For those of you who have read my previous postings, you will no doubt recall my warning about the future of social security, or lack thereof. Let me be perfectly clear here; this crisis that awaits social security is bearing down on defined benefit pension plans as well.
A case is point is last week’s court decision allowing United to dump their pension fund, which is under funded to the tune of $6.6 billion, in the lap of the Pension Benefit Guaranty Corporation. This is just the latest in a continuing series of pension fund defaults. Next up, General Motors, whose bonds were downgraded to junk status because of the company’s huge pension funding deficit.
Lest you think that you are safe because you do not pay into social security but a private retirement fund, take note of the latest news and plan accordingly. I know what your thinking…my pension plan is insured by the Pension Benefit Guaranty Corp. Even before the United pension mess, PBGC is facing a shortfall of $23 billion from a string of corporations who have gone under in recent years. Even if your particular plan is solvent and looking good 20 years into the future you need to understand that one of the governments fallback plans is to absorb those private plans into social security in the event that a crisis develops.
When that happens your benefits will be severely reduced, just like in United’s case. This brings me back to my original post. No one cares more about your money than you. You need to take control of your finances, boost savings, and prepare for the worst.
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