I think the new Pension Legislation "Pension Protection Act of 2006" (PPA) will do a couple of things....it will force employers who currently sponsor defined benefit plans out of them...which is sad. Well run defined benefit plans are still the best source of retirement security for participants in them. Period. But plan sponsors get no incentives to create or maintain such plans, just headaches.
However, the changes in the amortization requirements for plan liabilities will push out the catastrophe which might have occured sooner. By spreading out the risk for a longer period the inevitability of facing the music on funding problems is simply deferred. This is always government's favorite solution (e.g., Social Security, debt limits). The PBGC premiums have bene greatly increased already (a multiemployer plan now pays $8 bucks a head, up from $2.60) and this will help the PBGC, as will the deferral of the coming crisis thorugh the bookkeeping shenanigans in the new legislation.
People think 401(k)s are the answer, but do the math. A $400,000 balance in a 401(k) earning 6.5% annually on the remaining balance will last only 19.2 years if a person draws $$3,000/mo from it. So, if the person starts at age 60, by age 79 there is no money left.....so much for retirement security. During that period inflation would have eroded the buying power of the $3,000 by 45% at only 3% a year inflation factor.
Are you all ready to retire? |
