Financial planning tools and services to put you on the path to the future you want
Your guide to financial planning and retirement
Connect with peers and experts
Get to know the people behind the company and the mission behind the work
Offer financial wellness to the people at the heart of your business
January 5, 2015
As part of a massive spending bill, the House and Senate have passed a solution that could potentially cut the retirement pension benefits of millions of workers — even those who are already retired. The law, used to prohibit pension cuts on people who are already retired.
Who is Affected by the Proposal?
The Congressional proposal permits any multi-employer pension plan that could lose funding within the next 10 to 20 years to act with cutbacks on benefits to current and future retirees. Many plans are already in trouble. With more retirees to cover, longer lives of those covered and an economic downturn, the government agency, Pension Benefit Guaranty Corporation, is overtaxed and low on funds.
Multi employer pension plans are plans where a group of businesses in the same industry have joined together with unions to provide pension coverage.
Workers in many industries could be affected by the cuts. Union workers, such as truck drivers, make up a large portion of those who are at risk. But any multi-employer pension that’s already in trouble would have the ability to reduce benefits dramatically. According to CNN Money, that’s about 10 percent of all multi-employer plans and over a million workers and retirees.
Retirees 80 years old and above, as well as pensioners who are disabled, are safe from pension cuts under this plan. For those who fall into the 75 to 80 year range, there could be cuts, but they will not be as severe as for people under 75, who will shoulder the toughest changes.
How Deep are the Pension Cuts?
The effect of the cuts will vary by plan. CNN Money says the cuts might not necessarily be dramatic, they estimate that plans might only need to trim benefits by about 10 percent to protect the plan from becoming insolvent.
Why Are the Rules Changing?
Without any cuts, workers and retirees alike could ultimately see the plan they’ve contributed to and counted on disappear because the funds just aren’t there anymore.
What Can You Do to Protect Your Retirement?
Chances are, you’ve heard it said that no one can count on Social Security to pay out when you retire. The same can be said for pensions. While Social Security and pensions do help improve your retirement income, depending on either one as a sole source of funds after you retire is a risky endeavor.
If you have or are expecting a pension, here are a few steps you should consider now:
Thorough retirement planning is more important than ever. You might consider working with a financial advisor to help you plan for and navigate through a changing retirement landscape.Or, use an online retirement calculator.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
Share this post:
Our weekly newsletter full of inspiration, podcasts, trends and news.
© 2023 NewRetirement, Inc. All rights reserved.
Disclaimer: The content, calculators, and tools on NewRetirement.com are for informational and educational purposes
only and are not investment advice. They apply financial concepts in a general manner and include
hypotheticals based on information you provide. For retirement planning, you should consider other
assets, income, and investments such as equity in a home or savings accounts in addition to your
retirement savings in an IRA or qualified plan such as a 401(k). Among other things, NewRetirement
provides you with a way to estimate your future retirement income needs and assess the impact of
different scenarios on retirement income. NewRetirement Planner and PlannerPlus are tools that
individuals can use on their own behalf to help think through their future plans, but should not be
acted upon as a complete financial plan. We strongly recommend that you seek the advice of a financial
services professional who has a fiduciary relationship with you before making any type of investment or
significant financial decision. NewRetirement strives to keep its information and tools accurate and up
to date. The information presented is based on objective analysis, but it may not be the same that you
find on a particular financial institution, service provider or specific product's site. All content,
tools, financial products, calculations, estimates, forecasts, comparison shopping products and services
are presented without warranty.