Traditional Company Retirement Plans Are Still Strong

21 June, 2014

As more and more, older people start worrying about their retirement plans, the year 2013 had something very surprising to show. It has been found that the traditional retirement plans still continue to be very much in demand.

After the crisis of 2008, the performance of traditional retirement plans has been phenomenal and that’s the reason that they are still not done away with. However, while this is good news, the big corporate houses may take a cue from them and stop offering them altogether.

The funding deficit of some of the biggest known names in corporate houses in USA has come down quite drastically, when compared to previous years. Liabilities have come down, interest rates have gone up and the growth of funded status was amazing, to say the least.

Why then the risk

While the first paragraph is great news, there is no denying the fact that corporate houses would be keen on hiving these well-performing retirement plans to insurance companies in their endeavor to make money. They would conveniently name this as de-risking their portfolio, which is nothing but being greedy beyond a reasonable point.

What exactly is the reality?

While the conventional retirement plans continue to do very well, it would be pertinent to point out that around 45 percent of older people have no retirement plans. Only those belonging to the high income group are fortunate to stand benefitted from the famous 401I(k) options. However, the silver lining is that at least public sector workers continue to be covered by these traditional retirement plans.

Do not depend on your employer

The moot point that comes out from the above facts is that the employers are no longer to be relied upon for retirement benefits. The responsibility has to be taken by you and you should start at a very young age. You should understand the importance of being thrifty and frugal in your savings habit. You should make it a point to set apart at least 15% of your earnings towards long terms savings. You should also look at the various retirement saving options and channelize your funds to those schemes which are safe and offer the best returns, when compared, over a long over a period of time.

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