Pension Plan

Toward the end of the 1800s companies in America began to evolve from mom and pop shops to large corporations. With that shift, Americans began to trust in their employers to provide them with pension plans. By 1980 35.9 million private-sector workers (46 percent of all private-sector workers) were covered by a pension plan. In the 21st century, pensions are rapidly becoming a thing of the past. If you still believe that a pension plan is going to take you to the glorious sunset of retirement, perhaps a dose of reality may open your eyes to a sobering outlook.

Steel Workers

The birth of high-rise buildings and railroads created an insatiable demand for steel. Both innovations enabled people to have more efficient modes of transportation, which fueled population growth in metropolitan areas. The steel industry gave people a chance to make a good living, and therefore, people worked in this industry their entire lives. As steelworkers have aged and the steel manufacturing industry has experienced a dramatic shift in recent decades, pension plans have failed to meet their financial obligations to hundreds of thousands of workers who count on their defined benefit plans to survive. In fact, the metals industry accounts for about 27 percent of pension plan failures.

Air Travel

Airlines throughout the world were forever changed by September 11 when all airplanes were grounded. Since then, the larger and more established air travel companies were crippled by high fuel costs, poor labor relations, and an economy that incubated an increasingly cost-conscious consumer. Consequently, 257,280 employees in the industry were financially impacted by a failed pension fund. This pension failure created a massive financial liability for the Pension Benefit Guaranty Corporation (PBGC), a government funded entity that assumes responsibility for failed pension plans.

Private vs Government  Pension funds

Previously, pension plans were the foundation of a solid retirement. However, times and economic forces have caused a seismic shift in the economic viability of defined benefits in the workplace.  As Baby Boomers retire at an increasingly rapid rate, traditional defined benefit pension plans offered by private employers are rapidly facing extinction.  Additionally, government funded pension funds are entering the endangered list in rapid fashion. The 10 worst state pension plans in the country are all less than 50% funded. In other words, if all of the employees left work today and demanded payment for their pension plans, less than half would get paid the full amount and the other half would receive nothing! To further put this into perspective, these low performing pension plans have roughly 1.5 million employees.

Why you should be concerned

Since 1981, the number of pension plans has decreased by nearly 70 percent. The previous generation of retirees was able to enjoy their pension plans, social security, and their individual savings as a solid foundation for retirement. Clearly, those days are becoming distant memories as the shifting economic climate is forcing us to take refuge in our own structured retirement plans. If we intend to survive the impending financial storm, we must take matters into our own hands since we will always serve our own best interests.

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