Farewell, my good friend

Corporate pension funds are suffering in the current stock market plunge, and it looks like a number of employers are going to take this opportunity to cut their company retirement benefits adrift.

Not that I can blame them. Much like many household mortgages now underwater, it would appear that the future liabilities are more than the investments set aside to cover them.  In the boom years, the funds looked good and rosy. But, today they are grasping for air as the value of the underlying assets are dropping like stones.

Problem is, a number of companies (and also government employee retirement funds like Calpers) are now asking their employees to make up the difference. Not that the employees did anything wrong. They astutely put aside a sizeable portion of their income each month. And someone else invested it for them. Few knew where those investments went, how much were set aside as reserves, nor how lucrative the management ‘fees’ were for the fund executives. But, now the humble employee is on-the-hook for the excesses of the investment officers. Just doesn’t seem fair.

This may mark the beginning of the end for mutual funds. There just isn’t sufficient accountability, other than withdrawing all your funds thereby sending a message to the fund managers. You don’t vote for any oversight board. You have little say over how the mutual fund operates, such as how high goes the CEO and CIO salaries go. And perhaps worse of all, you really don’t own anything. You don’t have a stake in the company. You aren’t invested in the output of the underlying stocks. You never look an employee in the eye. All you care about is the short term returns, to heck with the underlying productivity.

Perhaps the scariest farewell, however, may be the decline in retirement benefits. Already, companies are dropping their pension plans in favor of 401(k) plans, even though many employees are now learning just how difficult it is to manage your own investments. As an interesting discussion over at Missoulapolis explores, few of us really know what to do with our money nor can we afford the time and money to learn.

In Australia, Colonial, the wealth management arm of the Commonwealth Bank and the largest fund manager in the country, has blocked investors from withdrawing their money. And, then there’s President Kirchner in Argentina, ‘nationalizing’ over $30 billion in private pension funds!

This is sad. Retirement funds were supposed to protect us all in our old age. We wouldn’t have to rely upon soup kitchens and food pantries. We would live a dignified retirement with time for our grandchildren, our neighbors, and a bit left over for the odd leaf-peeping trip or two. We would reap the reward for our dutiful hard work and contribution to the building up of our great country.

For the young’uns like me, I can probably work another five years or so. But, if I were in my sixties or seventies, then I’d be mighty worried. As my back gives out, my memory starts to go, and my hands get the shakes, I’m not sure I could keep working even if I wanted to. I hope I don’t have to sell my house. I hope there’s family and friends around me when the times get tough. My nest egg just might not feed me for very long and I’m not so sure I’ll have the strength the soldier on. It just doesn’t seem fair.

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