Pensions/Retiring Boomers

[1967 R50/2]

http://money.cnn.com/2006/06/12/magazines/fortune/pension_retirementguide_fortune/index.htm?section=money_pf

Great article summarizing the financial problems presented by retiring boomers, their political importance, and their desire for entitlements.

For a long time AARP has scared me for just the reasons that the author lays out.


Oh yeah...the article is also about pensions.

[widgeon13]

That is a good article but I don't believe it tells all the facts. I believe that a company that has a defined benefit plan is required by law to fund it as required on an annual basis. Trustees also oversee this initiative. Companies have avoided doing this and consequently get hit with a big amount further down the road, at that point they then default on the financial obligation. The result is that it then becomes the responsibility of the Pension Benefit Guaranty Corporation, a government agency. They sort of take the existing funds from the company and reduce benefits to the retirees while adding on to the tax burden in order to meet all it's obligations. (In other words the tax payer pays the bill, as usual)

I think that explanation is grossly oversimplified and perhaps inaccurate since I did no research in preparing this response but it should be good for some healthy discussion. I am not claiming to be an expert so don't shoot the messenger.

I took early retirement in Jan 2004, I was an officer of my company but had no benefits that separated me from any other employee regarding defined benefit plan. I could have taken the defined benefit plan BUT I took a lump sum settlement for the reasons sited in the article. I would rather fuch myself than have someone else doing it for me. I also fully funded my 401K every year I could as well as funded IRA's for both my wife and myself ( Jan 3 of every year). We saved religiously, if the plan works I will go in the ground just as the money runs out.

I do not blame the goverment for this situation, I blame the corporations for failing to acknowledge the problem long ago, they knew it was coming and were hoping for some miraculous event to save there a$$es, the PBGC has now given them that opportunity.

[Dixie]

As a group, retiring Boomers scare me. (And I am one.) Why? Well, once they retire they'll need money. More money they have. And how will they get it? By raising taxes!

That's why I save a chunk on an after-tax basis...

[widgeon13]

They will also start taking money out of the market in significant volume, that ain't good either.

[Moneyguy1]

I'm retired and still investing. I do not think people change all that much when they retire as long as they have planned well.

That being said, I fear for the following generations with the elimination of defined benefit pensions, rising medical costs, and cutbacks in Social Security. The amount required to comfortably retire that has to be put away monthly for 30 years is damn near impossible for the majority. And no one can predict inflation or market performance.

[mjohnson]

Originally posted by Capt. Carrera
That's why I save a chunk on an after-tax basis...

Yeah, I wonder about that.

We maxed out our 403b and 457 plans while we worked for a nonprofit, now we're doing the same with the 401k after our contract changed.

No significant after-tax investments.

So I'm thinking, all of the 401/403 stuff is tax-deferred. Who's to say that in 2035 the tax rate won't be through the roof? Maybe we should be paying taxes now so we won't have to later?

Then again, who knows if we'll be paying taxes later after paying taxes now?

That does it -- I'm burying gold, collectible flatware and Franklin Mint stuff in the back yard...

mike
'78SC

[Moneyguy1]

How about a Roth IRA? after tax investments, no tax on withdrawal.

[Flatbutt1]

Originally posted by Moneyguy1
How about a Roth IRA? after tax investments, no tax on withdrawal.

but limited contributions dependent upon earnings. The more you earn the less you can contribute..I think...

[Dixie]

So I'm thinking, all of the 401/403 stuff is tax-deferred. Who's to say that in 2035 the tax rate won't be through the roof? Maybe we should be paying taxes now so we won't have to later?

Here's what I do. I put enough in my 401k to get the company match. Then I put money in my wife's Spousal Roth IRA. After that I'll put money in her Traditional Spousal IRA (She does not work, so it's deductible.) Finally I put some money in 529 plans for each child. (I do not worry too much about the 529s because I'll be old enough to pull money from retirement savings to help with college costs.)

Then we eat beans, drive cars that are old, and hope nothing breaks….

[RoninLB]

Retirees have a large % voting. 77 million Boomers will demand Gov't entitlements imo.

