PENSIONS, RETIREMENT AND DECUMULATION?

#pensions #retirement #decumulation #MoneyandTime
The news stories appeared next to each other on the same day.
One headline read, “As pension plans fade, workers find retirement more elusive.” The story, written by Peter Whorisky for The Washington Post, talks about how pension plans are on the decline and workers are increasingly dependent on their own savings for retirement.
The second headline read, “Why you should resolve to spend more money.” The story, written by Suzanne Woolley for Bloomberg News, talks about how retirees who have diligently saved and invested for their retirement, should consciously decide to spend down some of those savings after years of frugality.
Both stories were published Jan. 28, 2018, in The Atlanta Journal-Constitution.
The obvious question here: what retirement position are you in, and is it the right place for you?
Many can relate to the former. Perhaps they were promised a pension by their employer when they were hired, but that pension is no longer offered. Or, perhaps the pension benefit disappeared.
Perhaps not nearly as many can relate to the latter. If you are fortunate enough to have a good retirement nest egg, by all means, enjoy it. Do what you like to do. But, as any financial adviser would tell you, it’s best to take out the dividends, interest and other earnings your money produces first. A good rule: if you never touch your principal, you will never outlive your money. So, spend, but spend with some care.
Retirement didn’t used to be this complicated. In decades past, one was hired for a job and, if they stayed out of trouble, showed up every day and did what was expected of them for many years, they could count on retirement benefits.
They would get whatever pension their employers gave, combined it with Social Security and, perhaps, some savings and/or a no-stress, part-time job that provided some pocket money.
To live in such a retirement, one had to spend carefully. Perhaps they had enough to enjoy some hobbies, travel, spoil grandchildren etc. But most had to watch how they spent their money. You may have heard the pleas of, “we’re on a fixed income, you know.”
Hopefully, by this time, their mortgages were paid off and there were very few other debts.
Contrast that with today. Job security is non-existent. Pensions, as the article says, are not offered to as many people. Many don’t have a great deal of savings for retirement, and perhaps have vowed to work until they die – or until their employer forces them to leave.
The “fixed incomes” of many fortunate retirees is greater than those of many of the younger, working cohort that’s helping to fund their parents’ Social Security payments.
The part-time “retirement” jobs many are forced to take involve longer-than-desired hours, much stress and take away whatever fun retirement might offer.
There is some good news in all this. There are many ways people can earn potentially good incomes by spending a few hours a week – and have some fun doing it. The good news: it doesn’t involve taking a second, or “retirement,” part-time job. To check out one of the best, message me.
If you are young, you can think about doing this using some time when you aren’t working at your traditional job. If you are diligent, you could be in the position of having a comfortable, spendable nest egg when you retire, and have the kind of decision the second article features.
If you are retired, either by choice or force, time is on your side, and you may find a less stressful way to earn an income.
So think about your retirement position today, and bear in mind that what you were promised, or what you thought you might get, may not be there. Build enough of a nest egg, however you choose to, so you won’t have to “work until you die.”
Peter

