A fairy-tale opening seems appropriate when discussing the topic of pensions, so, “Once upon a time … workers put in their decades of toil and retired with a guaranteed, albeit often small, monthly check from the employers’ pension fund. That supposedly would be coupled with savings and Social Security payments to make up the three-legged stool of retirement security.”
That metaphorical stool is looking extremely rickety now as survey after survey shows many households with little or no savings, and incredibly high levels of debt. So much for the savings leg.
News regarding the pension leg is not much better, with massive underfunding rampant among both private and public pensions.
I can testify to that from personal experience. Periodically the mailman delivers word that my union pension plan, from which I will attempt to begin drawing in a couple of months, continues in “critical and declining” status. That’s a polite, bureaucratic way of saying it’s on track to go bust in 15 years, give or take.
That anticipated union pension is a small chunk of potential change for me, acquired during my previous full-time career at this august publication. It was late in my run here that the newsroom unionized.
The bulk of my potential pension from my career is a nonbargaining plan, accrued before the newsroom joined the union. It, too, is a relative pittance, with conflicting figures I’m hoping to clarify shortly.
My ability to bid adieu to full-time journalism in March 2009, at age 53, was based on cramming money into my 401k plan during 15 years of working for the sister papers of the Greensburg and Pittsburgh Tribune-Review.
The philosophy was, it’s better to have one’s own retirement money than to count on pensions and Social Security.
Anyone starting out in a career should consider himself or herself the equivalent of an indentured servant, the European poor who borrowed money to pay passage to the New World, then worked off his or her debt in order to gain freedom.
Save money. Buy your freedom. It’s that simple, even in 2017.
The alternative is to spend everything you make, plus 10 percent, and hope to win the lottery or get a big inheritance. In case the lottery and/or inheritance don’t work out, you’d better love your job because you might well die doing it.
Even though I worked 20 years under defined pension benefit circumstances, my combined monthly figure, admittedly reduced by claiming it at age 62, would not be enough to pay the rent on a modest house in the area.
Social Security will be a much larger chunk. And the 401k money, now housed in an IRA, means I’m able to do better than eat cat food for dinner. The 401k plan falls into the defined contribution pension heading and is rapidly becoming the norm as employers exit the defined benefit world.
Since departing the Tribune-Review, I’ve done many things on a part-time basis to generate income.
The freedom from 40-plus hour work weeks is nice, whether or not I get the pension benefits I was promised.
Thank you again, 401k.
Increasingly, it’s becoming apparent that not all workers will get all the pension they anticipate.
The Teamsters’ Central States Pension Plan is estimated by actuaries to be insolvent in 10 years. A plan to cut benefits to members was shot down, for now, by the U.S. Treasury. Stay tuned.
Efforts to reduce public employee pensions in bankrupt Detroit have met legal walls, too.
It is important at this point to note the difference between private employer pensions and those for public employees.
In the past, public employees generally earned less in wages or salaries, but had better benefits, including outstanding pension plans.
Also, their job security was greater.
That has gotten out of control to the point that Illinois is underfunded by $251 billion on its pension liabilities, according to the Moody’s rating agency. A Forbes story from April 2016 calculated 7,499 retired Illinois educators with pensions of $100,000 or more a year.
The story is similar in California, where public employees, covered by the California Public Employees’ Retirement System (CalPERS), have pension underfunding to the tune of more than 50 percent, according to 2015 figures, the latest available to the public.
According to a June story in the Sacramento Bee, nearly 9,000 CalPERS retirees get at least $100,000 a year. The median wage earner in California makes just $56,000 working the entire year.
It’s worth noting that these public workers often retire at younger ages than private employees.
Private pension plans, while generally less generous, also are in dire financial straits.
Citigroup analyst Tobias Levkovich calculated in a report a year ago that the S&P 500 companies had a combined pension underfunding of $375 billion. The top 25 combined for $225 billion of the shortfall. We’re talking companies such as General Electric, General Motors, Boeing and Exxon Mobil, which made the top 4.
If private plans fail, they are backstopped by the Pension Benefit Guaranty Corporation.
It’s not a panacea. Just ask any Bethlehem Steel retiree.
And the PBGC is bleeding red ink. The Government Accountability Office web page boasts of the PBGC’s nearly $100 billion in assets.
Later, however, that same website concedes a PBGC accumulated deficit through fiscal 2016 of $79 billion.
Even more mind-numbing, the PBGC future exposure to underfunded plans is estimated at $243 billion. All of a sudden that $100 billion in assets doesn’t seem as impressive.
It’s hard to imagine anything other than a bad ending for this pension crisis.
I’m thinking the future will include phrases such as getting pennies back on your promised dollars of benefits.
That makes getting as much out as one can, as soon as possible, the obvious choice for me.
Sam Ross Jr. is a freelance journalist in Johnstown and former staff member of The Tribune-Democrat. He is a licensed health insurance agent.