[1967 R50/2]

Originally posted by RoninLB
Retirees have a large % voting. 77 million Boomers will demand Gov't entitlements imo.

Which is why I am scared.

[turbo6bar]

Originally posted by 1967 R50/2
Which is why I am scared.

Anyone with personal retirement savings should be very worried. The government tells us Roth IRAs have tax-exempt withdrawals during retirement. There's no guarantee at some point in the future Uncle Sam won't ask for a 2% redemption fee. Any person with money has something to lose.

[widgeon13]

First of all, it does no good to be scared of something you have no control over.

I'd rather have something to lose than nothing at all. The goverment has enough problems w/o screwing with people on fixed incomes. Since the average age on this BB is probably in the 28-35 range (guess). As a wage earner, I would be the one to worry. You are challenged to save for your own retirement as well as bale out the poor ba$tards at Delta, former Enron employees and the most recent victims from the IBM decision as well as all the others whose companies have defaulted on their obligations. It all boils down to ethics.

I would bet that most people on this BB have more of a plan than the other 99.5% of the population.

I'm probably a little too cynical but most Americans live for today and expect the goverment to bale them out in the future anyway.

[David]

If you're married and your combined income is less than $150K you can put the full $4K each in a Roth IRA. That amount decreases for the next $10K you earn and at $160K you can't put money an Roth IRA.

Our company did away with the retirement plan a few years ago. They grandfathered older workers (not me). They still match part of our 401K investments and give us 4% of our salary into a new retirement plan that's portable, so guess we don't have it too bad.

The good part is many older employees left when they got the chance so they wouldn't loose any retirement benefits. Many of these folks had the old utility mindset which wasn't good so I wasn't sad to see them leave.

[1967 R50/2]

I contribute the max to my companies 401K and get matched on 6%.
I also contribute to an IRA, even thought it is not tax deductible at my income level. Call it self discipline. I contributed to a Roth before that. And my company has a pension...for how much longer I am not sure, but they have one now.

So suffice it to say that I am about as covered as one can get.

Problem is, I doubt that it will be enough, especially if I have to pay for other oldsters once I retire. My concern is that their lack of planning will create a crisis on my part.

[Howard Agency]

Fun (?) read..

Fool

[widgeon13]

Retirement erosion
Strapped companies are axing them, healthy companies are freezing them, and more than half of U.S. workers will never even get near one: It’s the traditional pension, and it’s not long for this world. You should be worried.

Top 10 claims in PBGC history
1. United Airlines $6.6 bln 2005
2. Bethlehem Steel $3.7 bln 2003
3. US Airways $3.0 bln 2003, 2005
4. LTV Steel $2.0 bln 2002
5. National Steel $1.1 bln 2002
6. Pan American Air $841 mln 1991
7. Weirton Steel $689 mln 2004
8. TWA $668 mln 2001
9. Kaiser Aluminum $566 mln 2004
10. Eastern Airlines $553 mln 1991

[Joeaksa]

Originally posted by Moneyguy1
I'm retired and still investing. I do not think people change all that much when they retire as long as they have planned well.

That being said, I fear for the following generations with the elimination of defined benefit pensions, rising medical costs, and cutbacks in Social Security. The amount required to comfortably retire that has to be put away monthly for 30 years is damn near impossible for the majority. And no one can predict inflation or market performance.

Not retired here (yet) and agree with Bob on this. The recent actions by United and other large companies worries me.

[red-beard]

The Hospital where my mother worked went "not for profit" and then found the pension fund, underfunded and it was transferred.

She worked an extra 5 years so that she would get $600/month in retirement. Now she gets $200/month.

[cashflyer]

Boomer demands: My wife told me about this one recently.

She works at a nursing home and said that the administration has advised them that as boomers start making up a greater percentage of the customers, there are coming in more request (demands) that the staff change from their flower-print, scrub-type attire and revert to more traditional white outfits.

I asked her, 'so what do you have against nurses looking like nurses?'

That didn't go over too well with her, but I don't see a problem.