MOST PEOPLE AREN’T SAVING ENOUGH FOR RETIREMENT

#retirement #pensions #savings
Most everyone knows or suspects that people aren’t saving enough for a decent retirement.
But a World Economic Forum report spells it out: People are living longer. Investment returns have been disappointing. Therefore, within three decades there will be a $400 trillion shortfall worldwide in retirement savings.
The report was cited in an article by Katherine Chiglinsky for Bloomberg News. It was published June 4, 2017, in The Atlanta Journal-Constitution.
The shortfall includes a $224 trillion gap among the six large pension-savings systems: the U.S., U.K., Japan, the Netherlands, Canada and Australia, the article quotes the report.
Employers have been moving away from pensions and offering defined-contribution plans, which include 401(k)s, and individual retirement accounts. Those categories make up about 50 percent of global retirement assets, Chiglinksy writes.
The report warned that the savings shortfall in the U.S. is growing at a rate of $3 trillion a year, and may climb at an annual rate of 7 percent in China and 10 percent in India – countries with aging populations, growing middle classes and a higher percentage of workers in informal sectors, Chiglinsky writes.
So, how are you set for your retirement?
Have you got a pension lined up? If so, it’s entirely possible that it won’t be there when you are ready to take it, or it could be reduced.
Social Security by itself won’t let you live a decent life. And, if Washington doesn’t act, benefits could be reduced eventually. Many experts say we needn’t fear that Social Security will go away entirely. But benefit reductions are a possibility in a few decades.
Think of your retirement planning this way: if it is to be, it’s up to ME.
If you are young, and just starting your career, make retirement savings a priority. If you aren’t raking in big bucks, start with a small percentage of what you are making. Put that money away. Don’t touch it!
Once your savings have grown to an investible amount, say, a few thousand dollars, get it out of your bank savings account and put it into something that will pay you higher rates. Get good advice from a financial planner that you trust. You may want to start with fairly safe – everything outside of insured bank deposits carry some risk – investments, and diversify more as your money grows.
If you are older, you need to put more of what you earn into retirement savings. Young folks have lots of time to balance gains and losses. Middle-aged folks have much less time. Talk to a financial planner about you goals, and let him or her guide you as to how much to save, and in what vehicles to invest.
Of course, cutting spending is a must. Increasing income may give you a leg up on your retirement savings. To learn about one of best vehicles for doing both, message me.
In short, you can take matters into your own hands. It’s all about setting priorities, making good choices and sticking to your plan.
Whatever you sacrifice now, be it $100 a month in lattes, taking too many expensive trips etc., will pay you back in spades when your job goes away. And you don’t have to live in complete deprivation to do it.
Just look for value in what you buy, and make good choices in how you save.
Peter

BROKEN PROMISES AND PENSIONS: NEVER PRESUME

#UPS #pensions #FreezingPensions
UPS plans to freeze pensions for non-union employees effective 2023.
So says an article by Kelly Yamanouchi, a reporter for The Atlanta Journal-Constitution, which was published June 29, 2017.
The freeze will affect about 70,000 administrative and managerial employees, the article quotes UPS.
The employees will be shifted to a plan that includes extra company contributions to each employee’s 401(k) accounts, the article says.
“Continued increases in future pension obligations and volatility that makes it difficult to plan for future costs,” was cited in the article as the reason for the change. The non-union pension plan has a deficit of about $6.5 billion, according to the article.
It’s difficult to judge how badly those non-union employees will be hurt by this change, but it speaks to an ongoing trend.
If you are fortunate enough to work for someone that provides a pension plan – they are getting fewer by the day – be prepared for some changes somewhere along the way. Unionized employees in both the public and private sectors are susceptible to changes, even if a contract locks the employer in.
It’s truly the wise person who anticipates changes, even if he or she doesn’t know what those changes are, or when they will come.
UPS, it seems, is giving their affected employees some warning, so they can begin planning.
It’s unsafe to presume that your employer – again, if you are lucky enough to be in a pension plan – will do the same, or even give you notice.
So, if you are not covered by a pension plan, or if your pension plan undergoes a sudden change that may give less than you had anticipated, what should you do?
If you are still relatively young, start by not presuming that your company will take care of you when you retire. Remember the adage, if it is to be, it’s up to me.
Save your money as if there will be NO benefits coming to you from your company. If you get benefits, then you’ll be that much better off. In other words, consider whatever pension you get to be gravy.
Next, sit down with a trusted adviser who can guide you to a financial plan that will cover your life expenses now, and encourage you to save so you can provide for yourself in your elder years.
There’s nothing worse that working your tail off for, say, 40 years, and be broke, or close to, when you are older.
Also, anticipate the possibility that you WILL BE retired before you want to be. That is happening, and has happened, to countless people.
Another tip: instead of getting a second job if you are unable to save enough, look into one of the many vehicles out there that allows you the chance to earn a potentially lucrative income with a few part-time hours a week. To check out one of the best such vehicles, message me.
The corporate and business worlds are littered with broken promises to employees. Never presume that promises made when you were hired will be kept when you retire. Don’t even assume that promises made the day you were hired will be kept throughout your career.
Remember, too, that as you walk through that broken promissory litter, no one but you will pick up the pieces.
Peter

