Pension Envy

English: Ford Motor Company Headquarters, Dear...

Pensions are going the way of the dodo bird.  Soon they might be a fond memory like Thanksgiving at grandma’s house.  Ford, which has new employees on a defined contribution plan (401K), wants to get rid of pensions so much it is about to offer a lump sum to new retires in lieu of their pension. The State of Michigan is considering many moves to eliminate pensions including forcing current employees to take a lump sum right away.  New public school employees are already receiving a smaller pension with less perks along with a 401k type plan.

The move to a defined contribution plan from a defined benefit plan (pension) comes despite a recent study that indicates most people do not do nearly as well in their 401k plans as they had hoped.  Only those those who can contribute massive amounts of money are likely to get rich.  The study noted that defined contribution plans do not perform as well as pensions because pensions are often better managed.  I have proof of that.  About ten years ago I started putting money into a 401k type account after reading a popular book called The Wealthy Barber.   According to the book, if I started young I could retire very comfortably.  Perhaps I could even be a millionaire thanks to the power of compound interest!   Fast forward ten years and I have a little bit more in that account than what I have actually contributed (teachers don’t get matched contributions).  I’m no where close to being able to retire, let alone becoming a millionaire.

In hindsight, I guess I don’t know any wealthy barbers.  I also don’t know any wealthy teachers or wealthy assembly line workers.  I do know of a lot of very wealthy politicians and corporate executives.  These wealthy individuals are the ones who appear envious of the pension program.  Probably because it is the only thing standing between them and growing their own personal wealth.  If the Government can save money by eliminating pensions, then politicians can offer more tax breaks to businesses.  The majority of Michigan politicians are businesses owners.  If corporations can save money by eliminating pensions, then CEO’s can get bigger bonuses.  To summarize, dodos are extinct, pensions are endangered, and therefore the middle class has become threatened.

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