Will Your Pension Survive?

Nearly 20% of Americans rely on pensions to pay the bills in retirement. But as the market tumbles and the economy teeters, companies are changing their pension plans and pension funds are losing billions, leaving millions who had a guaranteed source of income wondering what will happen.

Charles Millard, the executive director of the Pension Benefit Guaranty Corporation, reassured viewers that while his agency has lost $2.1 billion so far this year, it still has $63 billion in assets and continues to pay out approximately $2.5 billion each year in private-sector pensions.

According to Millard, PBGC is taking deliberate and careful steps to change its investment policy in order to close the gap between assets and liabilities over time. Part of that plan involves a move into equities – but rest assured, he said, that that part of the policy has not been implemented yet and thus the agency’s performance as of late has fared much better than other large investors in the face of the market turmoil. In the end, Millard expects PBGC to be 45% invested in fixed income, 45% in equities, 5% in real estate and 5% in private equity – an approach he called “relatively conservative.”

If you’re one of the millions of Americans without a pension, relying solely on an employee-sponsored 401(k) to get you through your golden years, make sure you’re getting the most out of it. Bill Losey, our resident retirement expert, recommended checking with your employer to make sure your 401(k) plan is funded properly. Also, he said, follow the overall rules of spending less, saving more and consider working longer (even if it’s part-time). And if you’re able, max it out – money you contribute to a 401(k) is tax-free.