Friday, February 11, 2005

Target: Pensions

Nifty article at US News & World Report:

"Pension Tension"

And a prescient quote from the article:

...Because of small corporate contributions and subpar investment returns, the average 30-something who does manage to collect from a 401(k) will get less than $400 a month (in 2003 dollars) on turning 67, the institute predicts. The average 70-year-old pensioner today gets more than twice that.

Anyhow, the article makes a pretty nice summation of the current (flawed) system, IMHO. Workers such as those at GM, whom I encounter on a weekly basis, who believe their gilded pension benefits are guaranteed beyond any special circumstance, need only look around to the current situations of some their comrades in other mature and unionized industries (airlines, steel, etc.).

What the company giveth (and the government guaranteeth), the company and government may also taketh away.

When it comes to money, there are very, very few real guarantees.

— Posted by Michael @ 12:59 PM








2 Comments:
 

Isn't a pension different from a 401(k)? I know lots of pensions have either been pared way back or have gone the way of the dodo bird. However, 401(k)s belong to the employee. The only way they can lose them is through market losses.

I'll check out the article.

JLP

http://AllThingsFinancial.blogspot.com

 

Pensions and 401ks are very different entities, as you say. I think what the article is saying about 401ks is that most younger employees take minimal advantage of them — meaning that they make little or no contributions to the accounts. Thus, they will have very little in the way of monthly income from those same accounts 30 years down the road.

Contrast that with some of today's retired pensioners, many of whom receive pretty significant monthly checks from their company-sponsored pension plans.

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