RETIREMENT SAVINGS SHORTFALL PREDICTED

#retirement #savings #RetirementSavingsShortfall
Most everyone knows or suspects that people aren’t saving enough for a decent retirement.
But a World Economic Forum report spells it out: People are living longer. Investment returns have been disappointing. Therefore, within three decades there will be a $400 trillion shortfall worldwide in retirement savings.
The report was cited in an article by Katherine Chiglinsky for Bloomberg News. It was published June 4, 2017, in The Atlanta Journal-Constitution.
The shortfall includes a $224 trillion gap among the six large pension-savings systems: the U.S., U.K., Japan, the Netherlands, Canada and Australia, the article quotes the report.
Employers have been moving away from pensions and offering defined-contribution plans, which include 401(k)s, and individual retirement accounts. Those categories make up about 50 percent of global retirement assets, Chiglinksy writes.
The report warned that the savings shortfall in the U.S. is growing at a rate of $3 trillion a year, and may climb at an annual rate of 7 percent in China and 10 percent in India – countries with aging populations, growing middle classes and a higher percentage of workers in informal sectors, Chiglinsky writes.
So, how are you set for your retirement?
Have you got a pension lined up? If so, it’s entirely possible that it won’t be there when you are ready to take it, or it could be reduced.
Social Security by itself won’t let you live a decent life. And, if Washington doesn’t act, benefits could be reduced eventually. Many experts say we needn’t fear that Social Security will go away entirely. But benefit reductions are a possibility in a few decades.
Think of your retirement planning this way: if it is to be, it’s up to ME.
If you are young, and just starting your career, make retirement savings a priority. If you aren’t raking in big bucks, start with a small percentage of what you are making. Put that money away. Don’t touch it!
Once your savings have grown to an investible amount, say, a few thousand dollars, get it out of your bank savings account and put it into something that will pay you higher rates. Get good advice from a financial planner that you trust. You may want to start with fairly safe – everything outside of insured bank deposits carry some risk – investments, and diversify more as your money grows.
If you are older, you need to put more of what you earn into retirement savings. Young folks have lots of time to balance gains and losses. Middle-aged folks have much less time. Talk to a financial planner about you goals, and let him or her guide you as to how much to save, and in what vehicles to invest.
Of course, cutting spending is a must. Increasing income may give you a leg up on your retirement savings. To learn about one of best vehicles for doing both, message me.
In short, you can take matters into your own hands. It’s all about setting priorities, making good choices and sticking to your plan.
Whatever you sacrifice now, be it $100 a month in lattes, taking too many expensive trips etc., will pay you back in spades when your job goes away. And you don’t have to live in complete deprivation to do it.
Just look for value in what you buy, and make good choices in how you save.

