or
out of funds. You will also be taxed on the money you withdraw. Want to
know how to tap into your saving without incurring hefty fees and taxes?
Read this article for financial advice on different strategies to help you
make the most of your retirement account funds.
Do You Know Where Your
Pension Is (July 10, 2005)
Will your pension be available when you retire? If so, will you be
able to depend on it to support you throughout retirement? Sadly, the
number of companies freezing or canceling their pension plans is steadily
increasing. As a result, the answer to these questions can be alarming
because the truth is: you don't know.
How Much We'll Need in Retirement (July 3, 2005)
Everyone wants to live comfortably in retirement but too many people
plan too little ahead for it. Have you taken the time to calculate the
cost of your needs and wants for retirement? Retirement is an important
stage in life, so in order to take full advantage of your golden years,
start planning and saving now. If you do, when retirement comes, you'll
have a better chance at being prepared!
House Panel Passes
Pension Overhaul (July 1, 2005)
A Republican sponsored bill revamping private pension plans was passed
by the House Committee and awaits action from the House this month. The
bill is meant to help the faltering Pension Benefit Guaranty Crop., whose
deficit now runs around $23 billion due to failed airline and steel pension
plans. As the federal guarantor of traditional pension plans, this bill
would bolster PBGC's finances. The legislation includes provisions for
higher premium payments paid by companies to PBGC, a requirement of five
years to fulfill pension obligations, and anti-age discrimination
standards that would equalize or increase worker's benefits to that of
younger workers with the same plan. The most interesting feature would
identify underfunded multiemployer pension programs so that early
preventive action could be taken. Democrats in the House neither supported
nor opposed the bill, claiming the need for more information.
Lump Sum Pensions Make
Retirement Riskier (June 29, 2005)
Many retirees choose to take a lump sum pension payment over regular
monthly pension checks not knowing that it is worth considerably less than
monthly payments. What many do not know is that monetary incentives are
compelling companies to push for retirees to take lump sum payments. Even
financial advisors, who are expected to help consumers, are looking to
explore and spend pensioners' money. As a result, they often urge
consumers to take lump sum pension payments when the choice is clearly not
in the consumer's best interest. Should retirees take a lower lump sum
pension payment when they retire or should they take a leap of faith with
larger monthly payments? No choice is without potential risk.
Widows Struggle as Benefits
are Cut (June 29, 2005)
Imagine that you have worked for a company for over 30 years and your
pension plan was reduced after you have already retired. That is exactly
what is happening to many retirees today. Retirees of companies such as
AT&T are finding that the benefits they once relied on no longer
exist. Several companies are currently reforming their pension plans so
that pensioners receive less money and benefits while the company pockets
the extra cash as increased profits. Without secure company pensions and
with Social Security changes looming in the wings, how will retirees
protect themselves and the ones they love?
How Retirees are Blowing Their Nest Eggs (June 27, 2005)
The federal government is watching every step you take regarding withdrawals from your IRA. With new tax rules created almost everyday, even experienced financial advisory firms are making plenty of mistakes, and consumers are paying the price. How can you help yourself avoid trouble with the IRS? Here are some of the most common mistakes that consumers and financial advisors alike make with IRAs and how you can fix them.
Don't Save Too Much
for Retirement (June 26, 2005)
There has been plenty of news recently declaring that people must save
a lot of money for their golden years. Ty Bernicke, a financial planner
Eau Claire, Wisconsin, argues that older people spend less in retirement, and therefore need
less money in retirement. Bernicke, nevertheless, underestimates the cost
of retirees' medical bills due to medical conditions connected with
aging. One wonders if it is a fact that older people spend less money in
retirement or are financial analysts manipulating the data to achieve
their own ends?
