Day: June 9, 2011

http://www.governing.com/columns/smart-mgmt/Whats-a-Pension-Perk-Worth.html

SMART MANAGEMENT
What’s a Pension Perk Worth?
Employers can’t pinpoint what the real value of retiree benefits is to them.
BY: KATHERINE BARRETT & RICHARD GREENE | JUNE 2011

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It’s conventional wisdom that there’s an awful lot of cash being spent to keep pension promises made to employees during the course of their work life. But what benefits — aside from the obvious humanitarian desire to provide a good quality of life for retirees — are these pensions buying for the entities that offer them?

One argument has been that higher pension benefits make for lower turnover and more qualified applicants. There have been a small handful of studies over the past two decades that support the very broad idea that employees of governments that offer pensions are often more loyal than those working for entities that don’t offer pensions. But even if we accept those assumptions without question, there doesn’t seem to be anyone who can tell us what the marginal value each additional dollar of post-retirement benefits buys — and what we give up if we cut benefits by any given amount.

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Flying blind like this means governments that have been pushing for steep cuts in retiree benefits are risking a long-term negative change in their workforce that will make services costlier and less effective. By the same token, if cuts at a certain level could be shown to have minimal impact on workforce considerations, then there are a whole passel of states and cities that should consider making cuts without delay.

We don’t know the answer. But we sure believe somebody should.

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If managers are trying to figure out the value of the “pension”, or any “benefit”, then “employees” aka “wage slaves” should be figuring it out as well.

Argh!

Remember that the “rules” for “Success in Your Generation” have shifted away from “pensions”. (As well as imho 401ks and IRAs!)

(To explain that parenthetical remark. First, 401ks are a captive of the employer. Abuses like Enron were the very tip of the iceberg. The current crop of 401ks are full of abuses. And, the mutual fund choices inside of them are also abusive. Read Ric Edelman’s writings bout mutual funds. Second, there continues to be rumors of taking “tax deferred accounts” in exchange for “enhanced social security”. Third, tax rates in the future and the value of the dollar cast doubt on the value of a pension. Especially when that supposed pension is decades down the road. Fourth, a pool of savings might provide the capital for a business venture. That might be a good bet. Or at least a better bet.)

You can create your OWN pension. It’s nothing more than a very very expensive annuity.

Read the blog post about a 5 year quarterly cd ladder.

You can do it yourself … cheaper.

And, gold, silver, and junk silver coins may be the best bet over all.

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