Peter

STATES RESPOND TO RETIREMENT CRISIS

#retirement #pensions #401(k)s #SocialSecurity
“It’s clear there’s a retirement crisis,” Illinois State Treasurer Michael W. Frerichs told small business owners. “This is a problem not only for families but for all of us,” the quote continues.
Frerichs was quoted in an Associated Press article on the subject by Maria Ines Zamudio. It was published Feb. 22, 2017, in The Atlanta Journal-Constitution.
Zamudio’s article focused on how seven states – California, Connecticut, New Jersey, Maryland, Oregon and Washington, as well as Illinois, are in various stages of implementing state-sponsored retirement savings plans.
The plans, the article says, are tax-deductible IRAs with automatic payroll deductions, for which employees don’t pay federal taxes on the money until it is withdrawn.
Americans without work-sponsored savings plans are less likely to save for retirement, the article says. Zamudio quotes research from the Employee Benefit Research Institute that shows 62 percent of employees with an employer-sponsored savings plans had more than $25,000 in savings. Some 22 percent of those had more than $100,000 in savings.
Meanwhile, according to the quoted research from 2014, 94 percent of workers without access to those plans had less than $25,000.
We can certainly debate whether it should be the government’s role to set up savings plans for workers. What isn’t really debatable is that $25,000, or even $100,000, won’t get a person very far into retirement.
A good retirement savings would provide enough so that the person or couple could live comfortably off the interest and dividends those savings would kick off. If one does not have to touch his principal in retirement, he’ll never outlive his money.
Of course, those fortunate enough to get a pension from their employers, combined with Social Security, have a little more to work with, in terms of income.
But will those vehicles be enough to have the retirement you want?
Retirement should be about more than just living Social Security check to Social Security check. It should be about having the resources, combined with the time, to do things one didn’t have the time to do while working. Examples include travel, hobbies etc.
But so many at or near retirement age are not in that position. Some had signed on to work for an employer because of pension benefits, only to find that when the time came to access those benefits, they weren’t there.
Others, perhaps, were forced out of their jobs prematurely through downsizing, technology or other efficiencies. As a result, they lost of lot of work time that could have allowed them to save more. Or, they were forced to take a lower-paying job elsewhere, making saving for retirement impossible, or nearly so.
If you are among those facing tough decisions about retirement – perhaps you tell yourself you’ll have to work until you die – there are a number of good options for earning income that could augment or even enhance your potential retirement income. To check out one of the best, message me.
Meanwhile, if you have a job, make saving for retirement a priority. Closely examine where your money goes, and see whether you can trim spending to put money into retirement savings. Presume that there will be very little to bail you out if you are “retired,” but can’t afford to be.
Also, too, think about your time. How are you spending what free time you currently have? How will you spend your time when you retire? Will you be bored? Will you have the resources to perhaps do what you’d like to be doing?
Certainly, retirement is about more than money. But having enough money will take one worry off your plate so you can decide how best to use your time.
If you don’t want to work until you die, do something today to help eliminate that possibility.
Peter

PENSIONS: WHAT YOU WERE PROMISED MAY NOT BE DELIVERED

#pensions #retirement #RetirementSavings
Retired Teamsters are sweating.
For those covered by the Central States Pension Fund, a multiemployer pension fund, the outlook is grim.
Central States is paying out $3.46 for every dollar it’s taking in, according to Mary Sanchez, columnist for The Kansas City Star. Her column appeared in a February 2016 edition of The Atlanta Journal-Constitution.
To avert a dissolution of the fund, Central States applied to the Treasury Department, the federal Pension Benefit Guaranty Corp., which ensures pensions against bankruptcy, and the Department of Labor for permission to cut pension payments to beneficiaries, Sanchez writes.
If the plan goes through, many beneficiaries would face cuts of up to 60 percent in the payment they had spent their lives working for, believing it was guaranteed, Sanchez writes. Until 2014, it wasn’t legal to do that. But that year, the Multiemployer Pension Reform Act was attached at the last minute to a must-pass omnibus spending bill, according to Sanchez.
On its face, it’s not fair to those retirees. It is not their fault that their pension fund is losing its economic viability.
But it’s not as if this was a surprise. We’ve been warned for years that because there are more retirees than workers to support them, a pension crisis was looming.
The Great Recession exacerbated the problem because many of the workers have lost their jobs. In the case of the Teamsters, union membership has declined. There are fewer jobs, and more of the jobs that still exist are being done by non-union labor.
In fact, many employers are not including pension benefits as part of the employment package.
If you are still working, chances are very good that you are on your own to fund your retirement.
What to do?
First, especially if you are young, dedicate a portion of what you earn toward your retirement. Put that amount from each paycheck into a fund and, with the help of a trusted adviser, invest it properly. Don’t fret the gyrations of the stock market. Time usually heals such wounds, and the market, over time, has proved to increase a person’s wealth considerably.
Another solution is to find one of the many alternative ways to earn money outside of your job, and see whether it is right for you. For one of the best, visit www.bign.com/pbilodeau. If you like what you see, and do it properly over time, you may not have to worry about your retirement.
If you are currently retired, or near retirement, such Plan B options may help you live a secure retirement.
As Sanchez points out, the solution to the pension debacle will be costly. Even the Pension Benefit Guaranty Corp. is in danger, she writes.
Though making the pensioners pay the price may be unfair, it may be unavoidable.
Even if you were promised a good, secure pension, be it from the public or private sector, don’t presume those promises will be kept forever. The option of working longer may not be available. It’s best to take such matters into your own hands. Only you can assure a comfortable, secure retirement.
Peter

