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  (ARCHIVES)Back to Current
The Alchemist (04/18/2010)
By Al Thomas
PENSION PLANS

Do you have one? Is it funded?

Many people have the same attitude as this school teacher who is going to retire very soon. “We’ve never saved a dollar. Not One dollar. Why would we? We don’t have to. I get my full pension when I retire.”

Is your state running a deficit as almost every one is? Will there be enough money in your pension fund to pay the full amount or will your state pay only a percentage of the amount due? You will have to answer that, but it’s time to check.

Suppose your state cut benefits by 30%. Have you paid any attention to what is happening in Greece? It could happen here.

Why are so many companies’ pension plans underfunded?

All the plans were doing well in 1999. In fact the S&P companies had a surplus of $251 billion. Then the you-know-what hit the fan in 2000 and by the end of 2002 those same companies has a shortfall in their pension plans of $206 billion. And it isn’t getting any better. Why?

During the 1990s everyone was making money. Most of them more than 10%. The pension plans were getting fat. The super smart fund managers of the 90’s could not figure out the market was going down. From 2000 to the end of 2009, 10 years, the S&P Index lost 24%.

Because most fund managers are “buyNholders” they lost clients money. They could not adapt to a bear market, They haven’t changed and will be caught in the next downturn.

The most recent statistics of the S&P show that of 343 with defined benefit pensions 90% are in the red. How is your company doing? Investors who own stock in those companies should also be concerned.

Those plans are mandated by legislation to be 90% funded by 2011. That takes away from research, growth, acquisition, dividends and profit. Can the stock go up when this occurs?

During the next year there will be many companies changing or

abandoning pension plans of all types. They have to. The money is not there. Workers will scream, but it is that or no job at all.

Earnings season is upon us. Companies will be reporting how they did and how they THINK they going to do for the balance of the year. All of those projected numbers will be rosy. They will say they are going to pay up on their pensions. Let’s hope so, but who knows.

Managed pension plans put most of their money in stocks as well as bonds. If the market goes down instead of up you will be watching your pension getting smaller and smaller. They cannot pay out what is not there. Corporations, government, unions, municipalities have promised more than they can deliver.

Just like Greece.

Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy It!” has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2010 Williamsburg Investment Co. All rights reserved.

 

 

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