Quote:
Originally Posted by Susan815
Having no pension when I was laid off, I didn't realize all the games that are played by employers to avoid paying them. You have really given me an education on pensions!
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Oh boy
The vast majority of employers who offer pensions or did at one time, did so with the best of intentions. Most employers do
not try to screw their employees out of their pensions.
A few do and those are the ones that make the news and make people think that pension=bad and that pension plans are worthless.
What does happen QUITE often is that people don't understand their pension benefits. They don't understand how the plan works and what they are really getting or giving up when they leave. Some of that blame falls on employers for not explaining it well enough. But most of the shift away from pensions anyway is due to the reasons noted in my post above.
For example, many plans offer monthly benefits
prior to normal retirement age. If you are 55 and have earned a benefit of $1000 per month, payable at age 65, the Plan might allow you to retire early and begin receiving payments immediately.
Now, the benefit is likely to be reduced. Maybe you only get $850 or so. Maybe you only get half at age 55! People refer to this as an "early retirement penalty" or "getting screwed out of my pension." They forget that the benefit is a benefit for life and that they are going to receive
120 additional payments! It's actually a
subsidy, but people don't see it that way.
Another example: Pension benefits by nature and design grow slowly in the early years of employment. They are typically a function of pay and years of service. So if you leave employment after just a few years or if you have only a few years worked when the plan terminates, your benefit will be pretty small. The longer you earn benefits in a pension plan, the
faster they grow.
Again, people don't realize this and so if they leave after only about 10 years or so, the pension to them is a joke. They don't realize what they lost because the benefit had barely started to grow.
Then you have the many pension plans that are terminating. In this case, a younger, shorter service employee may have a very small monthly benefit. However, with interest rates at historical lows, there is a great opportunity there to take the lump sum that is offered (which is higher than it would be if rates were higher) and INVEST it to make
more of what's been given. ROLL IT OVER. SAVE IT.
But people don't. It doesn't seem like enough to bother with. So they lose a chunk of it to taxes, they spend the rest. And then they sit around and complain about how the company screwed them! When you do that - you HURT YOURSELF!
A "measly" monthly benefit that results in a $5,000 lump sum, saved for 30 years to retirement age, can become $29,000 or more. No, you can't live on that alone. But for a few years of work, it's not exactly a kick in the pants by the employer.
Yes, I know there are many stories out there of people who have been screwed. Everybody knows someone or has been that someone. But it's very important - especially in this economic environment that we are not so quick to jump on the bandwagon and assume that every employer is out to screw us.
Stop and try to put things in perspective. Stop to wonder if maybe there is a missing piece of information in that story. Because quite often, there is!
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