THE DISAPPEARING AMERICAN DREAM, PART 2: RETIREMENT PREPARATION ISN’T WHAT IT USED TO BE

#‎AmericanDream‬, ‪#‎disappearingAmericanDream‬, ‪#‎economicgrowthrates #retirementplanning
Retirement planning is complicated for Americans of all ages.
So says Jeff Reeves, editor of InvestorPlace.com, who wrote a column for USA Today. It was published in the May 10,2015, edition of The Tennessean newspaper of Nashville.
The Employee Benefit Research Institute, in a 2014 survey, found that only 64 percent of Americans have saved any money for retirement to supplement Social Security benefits. It says that roughly six of 10 Americans have less than $25,000 saved for retirement, according to Reeves’ article.
Certainly, if you are young – say, in your 20s and 30s – retirement is a long way off. Or, so you think. Time travels with break-neck speed, and 30 years can go by very quickly. It’s never too early to save, even if it’s only, say, $5 a week. That may be one visit to Starbucks that you would be sacrificing.
Your parents and grandparents probably were diligent savers. Perhaps they were disciplined and never touched their retirement money.
In their day, perhaps, jobs didn’t disappear more quickly than cake at a child’s birthday party.
If you are young, you face a daunting task of keeping a good job for as long as you want it. If you are older, say, in your 40s and 50s, perhaps you had a good job for a long time, and it’s now gone.
All this complicates saving for retirement, so that task requires extra discipline, perhaps more than your parents or grandparents had.
Despite all the gloom-and-doom reports, Social Security is likely to survive. Benefits could be reduced a bit, but it should survive. The question to ask yourself is, what kind of lifestyle will I have on Social Security alone? Even if you add in a pension, should you be fortunate enough to have one, it’s still not going to be that much. If you are a careful, disciplined person, you would have spent your whole life watching every dollar. Your retirement years should be enjoyable, not ones of deprivation.
Well, one does not have to rely on a job, pensions etc., to have a good retirement. One does not have to engage in risky, unsafe investments to get a decent return.
But, to achieve that, one has to be motivated to want to change his situation, rather than accept it and complain about it.
If you are that type of person, visit www.bign.com/pbilodeau. Check out how many people from all different backgrounds, education levels and skills are not only securing their retirement, but helping others do the same.
Many of us do not want to take handouts, but want to get what was promised to us. Promises can, and often are, broken. That’s why motivated people look outside what they are used to and find a new way to prosperity.
Now, if you are indeed young, you can save your way to prosperity. Reeves quotes John Sweeney of Fidelity Investments as saying, “we are seeing many examples of people who have $1 million in a 401(k) because they started early, they diligently contributed and kept to it.”
That’s more difficult to do as jobs come and go, and jobs, if they are replaced, are often replaced with ones paying and providing less.
But the discipline you will acquire if you diligently save and not touch those savings until later years, and put those savings in the hands of a trusted financial adviser that won’t gobble up too much in fees, you can secure potentially great retirement.
The new Voya ads talk about “orange money,” that one must put away for retirement and not spend. Designate your own “orange money,” or whatever color you deem it, so you won’t have to scrape together an old age of deprivation.
Peter

