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Retirement Planning > Saving for Retirement

Endangered Species

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One day in the not too distant future in these United States, little Sally, age five or so, is going to climb onto grandpa’s lap, look up at him and ask, “Grandpa, what’s a pension?”

Then, in a scene reminiscent of an outdated sitcom, the room will cloud up as grandpa goes into a reverie, remembering how things used to be. When he comes to, little Sally, in the way of children, is still staring at him, patiently but intently waiting for the answer to her question.

Grandpa, who is all choked up with emotion, tells Sally, “Sweetheart, a pension is a form of financial protection that many, many people in this country used to have. It would pay people who had retired (just like grandpa is now) a certain amount of money every month. It was something people could depend on and gave them a sense of security about being able to pay their bills when they got older.”

Then grandpa asks Sally, “Honey, where did you hear about pensions?”

Sally, in all innocence, replies that her kindergarten class was studying things that had gone extinct like dinosaurs and dodos, when one of her classmates said he had heard his dad talking to a friend and saying that “pensions were no longer even on the list of endangered species, they were extinct.”

Grandpa then asks Sally what her teacher’s reaction was to what the boy’s father had said. Sally responds that the teacher told the boy that although the pension was not an animal like a woolly mammoth, it was what some people used to call a species of financial protection.

Then the teacher explained that most species go extinct for one or two main reasons. First, the teacher said, the species finds that circumstances have changed in its external environment and it can’t compete with other species the way it used to. Then, when it has weakened sufficiently, other species step up their attacks and finally kill off the last one.

Then the little boy whose father had made the remark about pensions asked the teacher, “Is that what happened to pensions?”

The teacher, a 20-something who had never met anyone who had received a pension, said, “Yes, I believe that’s what happened to pensions, Jimmy.”

Grandpa tells Sally that it seemed like she had some pretty interesting things to talk about in kindergarten, and she agrees that was so as she gets off his lap to get a call on her cell phone.

Now, the reason grandpa clouded over when Sally brought up pensions was that he was an employee of IBM back at the beginning of ’06 when the tech behemoth said it was ditching its pension plan for current workers and transitioning them to 401(k) plans. It was an emotional time for those employees who had been counting on IBM-style security in their retirement and it still–many years later–brought up strong emotions.

But grandpa was wise and when he realized that his guaranteed income was going the way of the dodo, he went out and invested his savings in annuities that, with their variety of guarantees, did the job just as well, if not better, than his extinct pension would have done.

That’s why he and the wife were able to put money into a 529 for the grandkids’ college education and have Sally and her brother Tommy stay with them at their vacation house on the Cape for the whole summer, year after year.

Steve Piontek



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