Enron, IBM and the future of pensions plans
Enron officials Kenneth Lay and Jeffrey Skilling are on trial today in Houston for fraud and conspiracy charges. Since Enron first filed for bankruptcy in 2001, there has been an emphasis on the losses suffered directly by the company's 50,000 employees. Thousands were left with little or no pension after the company collapsed. For many, this loss was in the hundreds of thousands of dollars.
Pension programs have also recently been frozen or eliminated at some of the nation's largest companies, including IBM and Alcoa. Traditional pension plans (where the employer contributes a set amount) are being replaced by 401(k) plans (where the employee contributes for their retirement). According to The Christian Science Monitor:
Already nearly 65 percent of employers with retirement plans have a 401(k) system as their primary vehicle. But almost no plans are generous enough.
"Most people are going to arrive at retirement and not have adequate money," says Alicia Munnell, director, Center for Retirement Research at Boston College. "This is serious. None of us are good at doing our own retirement savings."
With the real value of Social Security pensions shrinking as Medicare premiums rise and the normal retirement age climbs to 67, the bottom one-third of new pensioners will be poor, Ms. Munnell says - far greater than today's 9.8 percent poverty rate for retirees.
When you add up all this news, the future looks pretty bleak for pension plans. It is an increasingly smart move for consumers to "back-up" their retirement savings with a secondary type of fund. In addition to 401(k) or pension savings, use independent IRA's to save for your golden years. If you are worried that your pension is at risk, research the Pension Benefit Guarantee Corporation (PBGC) and the Employee Retirement Income Security Act (ERISA) online for information about your benefits being protected by law.
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