#retirement bust YOU THOUGHT YOU WERE ALL SET, BUT …

History may judge the years 2007 to 2012, give or take a few years on either end, as the retirement bust years.
People not only lost jobs just before they were about to retire, but also their pensions shrank.
People who thought they were all set for retirement, with a nice, promised pension, got a rude awakening. The monthly benefit on their retirement documentation shrunk considerably.
It was a combination of the economy tanking, and companies contributing less, if anything at all, to their retirement accounts. Added to that, the stock market , which supports most retirement accounts, took a big tumble. The bottom fell out of thenNet worth of everything – companies and individuals.
Even the savviest investor could not prevent what happened in those years, short of taking his money out of the financial markets ahead of time. Any investor who withdraws completely is probably not that savvy. Savvy investors take the ups and downs of the market as an expectation, though no one expected what happened in those years.
So the question becomes not whom to blame for the mess. There’s plenty of blame to be spread around among Wall Street, government and, yes, individual decisions. But blaming wastes energy that should be focused on recovery.
We all have had to rethink retirement. Some of us have told ourselves we have to work until we die. Some of those folks may have other alternatives, but they are not seeing them.
Certainly, some of us have said we have to work past the age we thought we were going to retire. That’s fine if you are in good health personally. But don’t think for a minute that your job will be there for as long as you want it. Companies reorganize drastically and often. The younger generation of workers, when they retire, may brag about how many reorgs they survived, just as the older generation is thankful for the steady work they had.
Speaking of young people, they may want to think twice about ASSUMING they will survive every reorg. It’s great to believe, or even be told, how good you are at what you do and how your employer cannot possibly live without you.
But, you can’t always see into the future. The world changes quickly. Companies are constantly looking at ways to work more efficiently. Lots of good people have lost jobs they expected to have for as long as they wanted to work.
How do we avoid the instinct to cast blame and rethink retirement? First, work on you. Make sure you have a good and optimistic attitude. Remember, those who innovate are usually optimists. It’s tough to see the future properly without believing that all, eventually, will be good.
Secondly, think about the things you DON’T like to do – things that make you “uncomfortable,” or so you believe. Give them a try. Then, try them again, and again etc. This will take you out of your comfort zone, where you may have to go, eventually, to survive.
Thirdly, don’t be afraid to look at something different. The people who lament that they thought they were all set, are many of the same people who tell themselves, “oh, I couldn’t possibly do THAT!”
There are many ways to fight this. For one of the best, visit www.bign.com/pbilodeau. If you leave your comfort zone to look at something new, you may lose the instinct to cast blame for your troubles, and find a way out.
This may not be your dad’s way to retire, but the world has changed. We need to be part of our own solutions, rather than focusing on how we got into trouble.
Think of it this way: the federal government bails out some companies because innocent people would get hurt if they didn’t. But they won’t bail you out as an individual if you get hurt. You have to bail yourself out. You might not only bail yourself out, but prosper in many ways in the process.
Peter

YOU THOUGHT YOU WERE ALL SET, BUT …

History may judge the years 2007 to 2012, give or take a few years on either end, as the retirement bust years.
People not only lost jobs just before they were about to retire, but also their pensions shrank.
People who thought they were all set for retirement, with a nice, promised pension, got a rude awakening. The monthly benefit on their retirement documentation shrunk considerably.
It was a combination of the economy tanking, and companies contributing less, if anything at all, to their retirement accounts. Added to that, the stock market , which supports most retirement accounts, took a big tumble. Net worth of everything – companies and individuals — had the bottom fall out.
Even the savviest investor could not prevent what happened in those years, short of taking his money out of the financial markets ahead of time. Any investor who withdraws completely is probably not that savvy. Savvy investors take the ups and downs of the market as an expectation, though no one expected what happened in those years.
So the question becomes not who to blame for the mess. There’s plenty of blame to be spread around among Wall Street, government and, yes, individual decisions. But blaming wastes energy that should be focused on recovery.
We have all had to rethink retirement. Some of us have told ourselves we have to work until we die. Some of those folks may have other alternatives, but they are not seeing them.
Certainly, some of us have said we have to work past the age we thought we were going to retire. That’s fine if you are in good health personally. But don’t think for a minute that your job will be there for as long as you want it. Companies reorganize drastically and often. The younger generation of workers, when they retire, may brag about how many reorgs they survived, just as the older generation is thankful for the steady work they had.
Speaking of young people, they may want to think twice about ASSUMING they will survive every reorg. It’s great to believe, or even be told, how good you are at what you do and how your employer cannot possibly live without you.
But, you can’t always see into the future, especially today. The world changes quickly. Companies are constantly looking at ways to work more efficiently. Lots of good people have lost jobs they expected to have for as long as they wanted to work.
How do we avoid the instinct to cast blame and rethink retirement? First, work on you. Make sure you have a good and optimistic attitude. Remember, those who innovate are usually optimists. It’s tough to see the future properly without believing that all, eventually, will be good.
Secondly, think about the things you DON’T like to do – things that make you “uncomfortable,” or so you believe. Give them a try. Then, try them again, and again etc. This will take you out of your comfort zone, where you may have to go, eventually, to survive.
Thirdly, don’t be afraid to look at something different. The people who lament that they thought they were all set, are many of the same people who tell themselves, “oh, I couldn’t possibly do THAT!”
There are many ways to fight this. For one of the best, visit www.bign.com/pbilodeau. If you leave your comfort zone to look at something new, you may lose the instinct to cast blame for your troubles, and find a way out.
This may not be your dad’s way to retire, but the world has changed. We need to be part of our own solutions, rather than focusing on how we got into trouble.
Think of it this way: the federal government bails out some companies because innocent people would get hurt if they didn’t. But they won’t bail you out as an individual if you get hurt. You have to bail yourself out. You might not only bail yourself out, but prosper in many ways in the process.
Peter

