You can hardly pick up a newspaper, turn on the news or read a magazine where there is not a discussion about pensions. If you haven’t come across this yet, trust me, you will.
American companies, associations and state governments have a very serious issue. They have over promised pension benefits to workers while not taking care of the trust money that will fund these pensions in the future. General Motors is a perfect example. GM has become a pension company just as much as a car company. It has promises to past generations of people who are relying on that pension payment for their retirement. With more obligations than people paying in and bad investment choices, GM was in serious jeopardy. This is why the federal government had to step in to help. So, ask yourself as a taxpayer, where do you draw the line on paying for underfunded pensions? We have a duty to help others—but at what cost?
We will see this play out in Minnesota this year. The Public Employees Retirement Association General Plan (PERA) and Teachers’ Retirement Association (TRA) pensions are severely underfunded, and there will be discussions on how to fix this problem going forward. My heart goes out to those who are currently collecting on one of these pensions, as I’m sure they understand that something has to give. The state government is in deficit spending. I’m hopeful that this issue will be resolved correctly for the people on both sides.
Pensions For You?
People who have a pension like it because of the fixed monthly deposit into their account every month. It’s similar to Social Security in that it’s typically paid out for a person’s entire lifetime, no matter what happens to the stock market. It’s that security blanket.
We have served clients for many years with a variety of immediate annuities to provide them with protection and a monthly “pension like” income stream for life, to take care of day-to-day necessities. In many cases this covers both husband and wife, no matter the money source. The security of a protected income stream, has afforded our clients with a sense of comfort during times of volatile markets.
So, how do they work? A life insurance company acts as a pension company for the money that you invest. You deposit a lump sum of money with the insurance carrier, the money is invested, and you have a set monthly income based off the contract provisions.
These “create your own pension plans” rely on the insurance companies’ solvency rather than your past employer’s, and in most cases it’s easier to keep track of how that insurance company is performing. All immediate annuity products work a little differently and have different expenses and features associated with them, so you would need to speak to us about the specifics.
The concept of a pension is a wonderful idea, but you must be certain that the pension is sustainable. It makes sense to have a portion of your retirement income set, protected and stable for your future. If you want to discuss how this works and might fit your situation, give me a call. Also, if you know of people who have discussed concerns for their retirement income, have them call us for this discussion as well.