saw this in the nyt today (http://www.nytimes.com/2010/09/16/opinion/16riordan.html?ref=opinion) “Part of the problem is that pension funds need significant new financing to cover the growing number of retirees. But the real issue is the lack of incentive to improve pension performance. What we need, then, is a federal program that combines stimulus with serious fund reform.” agree or disagree?
DB plans, for larger companies at least, are going the way of the dinosaur. Far too many DB plans were mismanaged over the last decade which resulted in enormous funding deficits. It’s my opinion but, I think an individual’s retirement assets should be their burden and not their employer’s.
Chuckrox8 Wrote: ------------------------------------------------------- > DB plans, for larger companies at least, are going > the way of the dinosaur. Far too many DB plans > were mismanaged over the last decade which > resulted in enormous funding deficits. It’s my > opinion but, I think an individual’s retirement > assets should be their burden and not their > employer’s. I agree to an extent, but what do you do when you get a nation of elderly people who have exhausted their money because they didn’t know how to manage their retirement funds or outlived their savings? Just let 'em die? Also, DB plans are definitely going out of style, but you still have to deal with current unfunded plans - you can’t just retroactively drop them. The answer is there is no simple one size fits all solution. I’m not sure how legislation has progressed requiring individuals to invest a portion of their retirement funds in an annuity, but of course that hits backlash due to lack of choice and the gouging nature of individual annuity pricing.
^^^This is when families get to live together again. Mom and dad are moving in, that’s what happens in many instances.
sundevl21 Wrote: ------------------------------------------------------- > Chuckrox8 Wrote: > -------------------------------------------------- > ----- > > DB plans, for larger companies at least, are > going > > the way of the dinosaur. Far too many DB plans > > were mismanaged over the last decade which > > resulted in enormous funding deficits. It’s my > > opinion but, I think an individual’s retirement > > assets should be their burden and not their > > employer’s. > > > I agree to an extent, but what do you do when you > get a nation of elderly people who have exhausted > their money because they didn’t know how to manage > their retirement funds or outlived their savings? > Just let 'em die? How do you ensure these same people use their pension benefits in the optimal manner? There are no guarantees, and there is no reason to believe that those that inadequately plan for retirement will be better able to allocate their resources from a DB plan that spits out monthly/quarterly/annual checks. Also, DB plans are definitely > going out of style, but you still have to deal > with current unfunded plans - you can’t just > retroactively drop them. Totally agree. These companies and governmental agencies got themselves into this mess and now have to figure out a way to resolve the issue. Unfortunately, it will be a painful process for all involved, and even for many of us not involved at all.
I like the solution and agree that this would be the perfect rate environment to issue these bonds. Even if they had a juicy coupon they could call it back when yields unwind, although that probably wouldnt be wise considering they’d be calling bonds with money-owed.
sundevl21 Wrote: ------------------------------------------------------- > I agree to an extent, but what do you do when you > get a nation of elderly people who have exhausted > their money because they didn’t know how to manage > their retirement funds or outlived their savings? isn’t this what social security is for? that’s not working, either. i’d really like to read an article about how the people who lost their savings/pensions/etc. with Enron are fairing. wouldn’t it be great if you could hedge the risk with a cds of some sort?
If I am not mistaken, there is a government entity that under ERISA, insures against pension defaults (at least for DB plans). http://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation Of course, there are many other people who lose money to fraud or default, for instance Madoff’s clients.
The masses need to be educated on saving, investment allocation, and risk. I’m not trying to be a socialist but those subjects should be mandatory curriculum in every school across the county. I have plenty of friends who are very bright in their respective areas but are clueless regarding the aforementioned subjects. It doesn’t take a BS in Finance and Economics and a CFA charter to figure out how to save and how you should invest. I don’t want my tax dollars going to save some Fotune 500 pension plan because the two idiots running it thought a 40% allocation to commodities and natural resources was a great idea in 2008. 50 years ago DB plans were almost 85% fixed income. Most DB’s have less than half of that allocation now. Most of these plans leveraged up the risk at the wrong time, CALPERS for instance.