Resources

One of the most sobering things to me is the number of people who are unaware that their pension plans are NOT Guaranteed. When I was working as a Personnel Manager for a major utility I learned that pension plans are considered benefits and just like a company can change its medical benefits, they can change, modify or eliminate a pension plan at any time--before or even after a person has retired. Look in your benefits booklet and you will see the exact language.

When my company went through their first down sizing they hired some financial 'experts' to speak to those considering accepting their early retirement package. During their orientation, I asked how these experts were going to handle this bit of information--how they would tell these people that their pensions were not guaranteed. They laughed and told me it was a non-issue, that it would NEVER happen, and that I was worried about nothing.

Now the American Institute of CPAs (how conservative are they?) is warning people that the Pension safety net is weak and should not be relied on, and last week the feds announced that Social Security is weaker than they last thought. That leaves only one leg of the three legged retirement stool left--personal savings... Unfortunately most people think they have to 'invest' in the stock market or real estate market in order to shore up their savings... and are unaware they can get stock market returns WITHOUT having to put their money at risk, and have better tax savings than through their 401ks.

Pension Benefits Reduction

The vast majority of CPAs serving as corporate CEOs, CFOs, Controllers and in other executive positions believe American companies can't continue providing pensions that adequately cover their employees' retirement years, according to the results of a new survey by the American Institute of Certified Public Accountants (AICPA).
Moreover, many CPA executives believe reductions in pension benefits pose a threat to a company's ability to attract and retain the talent they need to compete.

"These findings are a wake-up call," said John Morrow, Vice President of the AICPA's division for CPAs in business and industry. "The traditional system of rewarding employees with pensions after long years of service is on its way out, because companies simply cannot bear the cost. Therefore, employees will have to find alternate methods of funding their retirement."

The AICPA surveyed more than 3,100 of its members in business and industry during the month of April. Of them, 59.5 percent work for private companies, and 21.4 percent are employed in public corporations. The remaining respondents are in the not-for-profit and government arenas.

When asked if U.S. companies could continue providing employees with pensions that adequately cover their retirement years, nearly three in four (74 percent) of the respondents said no. More than half (54 percent) indicated that the erosion of these benefits would hurt recruiting and retention efforts. A slightly higher number (57 percent) believe rising healthcare costs are the biggest barrier to a company's ability to offer pension benefits; nearly a third (30 percent) said the pressures to compete in the marketplace outweighed the pressures to provide retirement benefits.

Virtually all the respondents said their companies offer some type of retirement benefit today, with the majority offering a 401(k) plan with matching contributions (65.6 percent). Less than 5 percent said their companies offer no retirement plan at all.
Interestingly, well over half the respondents (59 percent) believe Americans have to educate themselves about retirement savings strategies.

"American workers have to understand the pension safety net will probably not be there for them and that planning for retirement is their personal responsibility" said Carl George, Chair of the AICPA's National CPA Financial Literacy Commission. "Americans must recognize that unless they take a more active role in their own retirement planning, they may find themselves working far longer than they had intended."

Jim Kindred,
Financial Strategies Group, LLC,
1031 S. Bluff, Suite 105,
St. George, Utah, 84770.