Private Pension Issues
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Retirement Rescue (December 8, 2008)
Those in their 50 and 60s are most likely to be rewriting their retirement plans due to the dramatic economic downturn. Many older people with the majority of their investment portfolio in stocks have seen significant declines in the value of their savings and have been holding too high a percentage of equities versus other financial instruments. Experts provide suggestions on how to re allocate retirement savings and what moves to take to conserve assets.
Report: Retirement Saving in Wake of Financial Market Volatility (December 2008)
Millions of US households have seen their retirement savings plummet due to recent extreme stock market volatility. Not surprisingly, the investment companies want to assure the continued tax advantages and other perks for persons who can afford the risk of investing in stock markets. In GAA’s view, this survey reveals the opening arguments to preserve the “bubble” mentality for retirement investments. The survey interviewers asked interviewees about their Defined Contribution (DC) retirement accounts as well as some of the retirement changes the industry favors. Caveat emptor
Pensions Frozen at Random House Inc. (November 20, 2008)
The country's largest trade publisher, Random House Inc., has become the latest in a growing list of companies to freeze the pension benefits of its current employees. Other companies that have taken this step include Verizon, IBM, Coca Cola and Hewlett-Packard. Random House has also decided to close the pension plan to new employees although the company will continue to offer matching funds, up to 6%, for 401(k) plans.
Feds Rethink Rules on Retirement Savings (November 19, 2008)
Amid growing concern over the severe drop in the stock market, government officials are considering last-minute relief from rules that require millions of Americans who are 70 or older to withdraw money from their retirement accounts. Also under consideration are various ways to provide tax relief for people who already have made their required withdrawals for this year. These actions are urgently needed to help seniors manage their retirement savings more effectively.
Serious Losses for Californian Pension Funds (November 14, 2008)
(Article in French)
Calpers, the largest pension fund in California, recently published figures that indicate serious financial losses. The market value of its shares has dropped by 35%, which represents around $3 billion. Calpers will not sell its shares but is waiting for better times. The total value of Calpers’ investments in various sectors, including real estate, is estimated to be about $189
Report: Are Baby Boomers Saving Enough for Their Retirement? (November 2008)
Whether people are saving enough for retirement depends on how much they will need once they stop working. That seems obvious, but that need depends very much on individual tastes and the ability to adjust consumption after retirement. Because they have been forced to live a frugal lifestyle, some lower income households may be better prepared for retirement because they can maintain the same consumption level before and after retirement. Unless they have been dedicated savers, more affluent householders will face the biggest adjustment in their pre and post retirement needs.
Report: The Financial Crisis and Private Defined Benefit Plans (November 2008)
Private defined benefit plans generally absorb the risk of market volatility and protect their participants during a financial crisis. However, there is a possibility of employers laying off workers or going bankrupt. The research shows that even though individual participants in the defined benefit plan can be protected from layoffs, company bankruptcies or freezing of the plan, they may still end up with less retirement income than anticipated due to the financial turmoil.
Retirement Fund Director Seeks to Calm Workers' Nerves (October 21, 2008)
Administrators have a message for the nearly 4 million people who save for retirement in the Thrift Savings Plan (TSP): don't let this financial crisis freak you out. The TSP is distributing a poster that shows a convoy of 18-wheelers snaking through very rocky and hilly territory. But the road itself is smooth and relatively straight. “Stay in it for the long haul," the caption advises. While heeding this advice, many members of the plan have moved their savings to less risky investments within the TSP.
Seniors Air Fears about Economy, Election (October 13, 2008)
At a convention in San Francisco for retired Californians, speakers and members of the audience decried the death of the American dream they said they had all lived for, and the futures they envision for their children and grandchildren. At the forefront of concern for California retirees was a series of cuts made to solve the state budget crisis. The budget slashed funding for adult day care and Alzheimer's programs, and eliminated tax rebates for low-income renters and homeowners. It also slashed Medi-Cal funding for the poorest of seniors.
Disappearing Pensions Make Americans' Lives Less Secure (October 8, 2008)
Of all the threats to the American middle-class standard of living, one of the most serious is the looming crisis in retirement. Traditional pension plans are disappearing in the private sector. Workers have not saved enough in their voluntary 401(k) accounts. Longer life spans are stretching savings even thinner. Social Security remains under stress. All that was going on before retirement plans lost $2 trillion in the stock market dive. The report discusses the effect of these trends on retirees and warns that many more older people are likely to be living in poverty in the future.
