More Companies Ending Promises for Retirement (European retirement

[rodeodance]

type plans are going to be needed).
Medicare and SS are becoming and more and more important but as they stand they are band aid appoaches to this problem.


http://www.nytimes.com/2006/01/09/business/09pension.html?th=&adxnnl=1&emc=th&adxnnlx=1136811661-SW2wVS0X64e4Wd2OlUU5TA&pagewanted=print

January 9, 2006
More Companies Ending Promises for Retirement
By MARY WILLIAMS WALSH

The death knell for the traditional company pension has been tolling for some time now. Companies in ailing industries like steel, airlines and auto parts have thrown themselves into bankruptcy and turned over their ruined pension plans to the federal government.

Now, with the recent announcements of pension freezes by some of the cream of corporate America - Verizon, Lockheed Martin, Motorola and, just last week, I.B.M. - the bell is tolling even louder. Even strong, stable companies with the means to operate a pension plan are facing longer worker lifespans, looming regulatory and accounting changes and, most important, heightened global competition. Some are deciding they either cannot, or will not, keep making the decades-long promises that a pension plan involves.

I.B.M. was once a standard-bearer for corporate America's compact with its workers, paying for medical expenses, country clubs and lavish Christmas parties for the children. It also rewarded long-serving employees with a guaranteed monthly stipend from retirement until death.

Most of those perks have long since been scaled back at I.B.M. and elsewhere, but the pension freeze is the latest sign that today's workers are, to a much greater extent, on their own. Companies now emphasize 401(k) plans, which leave workers responsible for ensuring that they have adequate funds for retirement and expose them to the vagaries of the financial markets.

[rodeodance]

1. "For women, the challenge is even tougher."

Jack VanDerhei, an actuary who is a fellow at the Employee Benefit Research Institute, offered a hypothetical example. If a man joins a firm at 40, works 15 years, and is making $80,000 a year by age 55, he might expect to have built up a pension worth $16,305 a year by that time, Mr. VanDerhei said. If he keeps on working under the same pension plan, that benefit will have increased to $27,175 a year when he retires at 65.

But if instead when the man turns 55 his company freezes the pension plan and sets up a 401(k) plan, the man will get just the $16,305 a year, plus whatever he is able to amass in the 401(k). It will take both discipline and investment skill to reach the equivalent of the old pension payments in just ten years, Mr. VanDerhei said.

For women, the challenge is even tougher. They have longer life expectancies, so they have to pay more than men if they buy annuities in the open market. It turns out the traditional, pooled pension offered them a perk they did not even know they had.

[MrPrax]

2. Love the fatalistic tone...

Like leaves changing every Autumn, so do pension plans change, wither and die...by some natural phenomenon and nothing can stop it...

so resign yourselves to "to the vagaries of the financial markets" and 'death knells'...the old economy is gone!!!

I see a bright shiny future...

[Yupster]

3. The problem is that pension plans

or defined benefit plans just don't make any sense for businesses.

So a business sends out 150,000 checks each month to its retirees. It gets back 3,000 of them returned in the mail. Some of the people have died. Some have moved without telling them into another home or a nursing home, some have remarried and changed their names.

The company ends up having a special department that does nothing but handle changes to their retirees lives.

So much easier to have a defined contribution plan like a 401 (k). The person retires, you transfr his account into his IRA, shake his hand and you're done with him.

In a few years the only workers who will have pension plans will be government employees.

[MrPrax]

4. So...

because businesses have a problem processing a 'change of address', someone with 26 years under their belt with a particular company should be left old and poor?

Our priorities for society are a little too far apart for a meaningful discussion I'm afraid....I mean, business comes and goes (as do the reasons for their profitability), but people usually remain the same in their needs.