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Current economic crisis helps make the case for guaranteed pensions

During the last few weeks, the Wall Street roller coaster has wreaked havoc on the economy and the retirement assets of the millions of American workers with 401(k) plans.

For workers who, like me, are relatively young and decades away from retiring, the current economic crisis doesn't make me terribly anxious about my 401(k). While the economic downturn concerns me, I'm not too worried because I have ample time to prepare for retirement. But I do admit that even I am too afraid to look at the balance in my 401(k) account!

But what about people who are closer to retirement age?  They have fewer years to make up the money their 401(k) accounts have lost in this volatile stock market. Imagine being only a few years from retirement and losing a big chunk of your expected retirement income because of the current crisis.

One person I'm not worried about is my mom. She's one of the 44 million private-sector workers and retirees lucky enough to have a traditional pension. She, unlike me, doesn't have to rely completely on the unpredictable stock market for her retirement security. She is lucky enough to have worked all her life for an employer who made and kept its pension promise to her.

You may be wondering what's so great about a traditional pension. Well, traditional pensions promise workers a set income for life and income for a worker's spouse in case of the worker's death. They're guaranteed. And when they retire, workers can't outlive the income they receive from pensions the way they can with 401(k) plans.

In addition, guaranteed pensions are part of the three-legged stool of retirement security, which consists of Social Security, personal savings and employer-provided pensions. The income retirees receive from pensions helps keep them out of poverty and has helped our nation build its middle class.

That's why I'm not worried about my mom's financial security in retirement. Her pension will take care of her post-retirement needs. It's those workers and retirees without the security of guaranteed pensions that I'm worried about.


Us retired folk who have relied on Enrolled Agents for Wells Fargo through HD Vest and advisors for AIG, ING, OPPENHEIMER etc. have lost hope in our retirement funds to carry us till death must come out of retirement or die early. What recourse do I have? The Government Regulators should be up on charges along with the Securities people who devised ways to lose our money while making huge profits.


George E. Mehlmauer/3busyguys.com/rev. living trust.
(951) 442-9503

Joellen's blog highlights that with the increased reliance on 401(k) plans, luck has grown to play an increasing role in retirement income. This element of luck creates a system of retirement income roulette. Workers currently on the verge of retirement are just plain unlucky that the stock market should decline so much right before they were planning on retiring.

In the past, luck did not play such a large role in retirement income because so many workers relied on defined benefit plans. With defined benefit plans, employers are able to smooth out the ups and downs in the stock market because the timing of their buying and selling of assets is smoother over time.

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