Market Slide Pushes Pensions Back Into Red (October 12, 2008)
Many large US corporate pension plans have gone from over funded to under funded due to the dramatic fall in the value of equities in the past few days. As part of the Pension Protection Act of 2006, companies with under-funded plans must make more aggressive contributions to get their pensions 100% fully funded. The same act also essentially closed loopholes in pension laws that permitted companies with under-funded plans to skip making pension contributions.
Retirement Accounts Have Lost $2 Trillion (October 7, 2008)
With the downturn in the stock market, the realizable value of the private pensions and savings funds of American citizens has lost $2 trillion according to Peter Orszag, the head of the Congressional Budget Office. However, if the stock market rebounds to levels of less than one year ago much of this realizable value will be replenished. Those who cash in their investments immediately and those holding stock in bankrupt companies are likely to be the most affected.
Seniors Worry about Retirement Savings (October 6, 2008)
Nationally, retirees are expressing more concern about having enough money. A recent survey by the Employee Benefit Research Institute found only 29% of retirees were very confident about having enough money for a comfortable retirement — a drop from 41% the previous year. Thirty-nine percent felt they were likely to outlive their savings, up from 29% in 2007. Nevertheless, many of the seniors interviewed for this article were upbeat about their ability to manage – even in the face of a global financial meltdown.
Wamu Employee Pensions Are Uncertain After Stock Losses (October 1, 2008)
WaMu (Washington Mutual) employed about 43,000 people across the country and more than half of all employees nationwide were estimated to be holding 401(k) plans. Those employees who chose to invest their 401K mostly in the stock of their employer will probably be the biggest losers from the collapse and sale of Washington Mutual to JP Morgan Chase. WaMu’s stock lost nearly all of its value in the past year, plunging to 16 cents a share after the company’s seizure by the federal government and ensuing bankruptcy.
Single Women Are in Peril of Achieving a Financially Secure Retirement (September 17, 2008)
The Ninth Annual Transamerica Retirement Survey found that single women frequently (46%) cite "outliving their money" as one of their greatest fears about retirement. Their fears are well founded. Studies have shown that elderly women are more likely to live in poverty. Their marital status is one of the critical factors that determine whether they will become or stay poor in retirement. The article provides a list of action steps that might help single women increase the likelihood of achieving their retirement dreams.
Companies Use Pensions to Fund Benefits for Execs (September 14, 2008)
At a time when scores of companies are freezing pensions for their workers, some are quietly converting their pension plans into resources to finance their executives' retirement benefits and pay. The maneuver, besides being a dubious use of tax law, risks harming regular workers. It can drain assets from pension plans and make them more likely to fail. In addition to the potential damage to the pensions of lower income workers, companies using this practice make tax savings so taxpayers are helping to finance the companies’ executive compensation.
Plan for Long-Term Care (September 8, 2008)
Many people expect to age in their home, but over 1.5 million Americans reside in nursing homes. According to the National Clearinghouse for Long-Term Care Information, the average cost of a private room in a California nursing home is $86,870 a year and in most cases Medicare and Medicaid will pick up only a small part of the tab. The clearinghouses’s website contains vital information on understanding, planning and paying for long-term care.
It's Not a Good Idea to Let Company Stock Dominate 401(k) (September 2, 2008)
Is your pension safe on a 401(k) plan? Sandra Block explains the pitfalls of the 401(k) plan exposed by the recent credit crunch. Companies that allow employees to invest in their company’s stock and shares through the 401(k) plan also place their retirement fund at risk. Collapses such as Bear Stearns and Enron highlight the danger of a stock investment option as part of a retirement plan. Sandra Block tell us that in general workers shouldn't have more than 10% of their savings in any single company stock and that they should be more active participants in making decisions about their own investments.
Report: Hard-Frozen Defined Benefit Plans: Findings for 2003-2004 and Preliminary Findings for 2005, (August 2008)
The Pension Benefit Guarantee Corporation has announced that the number of hard-frozen plans showed a net increase of about 700 plans between 2003 and 2004. A hard-frozen plan is one in which all benefit accruals have ceased. Preliminary indications also show significant new freezing and thawing activity during the 2005 plan year. A thawed plan is one reported to be hard frozen in one year but not in the following year.
