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Wither the Pension

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The grand old notion of working hard all your life for a single employer and then retiring, fat and happy, financially secure with a generous pension – well, that kinda seems like a 1940s concept, right? Or something people in Sweden do?

Your perspective on the efficacy and fairness of the traditional pension probably depends on a few factors: What your parents did while you were growing up, what sort of work your senior clients did during their working days, plus your memory of the current events of the last three decades.

The days of the pension being a given have all but dried up in most parts of the private sector, not only here but even in those once-prosperous socialist nations.

But the public sector still awards its employees in a sometimes maddeningly generous fashion; as the financial warbles weather on, both state and federal entities are finally cluing in that they may not be able to support the traditional pension system.

Or, at the very least, allow workers who started their jobs early and served their time, but have reached pension-worthy age well before traditional retirement age. With life expectancies now stretching further and further, a pension that begins at 59 might be drawn for 30 years, or more.

It’s even more financially impactful for military, fire and police retirees, who can often opt for still very well remunerated pension benefits at age 50.

According to a recent AP story, the notion of a 59-year-old teacher (granted, one who started work in his very early 20s) who will now pull in $174,308 per year in pension benefits, strikes some governments as being an unsupportable model.

San Francisco voters recently voted to raise minimum retirement ages for a portion of their city workers, and a state-wide initiative is seeking to raise the minimum retirement age for public employees and teachers to 65, and 58 for police officers. Even New Jersey bumped up its retirement age from 62 to 65.

At the same time, it’s well understood that private companies’ pension plans have all but disappeared (consider the plight of once well-funded airline pilots), leaving workers to rely on their 401(k) and other savings plans to carry them into retirement. And I think we all know what’s happened to the 401(k) safety net; we can only speculate what’s actually going to happen to Social Security as the Baby Boomers begin drawing benefits en masse.

The retirement age issue is popping up more frequently across the U.S. and the days of the golden parachute seem to be numbered.