Jean Chatzky's Top 10
Retirement Tips (June 21, 2005)
Thinking about saving for retirement? Do you have
questions about what the best methods are and how you can live comfortably
in your golden years? The "Today Show" Financial Editor, Jean Chatzky,
offers expert advice on how to make the best decisions for your future
Human Toll of a Pension Default (June 13, 2005)
The Pension Benefit Guarantee Corp. (PBGC), the federal insurance program that
insures a maximum of $45,000 a year in benefits for those who retired at 65, but considerably less for those who retired younger. This particularly hurts pilots, whom the law requires to retire from major airlines at 60, along with the fact that Social Security pays less to early retirees.
Company-based pensions, such as those with United, don't make much sense in an era of widespread bankruptcies of major firms. An industry-wide pension system, such as TIAA-CREF for university faculty,
averages the risk across the country rather than tying retirement to a single company.
Save Now or Pay Later to Avoid Poor Retirement
Years (June 12, 2005)
Recent analysis shows that most Americans are not on the track to live
financially comfortably when they retire. Most retirement experts say you
need 70 percent to 80 percent of your pre-retirement income to maintain
your lifestyle in retirement. As few as 10 percent of retirement income is
likely to come from personal savings. Young adult households typically
have just $9,000 saved for retirement, the typical midlife family has $30,
000 in retirement savings and pre-retirement households 55 and older
have $60, 000.However, 11 percent of those 55 and older say they haven't
started to save at all.
Pension Bill to Look a Lot Like Bush's Plan (June 9, 2005)
The chairman of the House Workforce Committee and a subcommittee chairman plan to introduce a pension bill on June 9, governing underfunded corporation pensions. This Bush proposal softens slightly the initial impact of some of its provisions.
The bill would require companies with underfunded pension plans to fund them fully within seven years. The worst-funded plans, those whose assets equal 60 percent or less of their liabilities, would be required to boost funding more rapidly. The bill also would allow employers to contribute more to their plans in good times but would eliminate credits now allowed for past overfunding. Such credits sometimes allow a company to escape having to put cash into a plan even if the assets that created the past overfunding have lost value.
Big Pension Plans Fall Further Behind (June 7, 2005)
The nation's private pension plans are in crisis. Contrary to the hopes that funding would improve as the economy strengthens, many of these plans are now underfunded. Workers who were promised higher benefits, such as airline pilots, do not get their full pensions if their plans are taken over by the PBGC (Pension Benefit Guaranty Corp). And the government guarantee is limited to a maximum of $45,614 in annual benefits for a retiree age 65 or older. Far more regulation of employers is needed-why should the public have to pick up the retirement tab for profligate employers time after time?
U.S. Airline Pension Troubles Push Pilots to Work Until Age 65 (May 25, 2005)
Hundreds of US airline pilots are asking Congress to raise their mandatory retirement age to 65, saying the change won't threaten safety and would give workers more time to recover money lost to pension cuts. But there's no real agreement at this point.
Men in Retirement Facilities, Often Outnumbered By Women, Bond in Conversation Groups (May 18, 2005)
Women dominate the social world of the elderly: they live longer and are much more numerous in nursing homes and elderly associations. That's why the Jewish Association on Aging's independent-living apartment building in Squirrel Hill set up activities reserved for men. Organizers say it's important to recognize men and women's different needs. This arrangement gives older men "a social option that makes them more comfortable about leaving their own living quarters."
The Debt-Peonage Society (March 7, 2005)
As the US economy plunges into too much consumer debt, credit card companies are pushing legislation to make sure that they get their money-regardless of the cost to families. The elderly will lose their houses, veterans will lose their property, the sick will lose everything! And the US Senators vote for this good program with ample loopholes for the very rich!
In his commentary, Paul Krugman warns about the bankruptcy legislation-and also about the dangerous trajectory of the US economy.
The Future of Retirement and the Elderly (January 5, 2005)
As we move further into the 21st century, it's natural to wonder what the future will bring: In what kinds of houses and communities will Americans be living in 2020? What kind of jobs will people hold? Writers Kim Campbell, Clayton Collins, Marilyn Gardner, and Elizabeth Lund sought answers to these questions - and more - from eight experts whose jobs require them to predict what our lives will be like in 15 years. Read excerpts from those interviews in this section. What are your predictions?