Hundreds of thousands of retirees are at risk of getting their monthly payments slashed…
USA Today recently reported that 35,000 New York retirees could see up to a third of their monthly pension payments wiped out. Their plan has barely half the assets needed to cover projected benefits.
One truck driver named Armand Gavazzi expects his $1,800 monthly check to get cut down to about $1,200.
It’s all due to a 2014 law that allows multi-employer pension funds that are facing insolvency (usually due to stupid investment decisions) to cut the benefits they promised.
For example, CNN Money reported last year that retiree Bill Hendershot could lose $2,104 a month if the Teamsters’ pension fund got its way – slashing his check by 60%.
In Bill’s case, he won a temporary reprieve earlier this year when the Treasury Department rejected the benefit-reduction plan. But eventually, Bill’s checks are going to get a lot smaller.
Your checks might get smaller, too…
Right now, the government agency that serves as a safety net for failed pension plans, the Pension Benefit Guaranty Corporation (PBGC), has total assets of less than $2 billion… and liabilities of more than $44 billion for multi-employer plans at risk of failing.
This is a huge problem. Almost no one is talking about it. And your risk isn’t limited to private-company pensions…
California just ruled on a case that would allow the government to reduce benefits in pension retirement plans for the state’s public employees. The court said that as long as the benefits remain “reasonable,” the state can cut back.
That’s a dangerous precedent. It means your “safe” pension may not be as safe as you think. This case now sits with California’s Supreme Court… And the situation looks bad.
A lot of plan administrators around the country would like the option of reducing their payouts…
State and local pensions are at least $1.8 trillion short of covering all their benefits. And according to financial-research firm Morningstar, 21 states are not “fiscally sound” when it comes to their retirement pensions. That means you’re at a higher risk of losing your money. Find out if your state is on the list by clicking here.
Here at Retirement Millionaire, we urge everyone to take control of their health and wealth…
I recommend you get your money out of your pension if you have the option to take a one-time payment (without paying significant penalties) or convert your income stream into a lump-sum payment. Then roll it into an individual retirement account (IRA) that you manage.
At the very least, don’t rely on a pension as your sole source of retirement income. Keep some significant assets in separate accounts that you control. Remember, the only person acting in your best interest is you.
What We’re Reading…
- Seven out of 10 Americans plan to work in retirement.
- Something different: The Quest to Make a True Blue M&M.
Here’s to our health, wealth, and a great retirement,
Dr. David Eifrig and the Retirement Millionaire Daily Research Team
November 7, 2016