Broker Check

Watch what governments do-and say-about your pension.

| April 14, 2014

Protect your retirement if you're eligible for a pension.

Get the facts. And have a professional analysis done.

If you or any of your loved ones / family / friends already have – or are expecting – a pension from a “Multiemployer Pension” (often associated with a union and several companies paying into it,) please try to stay calm when reading the remainder of this material.

 The PBGC – the Pension Benefit Guaranty Corp – is a government-funded agency responsible for “backing up” pensions in the private (business) sector.  (Let’s leave aside, for the moment, issues with pensions in the public sector, e.g. Detroit Police & Fire, to name one unfortunate example.)

“Unless Congress acts — and acts very soon — many plans will fail, more than one million people will lose their pensions, and thousands of small businesses will be handed bills they can’t pay,” said Joshua Gotbaum, executive director of the Pension Benefit Guaranty Corporation, the federal insurer that pays benefits to people whose company pension plans fail.

So, arguably, the headline of the article linked below might have included the factoid that the (Federal) government agency backing up these pensions is also running out of money and won’t have the funds – without additional action from Congress – to back up these pensions if any of the plans fail.

Who will this problem affect?  If it’s you, what should you do about it?

 For a starter, pay attention.  If you get some obscure, legalistic looking letter or envelope from your pension – open it – read it – and if you don’t understand it, find someone who does.

In the world of financial / investment / retirement advice and planning, there are virtually always advantages & disadvantages to every action.  Same is true here.

If it were me, and my multiemployer pension offered me a lump sum, I would get the facts!  The facts would specifically include having a professional financial advisor “run the numbers.”  Running those numbers includes knowing how large a “pension / immediate (joint) fixed life annuity” (which functions similarly) could come from that lump sum. 

I’ve definitely noticed that the pension payout from these plans was often much richer than the lump sum payout.  There was a reason.  The Plan wanted to hang on to the principal sum.  So, I’ve previously encouraged people to not take the lump sum.

For people who still have that potential decision in their future, it’s time to rethink!


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