YOUR PROMISED PENSION MAY SHRINK OR DISAPPEAR

When you were young, did mom or dad ever promise you something important, and not deliver? Or, did they give you something, but it wasn’t what you thought you were going to get?
Government entities have promised their workers, in most cases, a pension. Pension benefits, some of which are quite generous, are one of many reasons people take government jobs, often at lower salaries than they could make in the private sector.
But states, cities, counties and, yes, the federal government are all worried they may not be able to keep the promises they made to those workers.
Government revenue is down. Government workers are losing their jobs in relatively large numbers. And some public officials are taking action to ease their pension burdens.
Allysia Finley interviewed San Jose, Calif., Mayor Chuck Reed for an article in the Nov. 30-Dec. 1 weekend edition of The Wall Street Journal. Reed sees the crisis in the city’s pension obligation. It is now spending $45,263 each year per worker on pensions, according to the article. Reed sees that as unsustainable.
He is offering workers a choice: pay 16 percent more of your salary toward your pension – about 27 percent of a police officer’s salary – or accept lower benefits in the future. The choice circumvents state court decisions that protect workers’ vested pension rights. In other words, he can’t take their pensions away totally, but he can put more of the burden on the workers and less on the city.
The public employee unions are not too happy with this idea, as one might expect. Reed’s and other ideas from administrators and elected officials nationwide all but ensure that if you are young, and work for a government entity, chances are very good that you will not see the retirement benefits your older colleagues are seeing today.
Or, you’ll have to contribute more toward those benefits. Either way, government entities cannot sustain the status quo forever.
So, if you are that young, government worker, you have to begin thinking differently about retirement. Perhaps you will have to work longer than you’d planned. The idea of retiring with full benefits after 20 or 25 years of service – no matter how old you are – may not be in the cards. Yes, there are some jobs – firefighters and police officers, for example – that may not allow you to work past a certain age. So, you have to think differently.
That pension may not be enough for you to pursue a hobby, or second career, at your leisure, while you are relatively young. Instead, you may have to start now to set up your situation well ahead of retirement. You might even be able to set up something that won’t require you to work another job in your off time.
You hear people talk about investing and saving at an early age. That would be wise, but your government salary – and/or paying more for your pension benefits – may not allow as much flexibility to save much. Even if you can put away $5 a week, plus most, if not all, of any raises you get over time, and not touch it, you could have a pretty nice nest egg. Will it be enough?
There are lots of good ways to earn extra income while you are still on the job. For one of the best, visit www.bign.com/pbilodeau. If you and your friends in the same situation could lock arms, you all could not worry about making Reed’s choice, or deal with your promises not fully delivered.
Young folks in the private and public sectors all have to worry about how they will be employed for as long as they want to work. Unpleasant circumstances may intervene. Promises may be broken. If you presume they will happen, you can better prepare. Fighting valiantly to keep the status quo, as your union representatives and others may do, ultimately could be a waste of energy. Complaining about it is even a bigger energy waster.
Good things can come to those who prepare. The writing is on the wall. Eventually, Reed or some of his compatriots in government will reform pensions. Their decision(s) probably won’t benefit individual workers greatly. But they could benefit everyone into perpetuity. So get ready. Take action. Your future may depend on it.
Peter