Margaret Collins reports for Business Week (link here) on a new study showing low rates of personal savings in American households:
About 60 percent of U.S. workers said they have less than $25,000 in savings and investments, according to an Employee Benefit Research Institute survey.
…“People get the fact they shouldn’t be optimistic, but instead of saying I’m going to save more today, they just say I’m going to defer my retirement age once I get to 65,” said Jack VanDerhei, EBRI’s research director and a coauthor of the study.
…About half of all U.S. workers don’t have access to a retirement savings plan through their employer and many younger people haven’t been saving long enough to build a large balance, VanDerhei said of the findings.
The EBRI retirement savings study doesn’t include pension plans, but before we get overconfident that pensions will come to the rescue, let’s consider the shrinking number of workers who can look forward to pensions in retirement. Last year, Emily Brandon reported for U.S. News & World that roughly 3 in 10 workers have pension plans.
In addition, many existing pension plans are teetering on the edge. For example:
City of Stockton, California
Stockton, California, is facing the real possibility of bankruptcy, which could result in the end of its pension program for city workers. As reported by Gosia Wozniacka and Haven Daley for the Associated Press (via Yahoo! News, here):
City leaders seeking a way to dig out from under massive debts have taken a step toward making Stockton the nation’s largest city to file for bankruptcy.
…Under the state law, municipalities considering bankruptcy must first seek mediation with creditors, with the goal of settling debts without filing for Chapter 9 protection.
…”If they vote for mediation, it is the first step towards bankruptcy,” former City Manager Dwane Milnes told KCRA-TV. “That means 1,000 people could lose retirement benefits.”
Workers at American Airlines, currently in bankruptcy reorganization, apparently have dodged a bullet fired by their employer, which originally announced that it would terminate its pension plan completely. As reported last week by Chris Isidore for CNN (link here):
American Airlines retreated Wednesday on its proposal to terminate its workers’ pension plans and dump them on a federal agency as part of its bankruptcy reorganization.
The company will freeze the plans instead.
The move, which must be approved by a judge, means employees would not accumulate any additional benefits — and American’s future contributions to the underfunded plans would be reined in.
Notable books — February 2012 (suggested books on retirement planning and personal finances)