Retirement Plan Shift Is Creating a Generation of Workers Unable to Retire
CBS MoneyWatchBy Steve Vernon | CBS MoneyWatch – Fri, Nov 9, 2012 3:55 PM EST
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We can no longer afford to ignore the long-term consequences of short-term thinking about our retirement programs.
Yahoo! Finance/Thinkstock – We can no longer afford to ignore the long-term consequences of short-term thinking about our retirement programs.
Large U.S. employers continue to eliminate traditional pension plans that pay retired workers a monthly lifetime pension in favor of defined contribution and hybrid plans that offer lump-sum payments at retirement, according to a recent survey HR consulting firm Towers Watson.
Among Fortune 1000 companies, only 11 percent still offer a traditional pension plan to newly hired salaried workers, down from 14 percent in 2011 and continuing a long slide from 90 percent in 1985. Conversely, in 1985 only 10 percent of those companies offered only a defined contribution plan to salaried workers — today that figure stands at 70 percent.
The primary reason for this trend has been financial: Employers don’t want the exposure to unfunded liabilities if capital markets perform poorly. At the same time, until recently employees generally hadn’t expressed a preference for traditional pension plans and, in fact, have largely embraced 401(k) and other defined contribution plans.
But this trend has its consequences in the workplace, as large numbers of baby boomers have 401(k) balances that are inadequate to fund a traditional retirement. To make matters worse, most retiring workers don’t know how to turn their nest eggs into reliable retirement income. Employers also haven’t provided much help by offering retirement income options in their defined contribution plans.
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Well, the Gooferment has been messing up the economy and distorting the employer – employee relationship since it first ERISA rule attempted to prevent Lockheed from stealing pension benefits from older aerospace engineers.
They only made the problem worse.
Suppose that they stopped giving their corporate cronies tax breaks that weren’t available to individuals and let individuals fend for themselves for “benefits”, no problem.
Imagine that your car insurance was tied to your job?
It’s just dumb!
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