financial reflections

Part of the American Dream once included working for a company for 25-40 years and getting a decent pension that would let you live out your retirement years in peace.  I recall seeing that dream erode in the 1980s, and now it looks like pensions are near collapse.

Shouldn’t companies have put away enough money for the future?  Were finance executives out playing the ponies with pension funds?  Why has this part of the American dream become a nightmare?

Even back in the 80s I saw the writing on the wall.  Companies stared laying off employees and promised less and less to those coming in.  Never mind that I haven’t done anything about it, I did know that a pension was a perilous thing to hope for.

But what caused the fall of pension plans?  Shouldn’t a sound pension plan essentially be a gigantic 401(k) fund?  With the massive size of the fund, one would assume that company managers could steer the funds into sound investments, allowing for great growth.  But that hardly seems to be the case.

One problem, if you can call it that, is that we live longer now than we ever have.  I have an eighty-something relative who has been retired as long as he was working.  And he’s not alone.  There are many octogenarians (and older) who have been living far longer than their original pension planners–perhaps now deceased–could have imagined.  And if you extend that problem to younger folks, you may need to plan to live to 100.

If that was the only problem, perhaps some restructuring could have saved things.  I hear that some funds might not be managed very well and some are already in trouble.  But new accounting rules for pensions may shed some light on how stable one’s pension really is.

There’s not much I can do on the pension front anyway.  It’s a little late in the game for me to get started, so I’m going to try to move my net worth higher with 401(k) and Roth funds.  At least I won’t be so worried that the retirement funds will disappear some day…