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Pension Planning and Benefits

Can You Count on Your Defined-Benefit Plan?

Can You Count on Your Defined-Benefit Plan?

A defined-benefit plan is a pension plan where the company promises to pay participants a certain benefit, with the entire cost typically funded by the company. Those plans are now under considerable pressure. The recent market declines have seriously eroded the value of pension assets, while declining interest rates have dramatically increased liabilities for future benefits to retirees. The shortfall is so significant that many companies will now be required to start putting significant...more

How Much Savings, How Much Growth? (A Guide to Your Own 'Right' Retirement Blend)

How Much Savings, How Much Growth? (A Guide to Your Own 'Right' Retirement Blend)

By James O'Brien. The market might be enjoying record highs , but investors are increasingly committed to their cash. And that includes retirees. A recent report from State Street's Center for Applied Research shows that investors are leaning in the direction of cash allocation. In part, that means they're opting for perceived security, when it comes to holding onto their money against potential market changes, but it also means that many of them are giving up the returns that higher-risk...more

What Does

What Does "Retirement" Really Mean?

By Paula Pant. What comes to mind when you think of retirement? The word has very different meanings to different people. For some, "retirement" refers to life after we stop working altogether. But this isn't the only definition of "retirement" -- and it may not be the version that would make you the happiest. Let's take a look at some alternative types of retirement to see which one you should be planning for. The traditional definitionThe most well-known concept of retirement is the one that...more

Are Defined-Benefit Plans Extinct?

Are Defined-Benefit Plans Extinct?

Defined-benefit pension plans have been on a steady decline for the last couple of decades, while defined-contribution plans, such as 401(k) plans, have increased dramatically. In fact, defined-benefit plans have declined from 148,096 plans in 1980 to 56,045 in 1998 (the last year data is available), while participation in defined-contribution plans has tripled during the same period (Source: Federal Reserve Bank of Dallas, October 2004). In 2003, 44 million individuals were covered by...more

Retirement Dilemma: Pension or Payout

Retirement Dilemma: Pension or Payout

Picture this: you are getting ready to retire from your company where you have been a loyal employee, working hard for 40 years. The company offers you a $350000 lump sum payment instead of a $1600 lifetime pension. To quote a popular TV show, deal 'Or no deal' Even though many of us would like to be in this situation the truth is this is a major decision and there is no easy answer. The dilemma to take the pension or the payout is quite common in the current corporate, post employment world....more

Take Advantage of that Employee Retirement Plan

Take Advantage of that Employee Retirement Plan

Your company retirement plan is probably the most important yet overlooked investment tool available for a successful retirement. Let's take a look at the most common company plan the 401K. No other investment you will ever make will give you the advantages of your 401k plan. Contributing money to a 401K gives you an immediate tax deduction, tax-deferred growth on your savings, and usually a matching contribution from your employer. This is pretty amazing when you think about it. If your...more

Your Retirement Plan: the Buck Stops Here

Your Retirement Plan: the Buck Stops Here

Recent articles in the Wall Street journal have painted a pretty bleak picture about some major companies? retirement plans in danger of defaulting. This raises an important question-is my retirement plan at risk? The answer to this question is complex and depends on the type of retirement plan your company offers. To start, let's take a look at the two types of retirement plans most commonly offered by employers. The Defined Benefit Plan This type of plan the employer promises a fixed...more

Investment Philosophy for Pension Trustees

Investment Philosophy for Pension Trustees

Does the trustee for a tax qualified retirement program have to take factors into consideration not present for the general investor? We think so. We think there are two major considerations which the trustee must take into account and which the average investor does not concern himself with. The first general consideration arises out of the fact that the trustee is dealing with tax sheltered funds. In effect, he is playing a 'heads you win & tails I lose' game with the Internal Revenue...more

Is Your Pension Safe?

Is Your Pension Safe?

Most people assume that promises made to them by their employers are iron clad. For those of us who are self employed we have no employer to rely on and must rely on ourselves to make sure our future retirement is secure. 'Pension' is thought of by most people as a defined benefit pension plan that will pay a fixed dollar amount when you retire. Those plans are few and far between today as many businesses and employers try to reduce their expenses. This shift brings 'defined contribution'...more

Municipal Pension Minutia

Municipal Pension Minutia

The state and local governments are getting pretty slick at enticing our civil servants to take pensions early, based on emotion. As a general rule, you never want to make financial decisions with emotion. You want to operate only in the realm of logic and reason. What the new employer trend is to take a particular topic and heat it up emotionally to take the focus off of the real issue. Most recently many employers have used this negotiation tactic to drive people to make emotional...more

The Pension Issue

The Pension Issue

The term pension can have several meanings which I'll define for you to help you better understand the endless stream of technical terms those in the financial world seem to enjoy manufacturing. This conversation comes from two perspectives - the one of the employee and the one of the business owner. The first and most common meaning of the term pension is an income that is paid to a worker (typically paid monthly) for services given to the employer after separation from service (hopefully...more

Defined Benefit Pension Plan Disaster

Defined Benefit Pension Plan Disaster

To understand how best to develop a financial plan it helps to understand how some plans can go horribly wrong. We need to look no further than Defined Benefit Pension Plans (DBPP). Despite all the efforts of highly qualified actuaries and helpful government legislation this multi-decade movement has turned out to be a train wreck. DBPP were set up decades ago to provide pension benefits for company employees. However, it is now becoming increasingly apparent that in aggregate these plans...more

Pension Plans: Fancy projections, Dangerous Outcomes

Pension Plans: Fancy projections, Dangerous Outcomes

The problem with this methodology is that the whole analysis starts with theoretical assumptions. No doubt these assumptions seem reasonable and can be defended, but starting here in your planning or placing too much emphasis on these theoretical assumptions starts you off on very shaky ground and creates additional problems as you go along. Very long term returns, say over 50 years or so have historically been relatively stable, and so arguably it makes some sense for an institution with a...more

Pensions: Who's the Patsy?

