My Dearest Mister Roabilly,
As you invoked my name as your personal financial advisor, allow me this gracious opportunity.
You are essentially correct in your views about a pension vs. a 401K. You touched about something in which all 401Ks and pensions share in common... the reliance upon the various world stock markets in which the dollars are invested. Often times pensions attempt to reduce their exposure to the markets by looking for direct investments in private debt offerings or investments in privately held companies. For example, the Teamster's Central States Pension fund built much of the early days of Las Vegas casinos, and actually did reasonably well in terms of returns out-performing the stock market during that time. However, that in itself becomes part of the problem as would the investment decisions be based upon financial considerations or cronyism and kickbacks, as not all mob influenced investment choices were either sound or prudent back in the 1960's.
Allow me to digress further on the Big Picture of retirmement funding, having been an employer and manager, and an observer of people's attitudes towards savings. In a phrase... "Saving isn't sexy." Too often and too many people would not save with a 401K, even with an employer matching part of the contribution. Frankly, I think that is one of benefits of Social Security and pensions. Those retirement plans happen automatically, as they are deducted from the employees' wages or the employer makes the contributions, as well. My concern is that we could have fleet service agents who after 30 years of work and eyeing retirement would have little more than their SS check. We could argue that was their choice, but I think we all want more for those people, and ourselves. Pensions, in theory, are to be expertly managed by professionals, and unfortunately, I am certain there are a good number of fleet service agents would not be comfortable in figuring their 401K allocations, and even handling the neccessary portfolio changes to manage the risk better based upon their individual time horizons. As such, I lean more towards a pension plan due to the aforementioned reasons.
I think a better way would not make it an issue of pension vs. 401K, but rather to have better control on the pension investment decisions. As far as I know, I have not been privy to the investment portfolio of the IAMPF, so I cannot say as if the reasonings for the reduction in future retirment benefits were the result of a bad economy affecting the stock markets or suspect investment choices. I will admit that when the reduction in the pension benefit was announced approximately a year ago, I noticed what I considered to be questionable rates of returns, based upon the various employers' hourly contributions. To summarize, the more an employer paid in hourly contributions, the lower the rate of return, which seems hardly fair for those employees enjoying higher contributions earn less of a return than those with a smaller employer contribution, and the percentage difference was not small. Would not all investments from the contributions be treated the same? Or maybe the pension managers are attempting to cover mismanagement by bleeding-off some of the higher end employer contributions to the lower end employer contributions? Someone who is promised $500/month per year of service is not as likely to ask as many questions as to rate of return, than someone who is entitled to just $50/month per year of service, as both cases it was 'free money' paid by the employer and nothing out of pocket by the employee. Pay me $500/month per year of service with a pension, and I won't care to ask if it could have been invested better, and I think most people are like that.
I hope someone from our IAM leadership (Tim?) does begin to ask questions as to the pension's investment portfolio, and to explain the substantial reduction and lack of security in our pension.
So Recommends Jester.
