Reported Friday on my Yahoo News Feed, the aero space giant, Boeing, is ending their defined benefits program (pension) and moving to a defined contributions program (think a 401k or similar). Two generations ago, pensions were common for American workers.
What does that mean to you?
Whereas Boeing pension professionals once looked after the employees retirement accounts, now, effected employees will be responsible for:
Look at Boeing, and give them a lot of credit. Most companies ditched their pensions years ago (most went away in the 1990’s). Here is a feel for the trend:
We can get into the why companies are doing this at another time. But you need to see which way the financial winds are blowing as you move into your career.
You say not me; I am going to work for the government? Well, just see how today’s pensions stack up against the offers 30 years ago. They are a shadow of what they used to be, and many cities and counties are struggling to fulfill on that promise. May of those ‘promises’ are in question. Not good.
LESSON TO YOU?
You must have some basic financial acumen to assure you will have funding for the Golden Years. And statistically, you are not being taught that in high school or college and again statistically, if you are, you are not listening.
Lets just hit the most important point now:
This blog will help you get the lessons you need in a way that you can both understand and take action upon. There are a lot of other sites that can help and shortly we will point you to them.
Know the generation ahead of you is in sad shape in this department so you MUST do better. Remember, the opposite of failure is conformity.
Because pensions (Defined Benefits Programs) are going away or being gutted because both the public and private sector cannot afford them and remain competitive.
So if you think you are doing as good as others standing to your left and right, you are probably falling woefully short of what you need to do.
When you figure out how to fund the later (non-working) stage of your life, you will find that your biggest friend is compound interest (how money grows in a large way over the course of your life) (it also works against you with debt). It boils down to 3 parameters:
You will see a lot more on these topics over the coming months and years. This issue is vital to your long term happiness.
Stay with me, here we go.
Also, if you have specific question on any of this, and if you ‘get-it’ there should be, send them my way and I will prioritize them in a series of financial blogs.
About this data: (Please note that it is hard to get historical information because if you go back to say, the 1970’s, the assumption was all medium and large employers offered these benefits, and I predict if you are one of the few with a pension, these programs will be modified or eliminated over the course of your career. Private and public entities have too much of a challenge managing this volatile cost over time – So it is up to you!)