Pensions: Who's the Patsy?

"Will I have enough?" We all ask ourselves this question, and more than once. It strikes at the heart of our own sense of financial security. Although there can't be a definitive answer as it depends on so many variables far in to the future, we can all clearly improve our prospects by formulating an effective plan of action and executing it well. Now the question becomes "What is an effective plan?" This is where the controversy begins. Most investors are still directed towards a plan...more

Are Company Retirement Plans About to Get Better?

Are Company Retirement Plans About to Get Better?

Depending on your vantage point, I guess this question could be debatable. Yet, to me, it certainly seems like things are about to get better! Want to know why? Maybe in your parents? generation, certainly for your grand-parents' and possibly in your great grand-parents' day, one of the secrets for achieving 'the good life' was to work for a big company with a pension plan. Although fewer than half of private sector workers ever had a defined benefit pension, it was one of the few...more

Pension Reform:  Defined Benefit Plans - What's Wrong?  What Needs Fixing?

Pension Reform: Defined Benefit Plans - What's Wrong? What Needs Fixing?

Citing a February 2006 report by Charles Morris, of The Century Foundation, "The first realization that [Defined Benefit plan] pension promises were not ironclad may have come when the Studebaker Co. folded in 1963 and defaulted on its pension obligations. Congress eventually responded with the Employee Retirement Income Security Act (ERISA) of 1974. ERISA established financing and accounting standards for defined benefit pensions and created the federal Pension Benefit Guarantee Corporation...more

Pension Reform:  So, What's Washington, D.C. Doing About All This?

Pension Reform: So, What's Washington, D.C. Doing About All This?

In 2005, with Social Security reform having gone nowhere early in the year, pension plan reform quickly took center stage on Capital Hill. It might have seemed that defined benefit plan issues dominated the legislative agenda, but defined contribution issues started gaining traction as pension reform moved through the House and the Senate. The result of this focus produced both the Pension Security and Transparency Act (PSTA, S.1783), approved by the Senate on November 16th and the Pension...more

What To Do With That Lump-Sum Distribution?

What To Do With That Lump-Sum Distribution?

For many Americans, a comfortable retirement is the reward for years of long work hours, bumper-to-bumper traffic and endless staff meetings. Finally they have more time to travel, play golf, visit with the grandchildren, or just do anything they like'they're retired!! However, with these new opportunities come additional financial challenges. According to the Center for Health Statistics, an individual retiring today at age 65 can expect to spend 15 to 20 years in retirement. Therefore, it...more

Are Pension Plans in America the next Enron?

Are Pension Plans in America the next Enron?

As the trial of Ken Lay and Jeffrey Skilling of Enron draws to a close, most hope this will bring an end to one of the worst chapters of corporate greed and investor fraud in American business history. Enron's collapse in late 2001 wiped out $60 billion of capital from investors, employees, institutions, and public municipalities. However, Enron's demise could pale in comparison to the financial crisis that lies ahead if something isn't done about the under-funding of private and public pension...more

Pension Income Planning: Lump Sum or Monthly Fixed Pension

Pension Income Planning: Lump Sum or Monthly Fixed Pension

Retirement Income Planning - Know the distribution options for your 401k and monthly fixed pension now before you retire. Do you ever feel overwhelmed by all the financial decisions for which you are responsible? Are you afraid that if you make one little mistake, it could have a severe impact on your retirement? If so, you are not alone. According to Prince & Associates, a leading market research firm on the private wealth markets in the U.S., the number one fear of nearly nine out of ten (88...more

Social Security: Are the Forecasts of Doom and Gloom Fact or Fiction?

Social Security: Are the Forecasts of Doom and Gloom Fact or Fiction?

Will Social Security eventually go broke and be unable to pay any benefits, or is this a big myth? That was the focus of a seminar I recently attended at The Kaye Playhouse at Hunter College, as part of The New York Times Speakers Series. The panel setting was moderated by Robin Toner, domestic correspondent of The New York Times, and featured Paul Krugman, an Op-Ed Columnist of The New York Times and professor of Economics and International Affairs at Princeton University, John...more

State-Created Retirement Plans: New Proposals Aim to Close Small-Business Gaps

State-Created Retirement Plans: New Proposals Aim to Close Small-Business Gaps

By James O'Brien. More than a dozen states are exploring ways to offer new retirement options to private-sector employees. A number of the proposals under consideration are close to being implemented, and that could mean new and helpful retirement tools for workers, especially among small businesses. More than 70 million baby boomers are preparing to retire, and the percentage of private-sector employees who can count on a defined benefit plan has dropped to just 13% compared to about 33%...more

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