Pensions used to be one of the most sought after benefits and it’s easy to see why. On paper a pension allows you to put in your 30 years and receive a paycheck for the rest of your life. But things don’t always work out as planned. Many pensioners are learning the hard lesson that if you don’t have your compensation in hand you may never receive it:
Ken Petersen spent 30 years as a Teamster trucker, loading and hauling utility poles, fertilizer and other freight. All those years his employers socked money away for the monthly pension check Petersen has received since he retired from trucking in 2003.
Now, to save the Teamsters Central States Pension Fund from collapse, its trustees want to slash the pensions of 272,600 fund members, nearly 15,000 of whom are Minnesotan. Thousands are already retired and living on the pensions.
Petersen, 65, and working in a South St. Paul elementary school to make ends meet, said his monthly pretax retirement check would be chopped from $2,550 to $1,274.
The only constant in the universe is change. Pensions only work if certain criteria remain constant. The amount being paid into a pension fund must be greater than or equal to the amount being paid out. Pensioners have to die at the calculated rate, which is difficult to calculate due to improving medical technology. Whoever manages the pension account must not go bankrupt otherwise the account disappears. In other words there are numerous economic conditions under which a pension can fail.
Pensions, like stock options, are a gamble. They may pay off or they may not. This is why I tell people they don’t have any compensation that isn’t in their hand. If you’re offered a slightly larger paycheck now or a future pension take the bigger paycheck. Even if you looks like you’ll earn less over time it’s guaranteed.