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Are you eligible for a pension
Are you eligible for a pension, or already drawing upon one? If so, I have good news and bad news.
The good news is that you have a pension at all. Most people don't. In 1980, the Department of Labor estimated that 40% of all workers in the private sector had a defined-benefit (pension) plan, 19% were participating in a defined-contribution plan (401(k), 403(b), or 457), and 11% participated in both types of plans. By 2004, those statistics had been turned on their head, with just 19% of workers covered by a pension plan and 40% participating in a defined-contribution plan. (It's very likely that the percentage of employees covered by pensions has shrunk further still since then.)
The bad news? Many pensions, both in the public and private sectors, are in bad shape, owing to economic malaise and pension providers' overly rosy expectations about market returns. Many of the private-sector firms that offer pensions operate in the hard-hit industrial sector. A Watson Wyatt study showed that the 100 largest private-sector pension funds were underfunded by $217 billion in 2008. Government pensions are in even worse shape: A study by academics Robert Novy-Marx and Joshua Rauh put the amount of unfunded pension liability at the state and local levels at a staggering $3.2 trillion. Yes, trillion.
Even if your employer hasn't been making headlines as a result of worries about its financial health and the future of its pension plan, it's still worthwhile to check up on your plan's viability before relying on it for even a portion of your retirement income. And if it turns out that you have something to worry about, it's important to do some contingency planning in case part of or all of your pension benefit isn't there when you need it.
Ahorre August 27, 2010 06:59 AM