Retiree's

[johninpa69]

What happenses to the Ford retirees pentions if the company goes bankrupt?

[Pioneer]

What happenses to the Ford retirees pentions if the company goes bankrupt?

 

 

It's turned over to a government entity (forgot the name) and you will get paid by them. In the past, you have received about $.50 cents on the dollar, and you lose all medical benefits.

 

Scary.

[retro-man]

If I were a retiree in any of the big three right now, I'd be sweating rabbit turds. We've seen it happen to Enron, WorldCom, Lucent, National Steel, Bethlehem Steel, United Airlines, and countless others. I feel sorry for all those who worked faithfully, counting on these, only to find themselves at the back of the line when it came time to dismember the carcasses of their companies. Such a violation of contract, and of trust.

 

Their situation is not so much different from those who more recently were upgraded to one of our newer retirement plans: 401K. We'll see how that works out. Dow closed below 8,000 today. I could imagine it slipping all the way to 5,000 - or maybe, God forbid, even 3,500. Anyone remember the talk from a few short months ago about what a great idea it would be to invest Social Security funds in the stock market?

 

The lesson of our generation: Better off to put it under your mattress.

 

 

 

And don't count on retiring. At least not voluntarily.

[lfeg]

PBGC is the agency. Back when the steel industry collapsed, what generally happened when a company defaulted on the pension plan was that the retirees received a letter from the PBGC notifying them what portion of their company retirement benefit would be replaced by them. Only the pension benefit itself is covered, all else (medical, perscription, vision care, etc.)disappears. The maximum PGBC benefit is set by a formula they have, and the funding in the PGBC pool. The more people covered by PBGC, the thinner the payments will be, and as companies with defined benefit plans go under (they are the ones that pay into the pool) the pool will be smaller. Not good. If there are Chapter 7 filings, and Chapter 11 filings where the pension plans are dumped onto PBGC it will need its own bailout.

[old_fairmont_wagon]

For those grousing about 401K plans, remember, they require good stewardship. When you are young, you have many years to play the odds that, over the long haul, the stock market gains value. (well, has gained). We're getting back to 90s levels with the DOW right now, and, before its all said and done, it make retreat to 50% or so of its peak value. In between big corrections, the DOW typically returns between 6 and 8% per year. Those are good percentages on a long term strategy. Once you've reached the half way point in your expected work career, its time to start taking a portion of your 401K and either moving it to the lowest volatility fund available in your plan, or, find a tax sheltered way of rolling portions over into local bank IRAs and other savings instruments. By the time you've hit 75% of your working life, you should have well over half of your entire retirement portfolio in low risk catagories and perhaps as much as 25% in government guaranteed instruments like passbook savings, CDs, Treasuries, etc. At 5 years out, 80% should be in protected, guaranteed income classification investments. The other 20% can be in the moderate risk categories, or really ,where you feel comfortable having it.

 

the 401K offered the potential of having even better retirement income available to the average worker than the company could manage on its own while offering the employee protection from the future failure of said company and while freeing the company for any liability for past employees. When you retire with a 401K, you can roll it into the bank or financial management firm of your choice, spread it around in multiple rollovers, etc. All of that reduces your risk and increases the liklihood that you will have that money available to you at all times. I am frankly very in favor of the 401K over a company pension. Commonly, company pensions weren't even available to employees until they had been at the company for a significant amount of time. Commonly 5 years or more. A 401K can be almost immediately available to employees and can easily be moved from company to company. Its ideal for me. I work for gov't contractors. They typically come and go, regularly hiring and laying me off from one another as they win the contract that I work on from each other. I'd never qualify for the pension plans that two of them offer (5 years time to invest, has to be continuous) but I can always participate in their 401Ks.

 

People also commonly forget about company matches to their 401Ks. Companies typically match what you put into it to the tune of about 3-4% of your income max. That's basically free money. Its immediately considered a gain on the investment. For the typical plan, which I believe that I read somewhere was roughly 3% at a 50% of your investment (you put in 6% of your salary, they put in 50c on the dollar of what you put in). This means that your $100 a month going into the account immediately becomes $150. That's a 50% immediate gain on your initial investment, and any gains in the market or interest earned on the account after that is compounding on top of that. If you were able to put in $200 a month, every year, for 30 years to your 401K and your company matched you 50% on that, at the end of 30 years, without any other gain from the markets at all (and most plans at least offer some sort of guaranteed income plan at 2-3%). You'd have $108000. Add in a guaranteed 3% inerest income, compounded, and you'd be looking at an excess of $150,000. Now, granted, that's not a whole lot when you consider a retirement could last in excess of 20 years. But, you have to realize that that's a very conservative strategy, and assumes no long term market growth. Being more agressive in your early years of investing, having the market make its usual long term growth rates, and, you could easily double that final total. Take that across 20 years, and you have a monthly income of $1250, not including social security (assuming that that's still around), and that still doesn't take into account that your retirement money will still be earning income while you are drawing down the account. That means that you can potentially take a bit more per month if needed. For a single, retired person, pulling in a median income based social security, and drawing down that particular 401K, that is a comfortable living in a conservative town that has reasonable cost of living expenses.

[NickF1011]

If I were a retiree in any of the big three right now, I'd be sweating rabbit turds. We've seen it happen to Enron, WorldCom, Lucent, National Steel, Bethlehem Steel, United Airlines, and countless others. I feel sorry for all those who worked faithfully, counting on these, only to find themselves at the back of the line when it came time to dismember the carcasses of their companies. Such a violation of contract, and of trust.

 

Their situation is not so much different from those who more recently were upgraded to one of our newer retirement plans: 401K. We'll see how that works out. Dow closed below 8,000 today. I could imagine it slipping all the way to 5,000 - or maybe, God forbid, even 3,500. Anyone remember the talk from a few short months ago about what a great idea it would be to invest Social Security funds in the stock market?

 

The lesson of our generation: Better off to put it under your mattress.

 

 

 

And don't count on retiring. At least not voluntarily.

 

Under my mattress? You've got to be kidding. I'm dumping more into my 401K now than ever. I'm going to guess I'll have more money at retirement than the guy who put his savings under his mattress. As old_fairmont_wagon so wisely pointed out, with company matching, even with the market down as much as it is, I'm still in the black in my account based on my own direct contributions. I'm betting my 401K will provide me with a heck of a lot more retirement income than social security ever will.

[Fordowner]

Good advice on managing a 401k.

 

Regarding the loss of benefits for retirees, when you hear people like Mitt Romney say the best way to protect the domestic Auto Industry is to have them go bankrupt remember all this. I translate it as, Bankruptcy will put the cost on those who retired and those who are presently working under fairly negotiated contracts.

 

While both sides, workers, and employer say (and in Ford's case prove) they can suceed under the current structure we'd rather not loan the money now, bust all the contracts, true there will be massive transactional costs in the move through bankruptcy, costs that will translate into revenues for bankruptcy attorneys and Wall Street (new financing) and costs that through things like the pension guarantee system will still cost the taxpayers money.

 

But who cares! I Mitt Romney and every other pundit who spits back distorted and aged or backwards looking data on how much the "average worker" makes think the unions are bad and the employees are making to much money. So lets just throw it into bankruptcy.

Edited November 20, 2008 by Fordowner