"....Many of my Baby Boomer peers think a secure retirement should be normal because it’s what we saw in our formative years. In the early 1980s, about 60% of companies had defined-benefit plans. Today it’s about 4% ...
...Such pensions are all but gone from US private-sector employers. They’re still common in government, particularly state and local governments; and they are increasingly problematic. They are another source of angst for retirees, government workers who want to retire someday, and the taxpayers and bond investors who finance those pensions...
...ERISA also created the Pension Benefit Guaranty Corporation (PBGC) to insure pension plans from default and malfeasance.
Many experts believe the PBGC will run out of money in as little as 10 years at its current funding levels. The PBGC is not taxpayer-funded (yet) but exists as a classical insurance fund into which each retirement plan pays roughly $27 per year per covered employee. That figure would need to increase to $156 per year per person just to give the PBGC a 90% chance of staying solvent over the next 20 years...
... if your plan goes bankrupt and you fall into the gentle hands of the PBGC, your pension funding is likely to be cut by 50% or more. Plans that were at one point quite generous could see their beneficiaries lose as much as 75–80%...
...State and local governments can’t run endless deficits the way the federal government does.
....That’s all obvious; yet, for some reason, two things happened in recent decades:
State and local politicians kept raising pension benefits.
State and local workers believed the promises...
...we can’t expect city council members and firefighters to be financial experts. But they have access to experts. The unions that negotiate most public pension contracts have their own lawyers, accountants, and actuaries. They should know whether they are being offered unrealistic projections and promises...
[Example]
...Narvaez, 77, got a union certificate upon retirement in 2003 that guaranteed him a lifetime pension of $3,479 a month....
...in February of last year. It said monthly pensions had to be slashed by more than a third. It was an emergency move to try to keep the dying fund solvent. That dropped Narvaez from nearly $3,500 to about $2,000....
...Local 707’s pension fund fell off the financial cliff this month. With no money left, it turned to Pension Benefit Guaranty Corp. ...Narvaez now gets $1,170 a month – before taxes...
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