Report: Do Households Have a Good Sense of Their Retirement Preparedness? (August 8, 2008)
Forty-four percent of the US working-age households are at risk of being unable to maintain their standard of living in retirement. Writers
at the Center of Retirement Research investigated whether households are aware of the challenges they face in retirement. In other words, do people who are “at risk” of being financially unprepared know that they are “at risk?”
Now Wall Street Wants Your Pension, Too:
JPMorganChase, Citi, Cerberus, and Morgan Stanley are among the firms lobbying Washington to let them take over and run corporate pension funds (August 5, 2008)
Avarice knows no bounds. After creating havoc with the sub-prime loan crisis, Wall Street now wants access to retirement plans. Retirement plans offer a huge amount of potential capital. Today, some 3.2 trillion dollars are reserved for retirement plans. Big Wall Street firms are currently lobbying the White House to allow them to handle these assets. Unfortunately, it is very likely that these firms will not have the worker’s interest at heart. Forty-four million powerless workers might be placing their hard-earned funds at
Workers and Retirement (June 2008)
Almost anyone who must deal with the financial aspects of retirement has
to make complex decisions. They must gather and process information from a
wide range of sources, including Social Security, pensions, inflation,
interest rates, and the future value of each of component of their
portfolios. Older women specifically are not as financially literate as
older men. The National Institute on Aging has looked at how individuals
make retirement decisions. Knowledge gained from these analyses can help
people make better retirement decisions. In the United States, individuals
can consult the Financial Literacy and Education Commission which is
charged with developing a national strategy to promote financial literacy.
The Impact of PPA on Retirement Savings for 401(k)
Participants (June 2008)
Writers of this report describe the effects of the Pension Protection Act of 2006 and its impact on 401(k) plans. Because voluntary enrollment systems have now become automatic enrollment designs, many workers are expected to receive additional retirement savings. In fact, low income workers will receive the largest increase in 401 accumulations. However, for some workers these large increases may not be enough to cover minimal living standards in retirement.
The Housing Crash and the Retirement Prospects of Late Baby Boomers
The recent US housing market crash will likely decrease the wealth of people close to retirement. Extrapolating from 2004 figures, Baker and Rosnick say that families are expected to have 26.2 to 47.0 percent less wealth. Home owners will likely have negative net equity when they sell their property. Unfortunately, many US families, counting on continuing high real estate prices, failed to save over the last five years. The retirees will be highly dependent on Social Security and Medicare. They will suffer greatly if the US government cuts back on government pension and welfare expenditures.
Pensions Pay Off (April 13, 2008)
The pension situation for workers in the private and public sectors sometimes seems to be in direct opposition. Indeed, the 401(k) plan for workers in the private sector is based on their own contributions, more than on company-financed pensions. However, a new study from Dave Umhoefer, 2008 Pulitzer Prize winner for local reporting, reveals that some county workers enjoy ‘uncommonly generous buyback practices that convert ineligible services into pension-worthy time.’
A 401(k) Debit
Card is Dumb (March 25, 2008)
Borrowing from your 401(k) plan account is very dangerous. Workers
are accessing the money that is supposed to be saved for their future
retirement. Withdrawing money from 401 (k) plans should be kept for a
serious emergency or other rare situations. That is why the ReservePlus
decision to allow clients to withdraw money from their 401(k) plan is
dangerous. According to the author, it is even ‘dumb.’ Withdrawing
money from an ATM or even paying in shops that allow Visa are transparent
operations. People don’t realize that they are taking money away from
401(k)’s Tapped to Save Homes (March 11,
People from the United States are more and more in debt. Merrill Lynch,
Great-West Retirement Services and other financial or retirement services
show a new dangerous tendency: afraid of eviction and foreclosure, and in
order to save their home, people pay their bills by borrowing from their
401(k) plan accounts. Despite incurring fines and taxes, people find it’s
the only solution to keep their homes. These kinds of hardship withdrawals
create a situation that foretells dire shortages when people reach
Report: The MetLife Family Matters Study: Examining the Effect of Varying Family Structures on Retirement Planning (February 2008)
Does family structure matter when it comes to retirement? The researchers at MetLife Mature Market Institute analyze whether individuals in “Traditional Families” (families with two parents and children), “Blended Families” (families with two parents and at least one child from a previous relationship) and “Single Women Families” plan for and envision their retirement differently. While there are some common concerns that are shared by most middle aged Americans, this study found that family structure does influence retirement expectations and plans.