Читать книгу Retirement Planning For Dummies - Matthew Krantz - Страница 17

As the U.S. industrialized, and farmers hung up their bib overalls and moved to work in factories, a major shift occurred in retirement planning. Workers would sign up with a company and pretty much assume they’d stay their entire careers. Over time, workers counted on their loyalty and decades of service to result in companies providing for them their entire lives — even after they retired.

Given what you know about lifespans, you can see why it wasn’t a huge deal for companies to take care of employees for life. Let’s say an employee in a steel mill worked until age 65. Look back at Table 1-1 and you’ll see that in the mid-1950s and the 1960s, he’d be expected to live only until 70. His company would have to provide retirement income for only five years.

Hence, the pension was born. In a pension plan, which is sometimes called a defined benefit plan, the employer commits to pay the pensioner a set amount of money each year after retirement. If employees stay with the company, they know how much income to expect.

During an employee’s working years, his or her employer would contribute to a fund. It was the company’s responsibility to not only add to the fund but also to prudently manage it with investments on the employees’ behalf. The company was required to hold and protect sufficient amounts of funds to pay pension proceeds. If the fund got low, typically because money was paid out faster than the fund grew, the company had to use part of its profits to refill the reserves. As you could imagine, investors weren't happy when this happened.

If you’ve recently joined the workforce, pension plans probably sound strange. But in the 1950s through the 1980s, most employees, especially those working for large companies, expected a pension. Pensions are still common for public employees but have largely vanished for everyone else. As of 2011, only 18 percent of private sector employees participated in a pension plan, according to the Bureau of Labor Statistics. That amount dropped to just 15 percent in 2017, according to an updated estimate from Pension Rights Center (www.pensionrights.org/publications/statistic/how-many-american-workers-participate-workplace-retirement-plans), and to 11 percent in 2018 according to the Employee Benefit Research Institute (www.ebri.org/docs/default-source/ebri-press-release/pr-1244-retplansff-6jun19.pdf?sfvrsn=98a83f2f_4).

So how are you supposed to plan for retirement if you don’t have a pension plan? That’s where our story takes us next.